Massachusetts has succeeded in providing health care insurance for all but 2.6% of its citizens.
Yet the Commonwealth still struggles to make that coverage affordable. Health care inflation is driving Massachusetts’ system toward a cliff. Total outlays for medical services and products are climbing 8 percent faster than the state’s economy. Unless something is done to rein in the cost of care, health care spending in Massachusetts is projected to nearly double over the next 10 years, hitting $123 billion in 2020. State officials know they must find a way to put a lid on spending so that it grows no faster than the state’s gross domestic product. .
But how?
With that question in mind, The Massachusetts Division of Health Care and Policy (DHCFP) contracted with the RAND Corporation to develop a menu of cost containment strategies and options. In September RAND came back with a report that recommended 12 strategies for reducing health care bills.
Near the top of the list (right after “bundling” payments for doctors and hospitals), Rand suggested that Massachusetts set hospital prices by “establishing a regulatory board to determine appropriate rates for hospital inpatient, outpatient, and emergency department care, limiting payment to the minimum amount necessary to cover hospital operating expenses, and requiring all payers (both private insurers and Medicare) to adhere to the rates set.
In other words, Rand recommended that Massachusetts consider the “Maryland solution” (a.k.a. the “all-payer” strategy). Here’s a brief summary: In Maryland prices for all hospital services are set by seven commissioners appointed by the governor to four-year terms. When setting rates for at individual hospitals, the Commission takes into account each hospital's wages, charity care and severity of patient illnesses. Hospitals can appeal only to the commission or take the dispute to court.
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