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Curbing health care costs may cost state $40 million a year

The state will have to spend money to save money on health care costs, according to preliminary estimates from Governor Deval Patrick’s administration.

The cost to the state of imple­menting cost-control legislation being finalized by House and Senate leaders could be $20 million to $40 million a year, the governor’s staff said yesterday.

Most of that money would pay for an agency to oversee changes in how doctors and hospitals are paid, monitor whether the state is meeting spending targets, and potentially review performance improve­ment plans from insurers and providers that are too costly. A portion would pay for information technology and for existing agencies to implement new programs.


Even with a tight state budget, the governor’s office said the investment is worth the poten­tial savings that will result from cutting health costs and improving the coordination of patient care. House leaders, for example, estimate that their plan would save $160 billion over the next 15 years.

The administration’s estimate does not include rate ­increases to providers who treat patients enrolled in Medicaid, also called MassHealth, that are included in the House legislation. Spokesman Brendan Ryan said the administration cannot anticipate those costs now, ­because it is unclear who will qualify for fee increases and how much they will be.

Senate and House leaders are negotiating competing plans for controlling health care costs, and they expect to have a bill on the governor’s desk by the end of the month.

Increases in Medicaid payments to hospitals and doctors could cost millions of dollars more.

“We expect there will be some limited transition costs as MassHealth continues to move to more integrated care and alter­native payments, as well as other administrative costs associated with the new data collection and reporting requirements proposed in both bills,’’ Ryan said in a statement. “The state budget is tight, and any new costs force tough decisions. But both of these bills set the Commonwealth on a path to save more than $100 billion in health care cost growth in the next 15 years. These new administrative costs are a fraction of 1 percent of those savings; in that regard, they are worthwhile investments.”


Representative Steven Walsh, a Lynn Democrat who is overseeing the House bill, said setting standards for new organizations such as accountable care organizations, large groups of providers that coordinate care for patients, and medical homes that care for ­patients in a coordinated, long-term manner and making sure they meet those requirements will no doubt cost money

But those expenditures will in the end help hold the state to its spending targets, he said. By 2016, the House calls for annual increases in spending to shrink to half a percentage point less than the rate of growth of the gross state product, a measure of economic ­activity. The Senate believes the industry should not be forced to grow more slowly than the economy overall.

“The [new] agency will be responsible to hold the market to that number, which will generate billions of dollars in savings,’’ Walsh said. “Someone has to oversee that; it just doesn’t happen on its own.’’

Michael Widmer, president of the Massachusetts Taxpayers Foundation, agreed that an invest­ment is necessary and said $2o million to $40 million is reasonable.’ But given the broad powers of the new agency the House wants to create, he believes the cost will end up ­being higher.


He pointed out that the cost of some components of the House and Senate bills will not be borne by the state, but by ­insurers and providers. The House wants to charge insurers and providers a $200 million one-time assessment to help distressed hospitals and to pay for wellness programs, while the Senate wants to charge ­insurers $40 million a year over five years for wellness programs and information technology costs.

“You’re charging them additional costs while trying to hold costs down,” he said. “There are a lot of contradictions in the legislation.’’

Liz Kowalczyk can be reached at kowalczyk@globe.com.