Why is Health Care so Expensive?

The Massachusetts Attorney General’s office and the Massachusetts Division of Health Care Finance & Policy issued a series of reports detailing their investigation and subsequent findings which we have listed below.

Did you know Massachusetts insurance companies pay some providers twice as much as other providers for fundamentally the same patient care, according to a preliminary report by Attorney General Martha Coakley?  This indicates the market clout of the highest paid providers is a key component of the state’s ever increasing health care costs.
Refer below for the full report.


Among the major findings in the individual reports:

On February 12, the state's Division of Health Care Finance and Policy released a series of three new reports on health care costs.  According to the reports, Massachusetts spending is 15% higher than the rest of the nation and that increases in the rates providers charge are the major reason for premium increases over the last several years.

Massachusetts Health Care System in Context: the report examines different characteristics of the Massachusetts health care system and the factors contributing to high health care costs, which include

·   Greater availability and use of more expensive academic medical centers and use of outpatient hospital-based facilities for some services that could be provided
in less costly settings

·    A high number of specialty doctors, rather than primary care doctors, and a health care system dominated by academic medical centers, both of which tend to provide costlier care

A high concentration of physicians in academic medical centers compared to national averages

Private Health Insurance Premium Trends: the report explores health care premium growth rates during 2006 to 2008

·     Most of the health insurance premium dollar goes toward medical expenses - the actual health care.

·     In Massachusetts, more than 88% of the premiums are spent on medical expenses on average as compared to less than 84% nationally

·      The growth in the cost of premiums was caused almost entirely by growth in medical expenses.  Spending on non-medical expenses, such as health plan administrative costs and profits and brokers' commissions, grew more slowly

Health Spending Trends for Privately Insured: the report examines trends in health care spending from 2006 - 2008 for care provided to fully-insured and self-insured Massachusetts residents.

·       Price per service is rising more than utilization, as price increases were the major driver of growth in spending for most health care services

·       Much of the increase in spending went towards outpatient hospital services, which saw a growth in prices and volume of imaging services (such as MRIs and CT scans), medical procedures and cancer therapies provided

·        Large employer groups experienced faster growth in per person medical spending than small employers.  Over the three year period, health spending at large firms (500+ employees) at 16.6%, compared to mid-size firms (50-499) employees and small employers (50 or fewer employees), which both grew 15.4% during that period.