The Massachusetts test case – what the data shows


As the October signup period for uninsured Americans to avail themselves of the advantages offered by the Affordable Care Act (ACA), the news from Massachusetts, an antecedent to the ACA, suggests that expanding coverage is the easy part. The Massachusetts health care law has worked successfully to see that more than 90 percent of all residents now have health insurance. But, controlling the cost of health insurance and the underlying costs of health care remain stubbornly difficult.

Also in October, state health care regulators will question insurers and providers about what is causing insurance premiums for Massachusetts residents to rise faster than inflation, why the employer-sponsored insurance market is shrinking, and why fee for service remains the dominant payment method. The answers they get will give Massachusetts residents and Americans everywhere a glimpse of the future of health insurance and health care and what must be done to improve the care and restrain the costs.

A study by the state’s Center for Health Information and Analysis points to some of the driving forces. Based on 2011 data, the center finds that Massachusetts hospitals with a “larger commercial market share tended to be associated with higher relative price levels. Conversely, hospitals with a smaller proportion of commercial market share tended to have lower relative price levels.”

So, big hospitals, particularly very big and very high-quality hospitals that are common in Massachusetts, especially in Boston, negotiate larger reimbursement payments for their services than do smaller hospitals. That’s a finding one might have expected, but how about a hospital like the Martha’s Vineyard Hospital? The center’s research finds that “geographically isolated hospitals also tended to have higher relative prices due to their unique market advantages in their areas.” There’s no competition for health services in such markets, especially markets surround by water. But, to be fair, there are also unique small-market cost and range of services disadvantages.

And, apart from size, the center finds that “academic medical centers, specialty hospitals, teaching hospitals, and geographically isolated hospitals tended to have higher commercial relative prices.…”

And, these higher priced acute care hospitals accounted for approximately four out of every five dollars paid by the commercial payers to all acute hospitals in Massachusetts.

These findings are consistent with the experience of Vineyard hospital patients, who often begin medical care in what is certainly a “geographically isolated hospital” and often move to what is absolutely a big city, high quality teaching hospital. Both the Vineyard hospital and Massachusetts General Hospital are units of Partners.

The center’s analysis points to several contributors to the disproportionate increases in insurance and care costs. It found, for instance, that employers are stepping back from sharing insurance premium costs with employees, and that the average Massachusetts health plan premium of $421 per month in 2011 grew 5.2 percent between 2010 and 2011 and 9.7 percent compared to the premium cost in 2009. And, benefit levels shrank about five percent.

Fee for service, the insurance model fundamental to Medicare, combined with Massachusetts demographics which include a large share of older residents — Martha’s Vineyard demographics too — contribute to cost increases too. Fee-for-service is the most common payment method, the center found. For HMOs, a gatekeeper model intended to constrain costs, the number of insureds fell during the survey period.

October, nationally and here in Massachusetts, will yield a trove of data that will inform a course correction for health insurance and health care policy going forward.