Massachusetts Report on Health Cost Drivers

Several states have attempted significant efforts at reducing health spending.  Partly this is just politics, but Medicaid and other health spending is often the biggest budget item for states so they have reason to get spending under control.  Yet all the reforms rarely work as intended.  Massachusetts has been fairly innovative.  The state had an early insurance exchange and it has set up commissions to try to limit per capita spending growth to at least that of the economy.  It also has a prominent and supposedly high-quality set of providers.  A new report from the state looks at why it doesn’t seem to have controlled spending as well as it hoped.   (Mass. Report)  The report, from the Attorney General’s office, focuses on low versus high-priced hospitals, alternative payment methods and on use of price estimators.  Commercial premiums in the state increased 5.6% in 2018, and consumers are bearing more of that burden.  In regard to cost estimators, which are intended to help steer patients to lower-cost providers, the report finds that while there are useful tools, they have some shortcomings and are rarely used, despite payer efforts to provide incentives for using them.  No plan reported that even 10% of members used the tool.  A primary shortcoming is that the tools don’t handle alternative payment mechanisms very well, and they also often aren’t available in languages other than English and may not include all services, like pharmacy.  Women, young adults and people covered by high-deductible plans were more likely to use the tools.  Imaging services, women’s health services and behavioral health services were among the most searched conditions.  Even when the tools are used, patients reported rarely trying to hold providers to the estimates.

In regard to alternate payment mechanisms, their effectiveness is hampered by frequent patient switching of payers and providers and by providers’ difficulty in tracking and affecting their performance under the mechanisms.  Payers reported that over a two year period, over 40% of members had switched in or out of a plan.  Even assignment of patients to providers is sometimes uncertain, with very complex attribution mechanisms.  Low-priced hospitals have tended to have persistently low prices, but also to see less usage, which clearly reflects a lack of price sensitivity or awareness.  The share of inpatient spending at lower-priced facilities actually declined by 2.5% from 2014 to 2018.  Shockingly, patients assigned to large, expensive provider organizations tended to use much more expensive hospital care.  Wow, who would have thought that big, expensive health systems would try to make their patients use their facilities.  And as these large systems employ or buy more doctor practices who would have thought they would force those physicians to refer inpatient care to their expensive hospitals.  The report’s conclusion is that caution should be exercised in expecting the initiatives discussed in the report to have an impact on spending.  One thing Massachusetts definitely has done is allow excessive consolidation of health systems and providers and health plans.  The market power created by these large systems and plans largely removes incentives to be price and cost sensitive.  The state should have done more to prevent this consolidation and should take steps to reverse it now.  That would be the most likely way to increase competition and lower spending.