Private Health Care Spending On The Rise In Massachusetts

A new report finds that health care spending in Massachusetts continues to increase, with private payer costs outpacing national health care spending and spending by Medicare and MassHealth — the state’s Medicaid and CHIP program:

Spending per privately insured member grew 6 percent from 2007 to 2008 and another 10 percent from 2008 to 2009. This rate of growth was substantially higher than the increase in national personal health care expenditures per capita from 2008 to 2009. In 2009, national personal health care spending per capita increased 4.6 percent—a deceleration from 4.9 percent growth in 2008.

Spending by private payers grew faster than spending by public payers. The rate of growth for spending on privately insured people from 2007 to 2008 also outpaced the growth in spending for Massachusetts residents in Medicare (4.8 percent) or MassHealth (2.8 percent) during the same time period (Figure A). The rates of growth for both private and public payers in Massachusetts continued to outpace increases in per capita state gross domestic product and wages.

Rising prices played a significant role in increasing private spending for inpatient and
outpatient hospital services, as well as physician and other professional services. Higher
prices explained virtually all of the increase in private inpatient spending from 2007 to 2009.

Kevin Outterson explains that “the report is best understood as additional evidence of provider market power in Massachusetts” — a problem the state has been grappling with for some time. Insurance companies are paying some hospitals “significantly more than others for providing similar care,” even though the higher paid hospitals are not producing better outcomes. Disparities in payments were first documented by Attorney General Martha Coakley’s staff last year, “which concluded after an investigation that the highest paid hospitals had more market clout, some because of their brand names, but that they were not necessarily providing better care.”