Health Policy Commission backs provider price caps

Agency seeks more tools to rein in health care costs

THE MASSACHUSETTS Health Policy Commission is recommending that the state take more aggressive measures to control health care costs, including setting price caps on the most expensive hospital systems and imposing more penalties on needlessly expensive providers. 

“We think there are ways to both improve how different types of entities within our health care system are identified for excessive spending as well as increasing the penalties that are attached to entities that have above-benchmark spending or are in non-compliance,” said commission executive director David Seltz at a virtual commission meeting. 

On Wednesday, the Health Policy Commission released its annual report on state health care cost trends. Under a decade-old law meant to slow the growth in health care costs, policymakers set a target each year for how much health care spending should grow by. The benchmark was 3.1 percent in 2018 and 2019, but growth exceeded that in both years – it was 3.6 percent in 2018 and 4.3 percent in 2019. The Health Policy Commission annual report relies on data through 2019, so it did not reflect the impact of the COVID-19 pandemic. 

Stuart Altman, Health Policy Commission board chair, said in a statement after the meeting that he has “major concerns” about rising health care costs. “Without further action to enhance the state’s oversight tools, improve health care market functioning, and increase affordability, we will lose any progress made to lower health care cost growth and making health care more affordable for families and businesses in the Commonwealth,” Altman said. 

The state’s health care system is complex, and there are many parts of the system that can drive up costs. The report found that the biggest driver of the increased spending was the higher prices being charged for health care, along with some growth in utilization of services. For example, the average inpatient hospital stay in 2013 cost $15,100 compared to $20,900 in 2019. 

People are also getting care in more expensive places – from hospitals rather than doctor’s offices, and from expensive academic medical centers rather than cheaper community hospitals. There is little standardization in the prices hospitals charge for the same procedure. For example, a cesarian section delivery at Mt. Auburn Hospital in Cambridge costs $15,600, while the same delivery at Massachusetts General Hospital in Boston costs $24,000. 

For years, legislative leaders have been talking about passing another bill to address the high cost of health care and the price variation. But so far, lawmakers have been unable to agree on an approach.  

A process created 10 years ago lets the Health Policy Commission obtain specific data from health care providers and hold annual hearings on health care costs. The commission can hold the line on spending by requiring high-cost providers to implement performance improvement plans, but so far no provider has been targeted. Altman said at Wednesday’s meeting that the process has not been as effective as policymakers hoped. 

Altman said the data the commission gets is only on a limited subset of health care activities, centered on primary care spending. And it is old. “The data we review is several years old, and when we bring groups in to talk about it, they shrug their shoulders and say that was a long time ago, we’re doing much better,” Altman said. “We’re in the uncomfortable position of having to push them to the wall on outdated data.” 

Commission member and Harvard economics professor David Cutler said when the state’s price control law was written a decade ago, there was hope that the process would compress health care rates, but “that’s not happened as much as anyone would have liked.” 

The Health Policy Commission report recommends expanding the data the HPC can obtain to cover a wider range of providers and services. It also recommends increasing the financial penalties that can be imposed on providers that do not meet targets for keeping spending down.  

It recommends imposing price caps on the highest cost providers, to limit both the prices they can charge and the rate of growth. The report says these actions would promote equity and reduce unwarranted price variation. The bill also wants to limit “facility fees,” which are extra fees some hospitals charge on outpatient services so the clinics charge more than an independent physician would for the same service. 

The report talks about price caps in broad contours, and commission members acknowledged that crafting a specific policy would be up to the Legislature.  

Other recommendations included in the report seek to hold insurers more accountable for ensuring health care is affordable, by making sure that any savings accrued from policies like price caps are passed on to the consumer. The commission also wants to reduce administrative complexity among insurers by instituting more standardization of policies and programs. 

Other proposals relate to improving equity in the system, investigating how medical coding is used to drive up reimbursements, improving primary care and behavioral health care, and allowing more review of how expensive drugs are priced.   

Some of these recommendations have been floating around the Legislature for years but have not been adopted.  

Gov. Charlie Baker introduced his own bill in 2019 that would shift the focus of the health care system to primary and behavioral health care. Secretary of Health and Human Services Marylou Sudders said Baker plans to reintroduce a similar health care bill by January that will address many of the cost containment issues raised in the report.  

“The recommendations in here are very informative and helpful to us as we think about that legislation,” Sudders said at the commission meeting. 

Meet the Author

Shira Schoenberg

Reporter, CommonWealth

About Shira Schoenberg

Shira Schoenberg is a reporter at CommonWealth magazine. Shira previously worked for more than seven years at the Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as the launch of the legal marijuana industry, problems with the state's foster care system and the elections of U.S. Sen. Elizabeth Warren and Gov. Charlie Baker. Shira won the Massachusetts Bar Association's 2018 award for Excellence in Legal Journalism and has had several stories win awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Before that, she worked for the Concord (N.H.) Monitor, where she wrote about state government, City Hall and Barack Obama's 2008 New Hampshire primary campaign. Shira holds a master's degree from Columbia University's Graduate School of Journalism.

About Shira Schoenberg

Shira Schoenberg is a reporter at CommonWealth magazine. Shira previously worked for more than seven years at the Springfield Republican/MassLive.com where she covered state politics and elections, covering topics as diverse as the launch of the legal marijuana industry, problems with the state's foster care system and the elections of U.S. Sen. Elizabeth Warren and Gov. Charlie Baker. Shira won the Massachusetts Bar Association's 2018 award for Excellence in Legal Journalism and has had several stories win awards from the New England Newspaper and Press Association. Shira covered the 2012 New Hampshire presidential primary for the Boston Globe. Before that, she worked for the Concord (N.H.) Monitor, where she wrote about state government, City Hall and Barack Obama's 2008 New Hampshire primary campaign. Shira holds a master's degree from Columbia University's Graduate School of Journalism.

But any attempt at revamping health care policy faces lobbying from powerful interests – insurers, hospitals, physicians’ groups, and consumer advocates.  

Lora Pellegrini, president and CEO of the Massachusetts Association of Health Plans, put out a statement Wednesday saying the insurance trade group supports many of the provisions aimed at forcing hospitals and drugmakers to curb their prices – but it opposes the commission’s call for affordability targets for insurers, which would require the companies  to keep consumer premiums in check, unless the targets are coupled with significant reforms.  “Solutions like establishing artificial affordability targets that ignore actuarial soundness or public hearings do nothing to address health care cost drivers,” Pellegrini said, adding that targets would only work if accompanies by significant reforms.