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AG: Oversight Needed to Realize Health Care Cost Control

Posted by Kristen Lepore on Apr 25, 2013 3:31:00 PM

Attorney General Martha Coakley is warning Massachusetts officials to step up their scrutiny of the health-care market to protect the ability of employers and consumers to make decisions that could reduce their health premiums.

CoakleyIn a new report entitled Examination of Health Care Costs and Drivers, Coakley notes that employers and consumers are working to control health care costs by enrolling in health insurance products that offer tiered or limited networks. But she says that health plans continue to pay providers a wide range of amounts for comparable services and that providers are increasingly aligning in ways that may cloud efforts to move toward a more efficient health care system.

Coakley offers five recommendations she said will create the transparency needed to protect lower-cost health care providers and maintain consumer options. The recommendations urge state oversight organizations to collect detailed financial information on the health-care market and to evaluate proposed hospital mergers in light of changes in contract prices, referral patterns, market share, and volume to higher cost facilities - and the impact of all of these factors on total costs to consumers.

“Massachusetts still faces significant challenges in addressing historic market dysfunction, aligning payments with value, and controlling overall health care spending. To achieve these goals, all health care market participants must be actively engaged in promoting value-based health care,” the attorney general writes in her third major study of health-care cost trends in Massachusetts. The study was released yesterday.

Massachusetts employers and consumers pay the highest health-care premiums in the country at $16,953 per year for a family plan, according to the Commonwealth Fund.  Health-insurance premiums in Massachusetts grew 67 percent for individual plans and 72 percent for family plans from 2003 to 2011, raising the burden on purchasers from 12.6 to 18 percent of median household income.

The attorney general’s report indicates that the health cost control law signed by Governor Deval Patrick in August 2012, which created systems to increase scrutiny of medical cost variations, will require careful oversight to rein in those differences. The law limits increases in medical costs to the overall rate of economic growth, calls for paying doctors for outcomes instead of procedures, steers patients to doctors who provide good care at reasonable prices, and coordinates care to keep patients healthy and out of the hospital.

“As described in our prior Reports, without other fundamental changes, a shift to global payments may actually exacerbate the price escalation associated with market dysfunction by establishing widely different per member per month rates based on historic pricing disparities,” the study says.

The attorney general issued six key findings about the health care market:

  1. Employers and individual health care purchasers have increasingly moved toward health insurance products with tiered networks and high deductibles, and moved away from HMO products that restrict referrals through a primary care gatekeeper.
  2. Purchaser enrollment trends have significant implications for health plans designing products and providers managing risk contracts.
  3. Health plans continue to pay providers a range of amounts under traditional “fee for service” arrangements and global payment arrangements to care for patients of comparable health.
  4. Health plan product designs affect risk selection, total medical spending, and care management.
  5. Providers are taking on increased insurance risk without consistent mitigation by health plans.
  6. Provider consolidation and alignments have significant market implications that should be carefully reviewed, particularly where proposed consolidations may reduce access to lower-cost options for consumers and undermine efforts to promote value-based decisions by purchasers.

Richard C. Lord, President and Chief Executive Officer of Associated Industries of Massachusetts and a member of the state Health Policy Commission (HPC), welcomed Coakley’s report.

“Attorney General Coakley provides refreshing clarity to a complex topic with this new report, as well as with her previous studies in 2010 and 2011. The report underscores the need for transparent and reliable information to identify, measure, and correct problems with the health care market,” Lord said.

The ability of Massachusetts to keep health spending equal to overall economic growth is particularly important in light of significant potential cost increases that employers and consumers will face when federal health reform comes to the commonwealth next year.

Topics: Health Care Costs, Issues, Health Insurance

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