Coakley releases second report on health care costs

Jessica M. Karmasek Jun. 22, 2011, 11:55am

Martha Coakley

BOSTON (Legal Newsline) -- A shift to "global payments" is unlikely to control rising health care costs without also addressing provider price disparities and encouraging consumers to make better purchasing decisions, according to a report issued Wednesday by Massachusetts Attorney General Martha Coakley.

Coakley's report finds that providers who are globally paid in Massachusetts do not have consistently lower medical expenses. In addition, the report finds that medical spending is on average higher for the care of health plan members with higher incomes.

To reduce the growth in health care spending in the state, the attorney general recommends taking steps to give consumers more options to make value-based purchasing decisions through tiered and limited network health plans. Because historic price disparities -- not related to value or the quality of care -- distort how the market functions, Coakley also recommends temporary restrictions on how much prices may vary for comparable services until tiered and limited network health plans, and market transparency, can improve market function.

The report notes that global payments should ultimately result in better care coordination but won't lead to lower total medical spending unless underlying market disparities are addressed.

This is the second major report on health care cost trends and cost drivers by Coakley's office. Over the past two years, the attorney general's Health Care Division has conducted an extensive review of never before obtained data from Massachusetts health insurers and providers.

"The continued increase in health care costs is one of the most important issues confronting families and businesses," Coakley said in a statement.

"Our investigation shows that a move to global payments is not the panacea to controlling costs without first addressing provider price disparities that are not related to the quality or complexity of the services being provided."

The attorney general's report is based on information received from major Massachusetts health insurers and providers pursuant to a 2008 law enacted to promote cost containment, transparency and efficiency in the delivery of quality health care. This year's six key findings are:

  • There is wide variation in the payments made by health insurers to providers that is not adequately explained by differences in quality of care;

  • Globally paid providers do not have consistently lower total medical expenses;

  • Total medical spending is on average higher for the care of health plan members with higher incomes;

  • Tiered and limited network products have increased consumer engagement in value-based purchasing decisions;

  • Preferred Provider Organization (PPO) health plans, unlike Health Maintenance Organization (HMO) health plans, create significant impediments for providers to coordinate patient care because PPO plans are not designed around primary care providers who have the information and authority necessary to coordinate the provision of health care effectively; and

  • Health care provider organizations designed around primary care can coordinate care effectively (1) through a variety of organizational models, (2) provided they have appropriate data and resources, and (3) while global payments may encourage care coordination, they pose significant challenges.

    Coakley's recommendations include:

  • Promote tiered and limited network products to increase value-based purchasing decisions;

  • Reduce health care price distortions through temporary statutory restrictions until tiered and limited network products and commercial market transparency can improve market function;

  • Encourage consumers to select a primary care provider who can assist consumers in coordinating care based on each consumer's needs and best interests;

  • Promote coordination of patient care through primary care providers by recognizing the need to improve funding of care coordination, including the infrastructure necessary to coordinate care, and by giving providers timely access to relevant patient data regardless of their size or payment methodology;

  • Consider steps to improve the use of the all payer claims database (APCD) by: (1) developing reports for providers and the public to guide development of patient care coordination improvements and system accountability, and (2) increasing the standardization of claim level submissions by reducing differences in how payers report payment level information; and

  • Develop appropriate regulations, solvency standards and oversight for providers who contract to manage the risk of insured and self-insured populations.

    The complete report is available at

    From Legal Newsline: Reach Jessica Karmasek by e-mail at

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