How one state is curbing rising health care costs

How one state is curbing rising health care costs

Massachusetts has a long and well-deserved reputation as one of the most expensive states in the country when it comes to health care. Thanks to the presence of world-renowned advanced medical institutions and high service utilization rates, it is now the third most expensive health care state in the country, after Alaska and New York, according to David Seltz, executive director of Massachusetts Health Policy. Commission.

But what may go unnoticed when looking only at the overall cost figures is that Massachusetts is also emerging as a national leader in a potentially more important area – controlling the growth health expenditure. In seven of the past eight years, its health care commission, created by statute in 2012, has managed to bring the growth rate of health care spending below the national average. Additionally, according to an article in Health Affairs, “Massachusetts had the second-lowest growth rate in standardized spending per person from 2013 to 2019 of any state.”

High health care costs can be a significant burden on US households and state and local governments. Medicaid accounts for nearly one-fifth of overall state general fund spending in the United States, making it the second largest category of state spending after education, as noted by the Peter G. Peterson earlier this year. Meanwhile, research from the Peterson Center on Healthcare and the Kaiser Family Foundation shows that in 2019, nearly one in 10 American adults, or about 23 million people, had more than $250 in medical debt, of which about three million owed more than $10,000. . People who are poorer, less healthy or disabled were among the most likely to be burdened with this debt.

Although it has limitations, the Massachusetts Health Policy Commission’s model shows promise for dealing with rising medical costs, and other states are taking note and considering pursuing similar initiatives.

It is important to understand, of course, that there are a number of potential cost drivers that are beyond the reach of any state government. For example, when a very effective and expensive new drug for hepatitis C was introduced, it was extremely difficult to keep the costs down. In the absence of drastic measures to control health care costs by reducing the quality of care, factors like this can only interfere with the best efforts to contain spending.

Among the keys to Massachusetts’ success is its skillful collection and use of data, which provides insight into virtually every aspect of healthcare spending in the Commonwealth. Another critical factor has been the commission’s goal of keeping health care cost increases in the state at 3.6% or less per year.

An October 2022 study conducted by Mathematica and sponsored by the Peterson Center on Healthcare and Gates Ventures, delved into the Massachusetts approach by conducting a comprehensive review of public records and gathering information from about 50 people involved or affected by, the initiative of the State. The study found that “establishing a cost growth benchmark was an important step in curbing rising healthcare spending by establishing a common goal and giving the state and healthcare entities a concrete goal around which they could measure cost growth, make spending models more transparent and attach accountability mechanisms.

But setting a goal is only the first step. As Seltz explains, “We then try to understand the drivers that contribute to increasing or reducing expenses. This is where the opportunities lie.

A successful Massachusetts strategy relied heavily on the depth of its data assets, which allowed it to benchmark the performance and costs of various healthcare systems across the state. It is clear that there is a set of services that physicians and clinicians believe offer no clinical value, such as certain lab tests and unnecessary scans. So, says Seltz, “we looked for variations between different health systems and how often they recommend these types of tests. They hadn’t seen benchmark data, but when they saw our data, some said, “Oh, we’re not performing as well as we thought compared to our peers. And that triggered action on their part, which reduced costs.

With its ability to disaggregate healthcare spending across providers, the Health Policy Commission can identify those whose spending exceeds the cost growth benchmark. Then, after careful assessment, HPC may ask them to submit a performance improvement plan, including a description of the key drivers of expense growth and strategies to reduce them.

For example, when the state found that its largest health care system, Mass General Brigham, had above-benchmark spending growth for several years, the commission demanded that they develop a plan to address it. “And they did,” says Seltz, “They came up with a plan to generate $127.8 million in healthcare savings over 18 months.”

This was clearly a success, as Mass General Brigham was willing to work with the state. But if he hadn’t been, the state wouldn’t have had the capacity to do much to force his hand. One of the findings of the October study, according to Mathematica senior researcher Debra Lipson, was that the state had enforcement tools that weren’t powerful enough to compel its providers to take action. to control costs.

“People we interviewed said the state needed more teeth to control health care cost drivers,” she says.

Seltz agrees: “The current law contains a penalty for not following our recommendations, but that fine is capped at $500,000, while health care systems have billions of dollars in annual revenue. We therefore recommended that the Legislature consider increasing financial penalties if provider systems or health plans repeatedly exceed health care costs necessary for us to meet the 3.6% growth benchmark. I know this is an area that other states are also exploring.

There are a few other areas that Seltz and his team have targeted for improvement in the near future. As HPC’s 2022 Healthcare Cost Trends Report suggests, Massachusetts should extend “state oversight and transparency to the entire pharmaceutical sector, including how prices are set by relation to value”. It also recommends that the Commonwealth “take action to hold health insurance schemes accountable for affordability and ensure that any savings made on health schemes are passed on to businesses and consumers”.

The fact that the Health Policy Commission recognizes that there is room for improvement also provides guidance for states that want to achieve the same kind of results that have occurred under the commission’s direction. While it is trustworthy to be the first state in the country to create a successful initiative, it is even more creditable to continue on a path of continuous improvement that can provide lessons – and inspiration – to others.

In fact, a number of other states are trying to follow Massachusetts’ lead, including Delaware, Rhode Island, Connecticut, New Jersey, Nevada, Oregon, Washington, and California by creating their own initiatives. aimed at reducing the rate of cost growth. That’s no surprise, based on Mathematica’s findings.

Although the study highlighted some shortcomings of the HPC program, it argued that “other states can learn from the design and use of Massachusetts accountability mechanisms. . . His experience indicates that state policymakers must continually monitor trends and refine or adopt new measures to address emerging drivers of rising health care costs.

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