Massachusetts health costs growing faster than targeted

The Office of the Attorney General of Massachusetts released an interesting report describing how health care costs in the state are growing faster than what was targeted. Massachusetts seems to have one of the most engaged state governments trying to trim the cost of health care. The report describes some variation in the cost among providers (showing, for example, that Partners was about 43% more expensive for BCBS patients in 2013 than average) and note that higher-priced providers are attracting more patients. Apparently, the analysts reviewed quality data from insurers and providers and determined that the variation in quality did not support the variation in prices, leading to some providers labeled as higher-value and some others as lower-value. Despite the frequent discussion of price and value, there seemed to be very little discussion about quality (e.g. how it was measured, how much variation existed), which is somewhat ironic given that the report touts transparency as a way to improve the current situation.

The report does include some recommendations on how to get the growth in spending in line with targets. One recommendation, for example, is to simplify the tiering of providers, by doing so at the organizational level rather than at the individual level. That would likely simplify the transaction for prospective patients. The recommendation that seems likely to be more effective is to have the patient contribution more closely linked with the underlying price difference. That is, if a patient really insists on going to see a provider that is 40% more expensive than average, the patient should pay a much bigger part of the difference than he or she currently does. This step seems critical: having the decision maker (the patient) more fully bear the consequences of his or her decision. Until recently, it's been the insurer that has been paying for most of the difference, so there's very little direct downside to the patient to choose the more expensive provider. With costs continuing to grow faster than people would like, I expect that patients will increasingly be asked to pay more of the difference in order to help stem the tide of rising costs.