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David_morales Posted by: David Morales, Commissioner, Division of Health Care Finance and Policy

The Division of Health Care Finance and Policy (DHCFP) is pleased to release three reports on health care cost trends in the Commonwealth:

  • The Massachusetts Health Care System in Context: Costs, Structure, and Methods Used by Private Insurance Carriers to Pay Providers explores the factors that contribute to high health care costs in the state, including the structure of the health care system and payment methods currently used by Massachusetts health insurers. 
  • Private Health Insurance Premium Trends 2006-2008 examines health care premium growth rates from 2006 to 2008 based on data reported by Massachusetts health insurers.
  • Health Spending Trends for Privately Insured 2006-2008 examines trends in health care spending for care provided to fully-insured and self-insured Massachusetts residents between 2006 through 2008.

Summary of Key Findings:

  • The Commonwealth's health care system is a key employer and driver of economic growth for the region. However, personal health spending per capita is higher in Massachusetts relative to the nation and continues to rise.
  • Some characteristics of the Massachusetts health care marketplace that may be contributing to the high levels of cost growth, include:
    • High concentration of physicians (especially specialists);
    • Greater availability and use of academic medical centers for both inpatient and outpatient hospital based-services, and use of outpatient hospital-based facilities for some services that could be provided in less costly settings;
    • Richer health insurance benefits compared to the nation; and
    • Use of payment methods that are not designed to incentivize efficiency and coordination of medical care.
  • Most of a health insurance premium goes toward spending on health care services as opposed to administrative and other non-medical services. On average, in Massachusetts more than 88% of premiums are spent on health care expenses (compared to less than 84% nationally).
  • Average monthly health insurance premiums increased 12% from 2006 to 2008.  If employers and individuals had purchased comparable benefits each year, the growth in premiums would have been larger. 
  • Premium trends, benefit levels, and trends in health care spending vary across different-sized employer groups.  Small group premiums were higher and grew faster on average than mid-size and large group premiums, when adjusted for differences in benefits, demographics and location.   
  • Health care spending in the Commonwealth increased 7.5% per year from 2006 through 2008, a growth rate that is higher than the nation.  The increased spending can be attributed to several factors:
    • Price was an important factor contributing to rising health care spending across all service types.
    • One area of particular concern (and opportunity) is the variation in prices, which was typically greater for facility charges than professional charges.
    • In addition to price increases, care is being provided in more expensive settings over time—more inpatient care is being provided in academic medical centers and there is a decline in the provision of care at stand-alone outpatient facilities.   Much of the growth in outpatient hospital care occurred at academic medical centers located in the metro Boston area. 

These three reports are being issued by DHCFP as part of its new responsibilities under Chapter 305 of the Acts of 2008 to provide information and analysis on health care cost trends. These reports will serve as a basis for both the discussion at DHCFP's hearings on health care cost trends beginning March 16th and the development of strategies to mitigate growth in health care spending in Massachusetts.  As Massachusetts' policy makers and residents assess the most appropriate methods to mitigate health care cost growth, an understanding of Massachusetts' unique health care delivery system characteristics will facilitate determining how this public policy challenge can best be addressed in order to preserve the economic activity associated with the state's health care system, while promoting better care coordination, improved quality, and increased health care value. 

These reports and related publications are available online at: www.mass.gov/dhcfp/costtrends.

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