October 21, 2016 | Sarah Matousek and Emily Eibl

Massachusetts Healthcare Cost Trends Hearing Details


1. Prices and price variation are driving costs.

Robert Berenson from the Urban Institute explained that prices are driving cost increases, not utilization.  In fact, utilization has decreased in the US. Those who follow the work of the HPC will recall the price variation reporting from earlier this year, which made it clear that price varies widely among providers, hospital groups and payers. We know that prices are higher in heavily consolidated markets or markets with a limited a number of providers.

Stuart Altman, Chair of the Health Policy Commission, responded to multiple providers at the hearing who said they needed more money to do x, y, or z. He reminded them that healthcare spending is not about over-utilization, but about prices. Patients are increasingly publicly funded, and the government will not go along with price increases. The gap between private insurance and Medicare is 75% and in some places 150%, and private insurers can’t keep filling in the gap. In his opinion, providers aren’t going to get more money.


On Price Variation: The Attorney General’s office showed that similarly situated employer groups using different hospital systems experience incredibly disparate pricing.  Last year, the difference in the average price of the hospital that was used was as high as 45%. The Attorney General recommended further rewarding more efficient healthcare delivery as a solution by offering consumer incentives at the time of enrollment with lower premiums that account for provider efficiency.

Berenson, from the Urban Institute, also presented a number of possible policy solutions.  He advised leaders to think critically about payment design as a solution if historic costs are the basis for target spending since they can “bake in” pricing differentials. He also highlighted Rhode Island, which granted their Office of the Insurance Commissioner broad authority to promote improved accessibility, quality, and affordability of health insurance, by giving them the Commissioner the ability to review and approve payer-provider contracts. Because of this authority, RI has increased payouts to primary care providers every year.

The Commonwealth is currently taking steps to address these issues as well. The state formed a Special Commission to Review Variation in Prices among Providers, co-chaired by the Legislature’s Health Care Financing Committee chairs: Representative Jeffrey Sanchez and Senator James Welch.  The committee will evaluate various factors contributing to price variation in physician, hospital, diagnostic testing and ancillary services.


2. Drug costs are driving spending and increasing at an astronomical pace with no transparency around how prices are set.

Providers, insurers and consumers all discussed the problem of rising costs for both prescription and medical drugs, which are significant drivers of general cost increases in the Massachusetts healthcare system. All parties called for transparency around actual prices and clear methodology and justification for how drug prices are set. These data are necessary for developing solutions to the unsustainable pharmaceutical price increases. In addition to greater transparency, some participants pushed for more value based contracting for pharmaceuticals, such as Harvard Pilgrim’s outcome based contracting.



3. Transparency is integral to all positive change in lowering costs and ensuring quality.

Transparency discussions pervaded the hearings on both days – nearly every panel and speaker, including Governor Charlie Baker, touched on its importance. Specifically, participants repeatedly stated a clear need for more transparent information regarding the costs and quality of treatment options, providers and pharmaceuticals. This information should be available to both consumers and providers, so consumers can make cost effective decisions and providers can direct patient to high value referrals, pharmaceuticals, and treatments. This price and quality data needs to be all inclusive, simple and available at the point of care delivery.

The Attorney General’s office has been using their subpoena power to investigate provider and pharmaceutical prices in order justify the need for transparency. During the hearing, there was also a discussion of bringing all the interest groups together (including providers, insurers and patients) to collaborate on how to collect and provide transparent cost data.


4. The burden of healthcare costs is imbalanced, putting too much strain on low income people, small businesses, and private insurers.

A number of speakers touched on how high health costs and spending disproportionately burden some populations. The Attorney General’s office discussed how low income individuals have worse health outcomes; however, commercial healthcare dollars are concentrated in higher income communities. David Auerbach from the Health Policy Commission demonstrated how cost sharing does not vary by low or high income areas, leading to a higher relative burden on low income communities. This information is far from new, however, it remains a relevant discussion and should be addressed.

Auerbach suggested changing how insurance-related tax breaks are allocated.  For example, he reminded the group that tax breaks to employers for providing insurance to staff disproportionately help people with higher tax rates.  Instead of the current system, tax breaks could be structured so they more directly help low income individuals, similar to the public exchanges.


In addition to a higher burden on low income communities, healthcare costs disproportionately affect small businesses. Small business owner, Patricia Begrowicz, shared that a family plan was costing her over $20,000 a year- she is spending about 40% of her labor costs on healthcare for the business. Private insurers also seem to be experiencing undue burden. Robert Berenson of the Urban Institute shared that commercial rates in 2012 were 75% higher than Medicare, this is up from 10% in the period of 1996 to 2001.


5. There is a clear need for better behavioral health integration.

The panels on “Meeting the Health Care Cost Growth Benchmark” and “Strategies to Address Social and Behavioral Health Needs” touched on how behavioral health and substance abuse issues need to be better integrated into general care delivery, with an emphasis on post-acute care follow up. This is especially important for populations with medical comorbidities, which represent greater need and higher costs.

Telemedicine was repeatedly brought up as a tool to enhance behavioral health integration, where providers can see patients at home and easily follow up for post-acute care. However, the panel expressed a need for better provider reimbursement for this type of care and patient supports, like waived copays.  The US Department of Agriculture (of all places!) is leading change in this arena by funding telemedicine programs to address the opioid epidemic in low-access rural areas like Appalachia.


6. The healthcare community must go after the social determinants of health.

A growing number of leaders are aware that social determinants are one of the main drivers of health outcomes, more so than healthcare. If Massachusetts wants to cut healthcare costs and improve population health, social determinants of health need to be addressed in a more strategic way.

The growth in global payment methodologies has helped focus on health outcomes as opposed to just service delivery, but global payments and their associated risk adjustments don’t go far enough to incentivize and support providers to address social determinants. Better integration of social services with healthcare necessitates:

  • Better screening
  • Improved data regarding who needs what services and when
  • Connecting patients to (and delivering) the services they need.

Lauren Taylor presented a number of existing models to integrate healthcare and social services, including community benefit grants, offering individual social services, programmatic partnerships, strategic investments, and pooled health and social services budgets.

One major question that arose during the hearings: If healthcare and social services are going to be connected or integrated, who is at the center of that integration?  Is it the healthcare industry or someone else with the healthcare industry just being one spoke in the wheel?


7. Community partnerships and community involvement should be focused on and expanded.

Community partnerships are essential to addressing behavioral health needs and alleviating the social determinants of health. Lauren Taylor discussed three social services that produce better health outcomes and save money:

  • Housing
  • Nutrition programs
  • Case management with a home visitation component.

To address those needs and support those programs, healthcare providers need to build networks of community partners to better understand the needs of the population they are serving and form linkages to connect patients to social services. Not only is it important to partner with community organizations, but also hiring and training people from a community to care for their own community can have positive impacts on heath and community wellbeing. For example, East Boston Neighborhood Health Center’s education training center partners with three different colleges to train local students looking to enter the healthcare field.

Despite the idea of keeping care in the community being discussed openly and frequently, one of the largest drivers of health care costs in Massachusetts remains patients using high cost teaching hospitals as opposed to lower cost community hospitals.  Solutions to this problem will require major cultural shifts in perception.  Identifying key community champions to promote local healthcare organizations could go a long way toward achieving that goal.