Massachusetts health reform has not driven up costs

Massachusetts health reform is a hot topic of conversation nationally. It’s the progenitor of federal health reform and a big issue for Mitt Romney, who signed it into law. Most of the focus is on scoring political points, but there are interesting lessons to learn for those that want to study the consequences of universal coverage. I’ve been impressed with the work done by the Blue Cross Blue Shield of Massachusetts Foundation to lay out the impact of reform. They have a new report and chart pack  that includes a lot of good information about health care costs in the Commonwealth.

Massachusetts is an expensive state for health care. In fact, our per capita costs are the highest in the country. Costs were high before health reform and have continued to rise since the universal coverage law was passed in 2006, but the law had little impact on the rate of spending increases. If anything, Massachusetts costs have risen a little slower than the nation’s as a whole. That doesn’t mean the law is a failure, because cost control was not its objective.

High costs in Massachusetts are attributable to a number of factors. We’re a high cost state to begin with so most things cost more here. We tend to use expensive academic medical centers even for routine services. Our population is older, richer and has better insurance than the US as a whole. We have a lot of specialists and a few provider organizations with substantial pricing power.

The main driver of rising spending is rising prices for health care services. Higher utilization is a factor, too, but not a big one. There are big geographic differences in per capita spending, which is a function of utilization and price. Higher prices and utilization are not correlated with better outcomes.

There are some lessons in this analysis that are applicable more broadly, and others more specific to Massachusetts. The more universal lessons for me are:

  • Pricing is an important issue. One person’s cost is another’s revenue, so payment reform initiatives need to be thought through and implemented properly in order to succeed
  • The lack of correlation between price or utilization and outcomes means resource use is far from optimal. If anything the baseline for planning and policy should be low price and low utilization, unless someone can prove that more is better
  • Better plan design that exposes consumers to the consequences of their choices could help restrain cost growth or even reverse it

At least in the Massachusetts context, it’s reassuring to see that reform has achieved its coverage goals without the undesirable side effect of increased per capita spending. With near universal coverage in place, Massachusetts is ready to tackle costs. With good analysis, appropriate policies, goodwill and a bit of luck we may make some progress.

7 thoughts on “Massachusetts health reform has not driven up costs

  1. Rob Lindeman

    That surprises me, because I thought one of the objectives of the plan WAS to control costs.

    There were many consequences that may of been unintended but should have been anticipated, e.g., the supply-demand mis-match that was created with the huge influx of insured who needed primary care docs.

    And I continue to maintain that the increased use of the ED could have been anticipated. I don’t understand all the wrinkled brows and chest thumping over this. ED overuse is largely due to insured people (medicaid), not the uninsured. I believe I heard the “ED safety net” argument in a few variations when RomneyCare was being debated.

    Reply
  2. David E. Williams of the Health business blog Post author

    The way I remember it, after years of saying we couldn’t put everyone in coverage before controlling costs, Massachusetts decided to try flipping things around. The idea would be that once people were in coverage it would be easier to go after costs.

    As for your ED argument, yes that was a common misconception. But here on the Health Business Blog I’ve been making the point that those with insurance use the ED more. Here’s a post on the topic from 2007 http://www.healthbusinessblog.com/2007/01/universal-health-insurance-wouldnt-help-that-much-anyway/

    Reply
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  4. Eric Novack

    David- looking through the BCBS slide deck– how do you explain slide 10, which clearly shows an upward trend in spending since 2006, and slide 12, which shows a decrease in premiums?

    Can you find even a single mention in any of the slides that might put an iota of responsibility in the lap of the insurance industry? patients?

    The study/results/conclusions seem intent on getting to blame providers/hospitals… and to justify the goals of MA politicians who want more political control over health care dollars– and decisions.

    Reply
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