Healthcare Business News

Massachusetts health spending hits below target

By Melanie Evans
Posted: September 2, 2014 - 4:30 pm ET

Health spending in Massachusetts last year stayed below the target set by state policymakers to keep medical bills from growing faster than the economy.

That's according to the first report (PDF) of the Massachusetts Center for Health Information and Analysis, an independent agency created by a landmark state law to track the growth of health insurance and medical costs—including what Massachusetts patients paid from household budgets for co-pays, deductibles and co-insurance—and whether those costs accelerated more quickly than annual targets tied to the state's economic growth.

The results are good news for Massachusetts, which adopted the aggressive approach in 2012 as health spending persistently rose 6% to 7% before and after the state expanded access to insurance coverage during the tenure of Gov. Mitt Romney with a law considered the template for the Patient Protection and Affordable Care Act's insurance marketplaces. However, the report sheds little light on what was responsible for the turnaround.

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The state’s spending growth in 2013—2.3%—was more than 1 percentage point slower than the 3.6% target (the state’s projected economic growth) and also lower than the state’s 2.6% actual economic growth last year. And Massachusetts’ results in coming years could matter beyond its border, as policymakers elsewhere consider their own attempts to hold health spending in check and debate how slow is slow enough.

“Increasing transparency in the healthcare system is critical to empowering policymakers and regulators to make the best data-driven decisions as they seek to improve healthcare quality, affordability, access and outcomes,” said Andrew Jackmauh, a special projects manager with the center. “Establishing a goal and being able to map progress toward it is important for understanding performance of the healthcare system. This report provides one model of mapping that progress, but it is not the only model. We hope that other states will continue to find ways to increase transparency around healthcare spending.”

The 2.3% growth in Massachusetts still exceeded the inflation rate of 1.5%. The weak spending growth also came at a time of record-slow growth in national health spending. A slowdown in U.S. health spending became more pronounced with the last recession and has remained a historic lows since, dipping as low as 3.6% in 2011. The widespread and persistent drag on health spending has raised questions about whether the overall economy or health reform efforts deserve more credit for the slowdown. If the economy is the major culprit, the growth in health spending will likely pick up speed again as the recovery grows more robust.

“We will need to continue to monitor healthcare costs before we can attribute their slowed growth to specific policies,” Jackmauh said. “What is likely true is that Massachusetts’ cost-containment efforts are positively reinforcing this national trend.”

Still, the report shows the tepid growth benefited consumers. Premiums for commercial insurance in Massachusetts did not change last year, nor did the benefits included in health plans, the report said. In previous years, consumers paid more and received less than they did the year before. The amount paid by commercially insured patients from their own pockets in form of co-pays, deductibles, and coinsurance, also remained unchanged from 2012.

“It’s absolutely splendid news,” said economist Amitabh Chandra, a professor of health policy at Harvard University. Slower health spending could bring relief to taxpayers and workers, who pay higher taxes to cover rising costs for public programs and who see wages eroded by rising premiums, he said.

Chandra said the heightened transparency under the law likely contributed to the slowdown, with more pressure on health plans and health systems to keep prices in check. The growth of insurance contracts with incentives to reduce waste and cost, such as accountable care or global budgets, has also likely contributed to the slowdown, he said. “You’re starting to see the first glimmers of that reform paying off.”

Use of those new insurance contracts declined slightly last year among the commercially insured, to 34% from 35% the prior year. Increased use of such contracts could be hindered if national insurers don’t aggressively adopt them, even though the Massachusetts market is dominated by local payers, the report said.

Total health spending in Massachusetts was $50.5 billion in 2013. That amounted to $7,550 per person.

Follow Melanie Evans on Twitter: @MHmevans

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