For Immediate Release - May 26, 2011

Patrick-Murray Administration Releases Health Care Cost Trend Studies that Show Urgent Need for Cost Containment

Patrick-Murray Administration to Hold Cost Containment Hearings in June

BOSTON - The Patrick-Murray Administration's Division of Health Care Finance and Policy (DHCFP) today released two reports that highlight the urgent need for action in the face of troubling health care cost trends in Massachusetts. Earlier this year, the Governor filed comprehensive cost containment legislation designed to control costs and improve quality of care for consumers. The studies released today reveal that consumers and businesses continue to pay more for more limited health care benefits and that there is significant price variation among health care providers.

"These reports must serve as an alarm bell sounding the need for urgent action to control rising health care costs in the Commonwealth," said Governor Deval Patrick. "If passed by the Legislature, the health care cost containment bill I filed earlier this year will make significant strides in helping to achieve needed relief for consumers and businesses who are paying far too much for health care."

The first report, Premium Levels and Trends in Private Health Plans: 2007-2009, shows that private group health insurance premiums in Massachusetts increased roughly 5 to 10 percent annually over the two year period when adjusted for benefits. However, the Consumer Price Index increased by only 1.7 percent nationally and 2.0 in the Northeast region over the same period, signaling that the rate of increase in the cost of health care far outpaces the rate of inflation. In addition, the report shows that the level of benefits covered by private group health insurance is declining and member cost-sharing is increasing. Deductibles and copayments generally increased from 2007 to 2009. Among small groups, average benefits decreased 3.6 percent from 2007 to 2008 and 6.6 percent from 2008 to 2009.

"Health care premiums are one of the most transparent measures of the cost of health care for employers and their workers," said Secretary of Health and Human Services Dr. JudyAnn Bigby. "While the report found that premium increases were not notably higher than in previous years, consumers are paying more out of pocket and benefits are decreasing. This shift of costs to consumers is a troubling trend. Without swift intervention, we worry that consumers will cut back on needed health services, including preventive care."

A separate report, Price Variation in Massachusetts Health Care Services, showed wide variation across health care providers for every service examined. There was at least a three-fold difference for every service and, for most, a variation of six- or seven-fold. A comparison of median prices paid across hospitals reveals that for inpatient stays such as cesarean deliveries, the highest-paid hospitals receive payments that are typically more than double the lowest-paid hospitals. The highest severity-adjusted prices were often received by hospitals in the Boston metro area. While there was significant price variation among providers, the study found very little variation in the available quality metrics that are tied to the services for which prices analyzed.

Seena Perumal Carrington, Acting Commissioner of the Division of Health Care Finance and Policy added, "As we identify and implement strategies to reduce health care costs, it is critical that we separate anecdote from reality. It is my hope that these reports will inform the discussions to be held at the public hearings in June and spur action towards increasing the delivery system's efficiency."

In February, Governor Patrick filed comprehensive health care payment and delivery reform legislation designed to control rising health care costs and improve patient care. The bill, "An Act Improving the Quality of Health Care and Controlling Costs by Reforming Health Systems and Payments," establishes a structure and process to facilitate significant reforms to the Commonwealth's health care payment and service delivery systems over the next three years.

The legislation encourages the growth of integrated care organizations (ICOs) comprised of groups of providers that work together to achieve improved health outcomes for patients at lower costs; provides for the creation of benchmarks, standards and guidance for the transition to integrated care and alternative payment methodologies; and allows the Division of Insurance (DOI) to consider more criteria when making the decision to either approve or reject premium rate increase requests from both carriers and providers. To learn more about the Governor's cost containment legislation, please visit the Governor's website .

By statute, the Division of Health Care Finance and Policy is required to conduct an annual study regarding health care cost trends in the Commonwealth and the factors that contribute to cost growth. Following the release of these reports, DHCFP will conduct four days of health care cost trend hearings, scheduled to take place between June 27 and June 30. The hearings will be held in collaboration with the Office of the Attorney General.

The reports were developed with analyses conducted by Mathematica Policy Research, Freedman HealthCare and Oliver Wyman Actuarial Consulting, Inc.

The full cost trend reports are available on the Division of Health Care Finance and Policy's website.

# # #