What Can We Learn From the Massachusetts Report on Wasteful Spending?

Topics: Health Care Spending, Costs and Prices, Payments and Reimbursement, Payment Reform

By Heather Drost, Senior Writer

A recent report by Massachusetts' Health Policy Commission found that about one-quarter of the state's health care expenditures could be eliminated without reducing patients' quality of care. The commission also estimated that nearly 50% of the state's health care expenditures originated from just 5% of patients.

Does the report tell us anything new about efforts to control spending? Will it change how Massachusetts and other states approach cost-containment efforts? To find out, American Health Line interviewed several experts.

Katharine London, principle associate at the University of Massachusetts Medical School's Center for Health Law and Economics, said that the report provides good data but does not contain new information.

For example, she said, "We know that 5% of patients consume 50% of health care costs and that you want to focus on those patients by improving coordination and reduce duplication."

Although London said the report's data could be extrapolated by other states and used to identify areas of potential cost containment across the country, "it is not a call for legislative intervention."

She noted that the point of the report, as called for under a 2012 Massachusetts law that aims to control costs by setting growth targets, is to help focus the health care community on areas where they can contain costs. London said that going forward, the focus would be on "providers and insurers to focus on these cost-containment areas."

Gerald Friedman, an economics professor at University of Massachusetts at Amherst, agreed that the report's findings were unsurprising. However, he said he was surprised that report "does not really cover all the issues," such as not accounting for administrative costs, drug spending and hospital prices.

Rather than focus on prevention efforts aimed at keeping people out of the hospital, as the report recommends, Friedman suggested that Massachusetts should go in the direction of Maryland and target costs at hospitals. Maryland is the only state that sets its own hospital reimbursement rates for Medicare beneficiaries.  In addition, Maryland hospitals have agreed that the growth in their revenue from all sources -- including from private insurers, Medicare and employers -- will rise no faster than the overall growth in the state economy.

>> For more details about Maryland's unique Medicare hospital payment overhaul, click here

Friedman said, "The report talks about excessive prices but only the state can reign in the prices being charged by hospitals."