Investigation of Health Care Cost Trends and Cost Drivers

Preliminary Report
January 29, 2010
Office of Attorney General Martha Coakley

OVERVIEW:

The Office of the Attorney General (AGO) releases this preliminary report based on its ongoing investigation of health care cost trends and cost drivers pursuant to the authority granted to the Attorney General by Section 24 of Chapter 305 of the Acts of 2008, An Act to Promote Cost Containment, Transparency and Efficiency in the Delivery of Quality Health Care. In accordance with the statutory mandate, the focus of our investigation and this preliminary report is squarely on factors that contribute to cost growth within the Commonwealth’s health care system. This preliminary report identifies factors driving up health insurance premiums in Massachusetts to help policymakers in this state develop measures to control costs without sacrificing quality or access. It reflects current realities of the Massachusetts health care market to inform policymakers focused on cost containment. This report does not address health care reform efforts in other states or at the national level. This preliminary report provides a broad analysis of the Massachusetts health care marketplace and does not make any conclusions about specific health care providers or insurers. Although our investigation is ongoing, our preliminary analysis indicates that current contracting practices by health insurance companies and health care providers have resulted in significant differences in compensation rates among hospitals and physicians that do not appear to be based on the complexity or quality of the care provided. These market dynamics and distortions should be considered by the Legislature and administration policymakers pursuing  health care cost containment strategies.

Health care costs are increasing much faster than the growth in the economy, gross domestic production (GDP), and wages. Such increases, if unchecked, threaten the financial stability of individuals and businesses, and the future viability of our gains in health care access. Massachusetts is a national leader in health care. In the Commonwealth, we benefit from highly ranked health plans and hospitals, and we also have strong market reforms protecting access to health care that are a national model. As a result of Chapter 58, Massachusetts has expanded coverage to 97% of the population through the shared responsibility of individuals and employers. These landmark gains in access, however, are jeopardized by unsustainable increases in health care costs in Massachusetts.

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