AG HEALEY REPORT FINDS HEALTH CARE PRICE DISPARITIES PERSIST, BURDENING FAMILIES AND BUSINESSES WITH EXCESSIVE COSTS

AG HEALEY REPORT FINDS HEALTH CARE PRICE DISPARITIES PERSIST, BURDENING FAMILIES AND BUSINESSES WITH EXCESSIVE COSTSFifth Report Examines Efforts to Lower Health Care Spending; Continuing Market Dysfunction Threatens State Cost Benchmark Goals

BOSTON – Despite progress in improving the health care delivery system in Massachusetts, a new report released by Attorney General Maura Healey today finds that widely disparate prices – unexplained by provider quality – persist in health care, resulting in a market where patients continue to utilize higher cost providers, driving up health care costs. 

The effects of this market dysfunction, coupled with anticipated growth in pharmacy costs and utilization of health care services, raise serious concerns about the Commonwealth's ability to meet the 3.6 percent benchmark for 2015.

“Massachusetts has been a leader in health care reform, but challenges remain,” AG Healey said. “Continued cost increases are a burden on families and businesses, and it is clear more needs to be done to address continuing payment disparities that threaten long-term cost containment goals.”

This is the fifth report the AG’s Office has issued in its ongoing work to investigate health care cost drivers. It documents progress in efforts to improve the health care system like promoting the use of “tiered” or “value-based” health insurance products that encourage consumers to choose providers based on cost and quality.  It also shows growth in alternative approaches to paying providers, such as global payments, which encourage providers to deliver care more efficiently.

Many of the fundamentals of the market dysfunction first documented by the office in 2010 remain unchanged. Health insurers continued to pay health care providers widely different rates unexplained by differences in provider quality or other common measures of consumer value. The most highly-paid providers continued to grow their market share, further increasing costs. And global payments, while having positive effects, have tended to lock in historic payment differentials, thus sustaining disparities in the resources available to different providers to carry out their mission.

Specifically, the AG’s Office found:

There has been progress in both consumer-directed and provider-oriented initiatives, but important challenges remain.

• Consumers are interested in obtaining information on the price of health care services but experience challenges in doing so.
• Enrollment in tiered insurance products has increased, but the presence of these products has not resulted in an overall shift in patient volume away from higher priced providers. Current approaches appear hampered by inconsistent incentives for consumers to obtain care at higher value providers.
• Like fee-for-service payments, global payments continue to vary in ways unexplained by patient health need. This results in widely differing dollars available to care for similar patient populations.

Market dysfunction persists, with continued cost and access consequences for consumers.

• Price variation unexplained by quality persists, contributing to providers having different levels of resources to carry out their mission.
• Across the state and within specific regions, higher priced providers continue to draw greater patient volume.
• Projected growth in health care spending underscores the urgency of addressing market dysfunction. Given projected increases in pharmacy costs and utilization of health care services, to meet the state’s cost growth benchmark, provider price increases will need to be limited. If the distribution of price increases follows historic patterns, provider price disparities will likely persist or worsen.

Through rising premiums and other out-of-pocket costs, families and businesses in Massachusetts will continue to bear the negative consequences of market dysfunction, where payments are not well aligned with value. To strengthen efforts to address this dysfunction, the AG’s Office recommends the following:

Simplify and expand demand-side efforts.

• Require clear, easily compared information on the cost and quality of different insurance plans and provider systems for employers and consumers at the time of plan enrollment and selection of the consumer’s primary care provider system.
• Simplify and strengthen how tiered networks are designed, such as by tiering affiliated providers together as a system and increasing the difference in consumer cost sharing between tiers to better reflect the actual cost of obtaining care at different systems.
• Promote consumer access to and understanding of health care cost and billing information.

Consider ways to implement supply side incentives and penalties more evenly.

• Monitor variation in health status adjusted global budgets.
• Evaluate provider performance under the statewide cost growth benchmark in ways that take into account differences in provider efficiency, such that more efficient providers are given more room to grow under the benchmark than less efficient providers.

Monitor and address disparities in the distribution of health care resources.

• Consider forms of directly regulating the level of variation in provider prices and/or medical spending to reduce disparities in the resources available to care for similar patient populations.
• Monitor income and health status adjusted medical spending by zip code on an annual basis.
• Promote the development of population health status metrics that better account for socioeconomic risk factors.

Since 2008, the Attorney General’s Health Care Division has conducted extensive reviews of never before obtained data from Massachusetts health insurers and providers. In prior reports in 2010, 2011, and 2013, the AG’s Office showed, among other findings, how increased health care prices were tied to market clout rather than the value of services provided. AG Healey released the office’s fourth report in June 2015 highlighting the barriers that remain for patients seeking access to mental health care and substance abuse treatment. To view the fifth report, visit the AG’s website.

Today’s report was handled by Assistant Attorneys General Courtney Aladro and Emily Gabrault, Division Chief Karen Tseng, and Legal Analysts Robert Ciccia and Tara Ruttle of Attorney General Healey’s Health Care Division.