For Immediate Release - June 27, 2011

Patrick-Murray Administration Advances Health Care Cost Containment Efforts with Cost Trend Hearings

Testimony from Division of Health Care Finance and Policy, Division of Insurance and Attorney General will examine health care cost trends and explore strategies to control costs

BOSTON - The Patrick-Murray Administration's Division of Health Care Finance and Policy (DHCFP) today began a series of hearings to explore progress on the Administration's health care cost containment efforts and discuss cost trends in the health care market. DHCFP recently released three reports highlighting the urgent need for action in the face of rising health care costs, and these reports, as well as data released by the Division of Insurance and the Office of the Attorney General, will inform testimony during the four days of hearings from June 27 through June 30.

"All that we're hearing about current trends in the health care industry underscores the need for urgent action to control skyrocketing costs," said Governor Deval Patrick. "Our bill will make significant strides in helping to achieve needed relief for families and businesses paying far too much for health care, but we need action, and we need it now."

During today's hearing, Governor Patrick outlined his comprehensive health care cost containment legislation, filed in February, and urged the Legislature for swift action on the bill. The legislation, designed to control rising health care costs and improve patient care, establishes a structure and process to facilitate significant reforms to the Commonwealth's health care payment and service delivery systems over the next three years. The measure builds on the Administration's previous success in reducing health care premiums for thousands of small businesses and families through the Division of Insurance's rate review. The Group Insurance Commission (GIC) also recently announced that more than 30 percent of state employees enrolled in lower-cost limited network plans during its annual re-enrollment period, saving the Commonwealth an estimated $20 million this year.

The DHCFP hearings, held at Bunker Hill Community College, will examine ways to continue promoting innovative measures to achieve system-wide cost reduction. Hearing participants include Governor Patrick, Secretaries JudyAnn Bigby and Jay Gonzalez, Attorney General Martha Coakley, Inspector General Gregory Sullivan, Senate President Therese Murray and prominent stakeholders in the health care industry representing both providers and insurers. These participants will discuss the factors underlying rapidly rising levels of health care costs and strategies for cost containment. Testimony at the hearings will help DHCFP develop a final report with concrete recommendations on how to increase efficiency in the Commonwealth's health care delivery system.

Data from DHCFP's reports reveal that from 2007 to 2009, health care spending in Massachusetts continued to outpace growth in the state's economy. Health spending by private insurance companies in Massachusetts outpaced spending by both Medicare and Medicaid, and this faster growth in spending by private payers was largely due to increasing prices. Additionally, DHCFP found that there is a significant variation in prices paid to providers for the same health service. There was at least a three-fold difference for every service analyzed and for most, a variation of six or seven- fold.

The Division's reports also reveal that consumers and businesses continue to pay for more limited health care benefits. On average, the level of benefits covered by private group health insurance is declining and member cost-sharing is increasing. From 2007 to 2009, private group health insurance premiums in Massachusetts increased roughly 5 to 10 percent annually, when adjusted for benefits.

"We need change now. Consumers are paying more out of pocket while their benefits are decreasing. We can expect to see consumers cut back on health services they need," said Secretary of Health and Human Services Dr. JudyAnn Bigby. "The hearings will highlight how to move forward in reforming systems to ensure access and quality while containing costs."

Acting Commissioner of the Division of Health Care Finance and Policy Seena Perumal Carrington said, "These hearings will offer a unique opportunity to better understand health care costs in the Commonwealth, and to highlight successful strategies to contain costs from those that may be less so. We need frank, open discussions to effectively move forward, and that is our objective."

Last year, Governor Patrick called on the Commissioner of the Division of Insurance to use his existing authority to disapprove rates from carriers that were unreasonable or excessive. Through disapprovals and settlements, small businesses and individuals saved $106 million in the last year on health care premiums. Legislation signed by the Governor last August called for the creation of limited network plans, which will cost at least 12 percent less than regular plans, and group purchasing cooperatives that allow small businesses and individuals to combine market power. Those initiatives are scheduled to be fully implemented by the end of this year and will bring additional savings to small business owners across the Commonwealth.

"Over the last 18 months. we have seen important changes in the health care landscape as we work with carriers, providers and other stakeholders in lowering costs," said Joseph G. Murphy, Commissioner of the Division of Insurance. "We still have a need for long-term reform, and these hearings will help us move that conversation forward."

"Consumers are frustrated that while we continue to pay more out of pocket, the quality of our care has not improved. Governor Patrick's payment reform legislation will address this problem by refocusing incentives in our current health care system in order to put patients at the center of their care and encourage better coordination between medical professionals," said Amy Whitcomb Slemmer, Executive Director of Health Care For All. "We urge legislators to act quickly on this legislation so that we can encourage healthier outcomes and reduce health care costs."

The mission of the Division of Health Care Finance and Policy is to improve health care quality and contain health care costs by critically examining the Massachusetts health care delivery system and providing objective information, developing and recommending policies, and implementing strategies that benefit the people of the Commonwealth. The three DHCFP reports discussed during today's hearings were developed with analyses conducted by Mathematica Policy Research, Freedman HealthCare and Oliver Wyman Actuarial Consulting, Inc.

The full reports, written testimony, and related hearing materials are available online at .

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