By Matt Murphy

STATE HOUSE NEWS SERVICE

STATE HOUSE -- While consumers saw their health insurance premiums and benefit levels stabilize in 2013, overall state spending on health care in Massachusetts climbed to over $50 billion and efforts to move away from fee-for-service care "stalled," according to a new report.

The Center for Health Information Analysis, created by the state's 2012 health care cost containment law, released the first-ever report Tuesday on total health care spending in Massachusetts, finding mixed results for efforts to rein in high health care costs that have long been identified as a drag on the economy.

"It's a good report for consumers, but there's a caution, which is that some consumers will have experienced higher premium increases and for those families the averages are no comfort. You really want to be able to show across the board better experience for all families, ideally," CHIA Executive Director Aron Boros said Tuesday, after delivering a briefing on his agency's finding.

The state's focus on controlling costs by encouraging alternative payment methods also received an incomplete grade, with its nation-leading 35 percent of patients enrolled in some type of global payment plan stalling out after initial gains caused by large providers pursuing new coordinated care contracts.


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"The fact that premiums have remained relatively flat and that administrative costs are lower, according to these reports, demonstrates that we've taken it very seriously and from this report it's really important that the entire health care community work as hard as it can to make sure it's meeting the cost growth benchmarks," said Eric Linzer, spokesman for the Massachusetts Association of Health Plans. Linzer said challenges remain to hitting future cost growth benchmarks, including prescription drug costs.

Total spending on health care in Massachusetts topped out at $50.5 billion in 2013, an increase of 2.3 percent that fell below the state's cost growth benchmark and largely reflected similar national trends in slowed spending growth rates, according to the report.

Gov. Deval Patrick called the report "a mixed story."

"We have more people insured than ever before - more than anywhere else in the country - and the fact that there are more people insured and eligible for insurance is going to add to cost," Patrick told reporters. "We have slowed the rate of increase, but we actually need to reduce the total cost of health care, and those alternative payment methods, which were being so widely embraced when they were first put in place - I want to see the uptake continue, so there's work to do. It was never going to happen in one year."

Though state health care costs remain among the highest in the nation, Boros said the slowing growth rate was probably a combination of the national trend as well as cost-containment efforts at the state level. He also said there has been a "gradual, sustained" shift in the market away from HMOs to PPO plans that are fee-for-service based and less coordinated, as well the self-insurance model.

Associated Industries of Massachusetts called it "good news" that expenses fell below the benchmark, but said consumers who saw their premiums hold steady might be in the "eye of the storm."

"The fact that medical spending increases came in well below the overall rate of economic growth is a 'win' for the economy, confirming AIM's long-held positon that the benchmark should have been set lower - two percentage points below gross state product. At the same time, the easing of health spending and premium costs largely reflects a national trend that is unlikely to last as employers face rate increases from federal health reform in 2014," wrote Christopher Geehern, in an AIM blog posting Tuesday.

An AIM survey from January found that 60 percent of small employers saw premiums increased when they renewed policies for the year, and among those who said they would consider changing their plan 20 percent said they would drop employee coverage altogether. 

Premiums remained flat in 2013 at an average of $430 per month, though Boros said consumers purchasing insurance on the individual market "continue to see high and rising premiums and the gap between individual market premiums and the other group sizes continues to widen."

The report found that public spending on health care for Medicare and Medicaid made up 60 percent of the state's total spending on health care, while the average per capita cost of health care totaled $7,550 per resident. Nearly a quarter of state residents received some type of subsidized insurance through MassHealth or Commonwealth Care compared to the 18 percent nationally that receive public health benefits.

While spending growth came in below the 3.6 percent growth benchmark outlined under a 2012 cost containment law, total expenditures grew faster than the 1.5 percent inflation rate but below the 2.6 percent increase in gross state product, the factor to which the health care benchmark is pegged.

"What we think is happening is the health insurers themselves are absorbing some of those increased costs, so although medical expenses are increasing, their administrative expenses are decreasing so it's squeezing their margin," Boros said.

CHIA said it plans to update its 2013 findings and report preliminary 2014 trends next summer when full data for last year becomes available from payers and providers. Later this year, CHIA also plans to publish more research on service pricing and quality.

The agency found that spending on Medicare increased 3.1 percent to $15.2 billion, driven largely by "unexplained" enrollment growth, while Medicaid spending grew 4.7 percent to $13.4 billion. Boros said Medicaid spending is still well below its inflation adjusted level from 2005.

In the commercial market, costs climbed 2.2 percent to $18.4 billion. The data showed wide variations from provider to provider and health plan to plan. Boros was careful to note that researchers were not identifying any providers or health plans whose costs were "excessive" or threatening the state's ability to meet its benchmark, even though some exceeded the level.

For instance, the doctor's group associated with for-profit Steward Health Care saw costs rise 6 percent for patients in its Tufts Health Plan network, while Steward doctors with Harvard Pilgrim Health Care and Blue Cross Blue Shield saw shifts closer to plus or minus 1 percent and their overall level of spending was about average.

Blue Cross Blue Shield of Massachusetts, the state's largest insurer, saw its costs grow 3.65 percent when adjusted for health status, though actual spending in dollars grew by a smaller 2.1 percent. The higher adjusted value reflects the relative health of the population in the BCBS population, according to CHIA.

Boros singled out Partners Community HealthCare, the state's largest provider network, for having both consistently high increases, including some above the 3.6 percent benchmark, and overall levels of spending.

"We don't have any compelling evidence that there's clearly higher quality associated with higher costs and so we continue to look at that," he said.

Rich Copp, spokesman for Partners, said after an initial review that CHIA's numbers are not entirely consistent with the provider's own information, but he said company was still reviewing the report.

"Slowing the trend of health care cost growth is a long-term effort and is difficult to measure in a one-year snap shot. Partners experienced great success in 2012 actually lowering the cost of care for our patients by nearly a percent and in 2013 costs grew faster than expected but we're confident over the long-term our approach to the delivery of health services and delivering lower cost care in community settings will improve care of patients and keep costs affordable," Copp said.

The CHIA report did not factor in spending on dental, vision or other out-of-pocket expenses for nursing care or procedures that aren't covered by insurance. The report also did not capture spending in the self-insured marketplace.

Steven Walsh, the executive director of the Massachusetts Council of Community Hospitals, said he was "encouraged" by the report. Walsh helped to write the 2012 cost containment law as a member of the House and co-chair of the Health Care Financing Committee.

"It's slow going, but that's to be expected. Things always take longer than maybe we hope. The immediate takeaway is that community hospitals are doing their job providing high quality, cost efficient care and its incumbent on us to drive patients back to their community providers," Walsh said.

Andy Metzger contributed reporting.