Controlling Health Care Spending in Massachusetts

I n 2006, Massachusetts passed landmark legislation ensuring near-universal health insurance coverage to residents of the state through a combination of mechanisms. By 2008, only 2.6 percent of Massachusetts residents were uninsured, considerably below the national average of 15 percent. However, continued increases in the cost of health care services threaten the long-term viability of the initiative. As highlighted in Figure 1, in the absence of policy change, health care spending in Massachusetts is projected to nearly double to $123 billion in 2020, increasing 8 percent faster than the state’s gross domestic product (GDP). If health care spending could be held to the rate of growth in the state’s GDP, this would keep health spending from consuming an ever-increasing portion of the state’s economy; spending would be $107 billion by 2020. Finding a way to reduce spending on health care is a major focus for private and public policymakers in the state. Policymakers are asking: Is it feasible to reduce the growth of health spending? And, if so, what are the most promising strategies for doing so? Th ese same questions have been raised in the debate over national health reform legislation, and federal policymakers are looking to the Massachusetts experience for insight about the possible outcomes of national health reform. Th e Massachusetts Division of Health Care Finance and Policy (DHCFP) contracted with the RAND Corporation to develop a menu of cost-containment strategies and options and to determine how they would aff ect all sectors of the health care system in Massachusetts, including state and federal government, providers, Key fi ndings: