Massachusetts AG: Global Payments Aren't Controlling Costs Either

One of the main attractions of the Massachusetts health care plan (other than the obvious primary goal of expanding coverage) was that it would control many areas of cost growth.  Insurance was supposed to become more affordable, as adverse selection ceased to be a problem.   Cheap preventative care was supposed to avoid costly crises.  Giving people access to regular health care was supposed to cut down on costly emergency room visits.


Most of these savings didn't materialize.  The already high cost of insurance continued to rise faster than the US average.  ER visits actually rose, as wait times for primary care appointments stretched out, and people who'd used the ER to schedule around inflexible work demands continued to do so.  Preventative care turns out to be largely not cheaper than letting people get sick (though of course, that doesn't mean it's not a good idea for other reasons).  When last heard from, the Massachusetts government was blaming the fee-for-service model and contemplating some sort of move to capitation (paying per patient, rather than per procedure).

But last week, while I was rusticating in the wilds of Kentucky, Massachusetts Attorney General issued a report saying that this isn't going to work either:

The yearlong review of what six large Massachusetts insurers paid providers in 2009 found that doctors working under the new "global payment'' system -- which puts them on a per-patient monthly budget -- generally did not cost less than doctors paid the standard way. And in some cases, large doctors groups such as Atrius Health and Mount Auburn Cambridge were far more expensive than physicians paid under the fee-for-service system, despite being put on a budget.

. . . Coakley recommended that the state adopt "temporary statutory restrictions on how much prices may vary for similar services.'' She said this would "reduce health care price distortions'' until insurance plans that direct consumers toward less expensive providers, and other measures have time to work.

Of course, this is only a limited study.  But it's not entirely surprising.  Capitation was tried and failed in the United States in the past, as both patients and providers rebelled, and marshalled considerable political and financial muscle to fight its imposition.

There's a great deal of path dependence in health care systems, as with most systems.  It's a lot easier to keep a system cheap than it is to make an expensive system less costly.  If Massachusetts went to price controls, we might find that even the single payer type systems that have kept costs somewhat lower in Europe, don't do the same thing here.

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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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