THE BURDEN OF health care costs has been a national challenge for the last 50 years. Costs have consistently grown faster than the rest of the economy and, as a consequence, have crowded out other discretionary spending by government and employers while creating progressive hardship for individuals, particularly the low-income employed. These facts are unquestioned, but as we prepare to act on local remedies it is important to consider where our state stands on the national spectrum.
Massachusetts is a high cost-of-living state; it was 37 percent above the national average in 2016. Not surprisingly, those input costs (labor, real estate, utilities, etc.) lead to higher health care costs. Even so, the absolute differential in family health insurance premiums between the Massachusetts and US averages is a more modest 6 percent and steadily declining. The absolute differential used to be greater; market reforms and other policy changes put in place since 2006 have made a difference.
Adjusted for wage differential, which is 18 percent higher here, Massachusetts health care costs to employers and consumers are among the lowest in the country and growing at historically low rates in the last five years. Out-of-pocket consumer costs are the lowest of any state, at 7.3 percent of median family income. Anecdotal reports of large increases in premiums to small employers are not caused by provider cost increases but reflect flaws in the way the insurance underwriting process works.
In addition, Massachusetts hospital prices are in the bottom 20 percent of the country, according to the National Bureau of Economic Research. In spite of this, our health care is consistently ranked among the best for quality and access. When polled, 75 percent of our residents believe that we have the best hospitals in the country for clinical care. We also lead the nation in life science research funding per capita (nearly double the next most successful state). Unlike the rest of the country where nearly all of the research funding goes to universities, in Massachusetts most of the life sciences research is done at hospitals. This strength in research is an important contributor to employment and the local economy that is unmatched in the nation. When you add all this up, our health care system is one of our state’s greatest assets across multiple dimensions — affordability, access, quality, and scientific and economic productivity. Portraying our health care environment as causing a perpetual state of crisis, with a need for aggressive intervention, is simply not supported by the present context or trends. In fact, the business climate in Massachusetts is attractive to employers and out-of-state investment. Unemployment is the lowest in 15 years — 2.9 percent — and we are one of the top 10 states in the rate of job growth.
We need to keep working to make our health care delivery system better, because it will clearly never be perfect. Right now, due to a combination of low commercial payer mix and rates and inadequate government reimbursement, a segment of our important community hospital sector is struggling. Better commercial rates may relieve some of these institutions but, in the end, most hospitals facing this problem will need help from a targeted solution sourced from a broad base, something akin to how uncompensated care was managed collectively for years before health reform.
Proposals for government intervention in hospital payments with regulations that sanction our teaching hospitals, already reimbursed at rates that are lower than national competitors, will threaten some of our most important regional assets for both complex clinical care and research. Massachusetts lost its lead in computer technology to Silicon Valley just a few decades back. Our substantial lead in life sciences cannot be taken for granted in an intensely competitive arena where we compete for talent on a worldwide scale. There is a great deal at stake in this discussion, and good policies can rise only from a clear understanding of the full context.
David Torchiana is president and CEO of Partners HealthCare.