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Why Are Health-Care Costs Rising?

Posted by Katie Holahan on Feb 9, 2016 2:33:45 PM

A study released today by the Massachusetts Association of Health Plans, Associated Industries of Massachusetts (AIM), the National Federation of Independent Business (NFIB), and the Retailers Association of Massachusetts (RAM), identifies 14 key factors in the rising cost of health care.

HealthCost.jpgThe report is based on a review by Freedman HealthCare (FHC) of nine recent studies of the Massachusetts health-care marketplace.

"The rising cost of health care is a significant challenge for Massachusetts employers. These reports shed light on the factors driving health care costs and will inform the conversation on measures to contain the cost of health care," said Rick Lord, President and Chief Executive Officer of Associated Industries of Massachusetts.

Here are the 14 factors:

  1. Provider price, not utilization of health care services, is the biggest cost
    driver in the Massachusetts market. (Providers are doctors, hospitals and other entities that render medical care.)
  2. There is a significant gap between the highest and lowest paid providers.
  3. Health care is most often delivered in higher priced settings.
  4. High prices do not directly correlate with high quality of care – in other
    words, the highest paid providers do not necessarily provide the highest
    quality of care.
  5. Providers with the highest public payer case mix have the lowest
    commercial reimbursement.
  6. Academic medical centers are associated with higher health care costs.
  7. In response to increasing provider prices, the commercial market is seeing
    increased consumer cost sharing.
  8. Market share impacts health care costs by influencing price, utilization,
    and available resources.
  9. There is growing policy concern that provider consolidation may lead to
    higher prices, rather than savings from integration of care or improved
    efficiency.
  10. Despite its increasing promotion, the widespread adoption of global
    payments faces significant challenges, and there is limited evidence to
    suggest that global payments produce cost savings.
  11. Performance against the cost growth benchmark is mixed.
  12. Pharmaceutical costs have been increasing and are expected to increase
    in the future.
  13. The state is increasingly focused on behavioral health – specifically, the
    high cost associated with behavioral health conditions, the challenges of
    clinical and administrative integration of care, and the need for better data.
  14. Due to persistent and increasing disparities in provider prices over the
    past several years, the state is recommending policy action be taken to
    reduce excessive price variation.

Topics: Health Care Reform, Health Care Costs, Health Insurance

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