Mass. leading way on reining in health care costs

Mass. leading way on reining in health care costs

Credit a united effort, avoidance of regulatory overreach

THE CONSTITUENCIES THAT CAME together to gain passage of the state’s landmark universal health care law in 2006 — consumers, employers, providers, insurers — were justifiably proud of our achievement. But we all recognized that an even larger problem lay ahead – gaining control over the escalating costs of health care. Looking back, we could never have imagined the striking success the state would actually achieve in controlling those costs over the next decade.

For years, the state’s rate of growth in health costs exceeded the nation’s, but in the past decade there has been a startling reversal. In 2006, the state’s health costs grew by 7.6 percent, some 40 percent higher than the US rate of 5.4 percent. Our rate of growth has steadily declined since 2006, reaching a remarkable 1.6 percent in 2017, the slowest rate in at least two decades and less than half the national rate of 4.3 percent.

Inpatient hospital spending, the largest portion of health care expenditures, grew a tiny 0.9 percent in 2017, well below the already small 2 percent average annual rate of growth over the prior four years. Both overall expenditures and inpatient hospital spending grew much more slowly than the state’s 3.6 percent benchmark.

This extraordinary turnaround has been achieved because the constituencies that joined forces to produce universal coverage have stayed united around the goal of controlling costs. Of course, there have been sharp disputes at times between consumers and employers or insurers and providers, or even intramural struggles within each of these groups. But all parties have remained committed to the overall goal of containing cost growth.

The Legislature deserves much credit as well. Over this period, the House and Senate passed four bills addressing health costs — a cost containment bill in 2008, a small business relief bill in 2010, municipal health reform in 2011, and comprehensive cost control legislation in 2012. The latter created the Health Policy Commission and established a benchmark for annual cost growth in the Commonwealth.

These bills have one thing in common. They took meaningful but measured steps to address costs but, importantly, did not overreach and attempt to regulate the health care marketplace, avoiding the common trap of unintended consequences in the complexities of the health care arena. This is a cautionary note for any future legislative initiatives.

Another bright spot has been the Baker administration’s successful efforts to rein in expenditures for the state’s Medicaid program, helped in part by a decline in enrollment.

It is important to put into context the constant refrain that Massachusetts has the highest health care costs in the nation. In fact, that is only true using a misleading per capita measure which doesn’t take into account the higher incomes in Massachusetts. As a percent of median household income, a better measure, family premiums in Massachusetts (including both employer and employee shares) are near the bottom of the 50 states with only Maryland, Minnesota, and North Dakota lower. Furthermore, commercial premiums in Massachusetts since 2012 have grown much slower than the nation, averaging less than 2 percent growth a year.

Using that same preferred measure, employee health care costs in Massachusetts are the lowest of the 50 states — 7.3 percent of median household income in the Commonwealth compared to a US average of 10.1 percent.

This is not to say that premiums and deductibles are not a burden for many lower income families in Massachusetts. And there is disturbing data on an increase in high deductible plans and consumer out-of-pocket spending on health care. The state’s efforts to balance access, cost, affordability, and quality will always be a challenge, and state leaders must address problems as they arise.

Meet the Author
Nevertheless, we should recognize our enormous achievements — initially in being the first in the nation to provide universal health care and now leading the country in restraining the growth in costs.

Michael Widmer is an analyst of Massachusetts state government who lives in Belmont.