Media release from GlobalData

LONDON, UK (GlobalData), 14 August 2012  - On July 31, 2012, the Massachusetts state legislature passed a bill aimed at limiting the growth of the state's healthcare costs. This comes on the heels of a recent publication by the Massachusetts Division of Health Care and Policy, reporting that health insurance premium costs in the state are among the highest in the nation, and constitute a substantial burden on consumers and employers seeking good value for their spending on medical services. Massachusetts is the second most expensive state in terms of healthcare costs, with Maine topping the list. The passage of the bill makes Massachusetts the first state to try to limit how much providers and insurers can spend on medical care. This furthers the state's history of healthcare innovation - its  2006 healthcare reform by then governor, Mitt Romney, now the Republican presidential candidate, was the national blueprint for the Health Care and Education Affordability Reconciliation Act of 2010 ("2010 Reconciliation Act") which amended the Patient Protection and Affordable Care Act (PPACA), more often known as the Affordable Care Act, or ACA.

As GlobalData's Global Healthcare Policy Analysis 2012 report explores, the state's economy has been growing at about 3.7% in recent years (faster than the United States' as a whole); however, healthcare spending has been growing at approximately double that rate in Massachusetts. The bill will prevent healthcare spending from growing faster than the state's economy through 2017, and for five subsequent years, will ensure that any rise in healthcare costs would be half a percentage point lower than the increase in the state's Gross Domestic Product (GDP). To do this, a new commission will be set up to monitor growth in healthcare costs, enforce spending targets, and ensure that providers whose costs exceed these benchmarks file performance improvement plans. GlobalData expects this to improve healthcare provider transparency. Also, certain hospitals and private carriers will be charged one-time fees to generate $225m over four years. Of these funds, 60% will be allocated to distressed hospitals, 26.7% to the prevention of diseases such as diabetes, asthma and obesity and 13.3% will go to supporting the state's transition to Electronic Medical Record (EMR) infrastructures. A system will be established to track price variation among different healthcare providers over time and evaluate the factors responsible. In addition, state agencies responsible for purchasing prescription drugs will form a uniform procurement unit for bulk purchases. These and other cost-slowing provisions in the bill are expected to save the state as much as $200 billion in healthcare spending over the next 15 years. GlobalData believes that the bill is a step in the right direction, as the initial focus of the 2006 reform was expanding insurance coverage, and not cost control. However, limiting the amount of money health providers can receive for treating illnesses might prompt doctors and hospitals to cut corners and sacrifice patient well-being to complete treatments on budget.

There are more severe ways to cut healthcare costs, including making physicians accept a salary instead of getting paid through reimbursement, and placing a cap on medical spending. GlobalData believes these alternatives would be unacceptable to physicians and low-income individuals with terminal illnesses. Physicians might decide to leave the state for greener pastures where they will not be placed on a salary scale or be limited in the array of treatments they can offer patients to enable them stay within budget. This is a situation the government cannot afford to get into, based on the current ratio of physicians to insured individuals in the state. In addition, capping medical spending would limit individuals to a streamlined healthcare system which could mean that low-income earners covered would no longer have access to very expensive life-preserving therapies for terminal illnesses which were previously covered under their insurance plans.

Although healthcare reform in Massachusetts has had positive implications for citizens in terms of insurance coverage, other challenges such as an inadequate physician workforce and patient wait times also need to be dealt with. According to a workforce survey conducted by the Massachusetts Medical Society (MMS) in 2011, eight of the 18 specialties surveyed (including family medicine, general surgery, dermatology, and internal medicine) are currently experiencing shortages in Massachusetts. Also, Primary Care Physicians (PCPs) have been experiencing shortages in the state for the past six years. GlobalData believes that this could be due to aging of the physician population. Between 1995 and 2005, the proportion of physicians in the state aged 55 and older increased by seven percentage points to 38%. Because more than 98% of Massachusetts residents currently have health insurance coverage, and there are an inadequate number of physicians, average wait times of patients have increased substantially. The average wait times for internal medicine physicians have increased by nine days to 49 days post-healthcare reform, and more than 50% of PCPs in the state are not accepting new patients.

There is currently no "silver bullet" to solve all the problems of healthcare in the state and nationwide, but GlobalData believes that this bill could yield some encouraging results and it won't be long before other states in the nation follow in the footsteps of Massachusetts with similar initiatives targeted at reducing their healthcare spending.