Reducing the Cost of Health Care

By Deirdre Cummings
Legislative Director

In 2006, Massachusetts became a model for the nation when we enacted a law that expanded access to health care. We now lead the country with over 98% of residents insured, having extended coverage to 400,000 Bay Staters who were previously uninsured and without meaningful healthcare.  

Our success will unravel, however, if we fail to reverse the trend of rising health care costs that are now among the highest in the nation.  The more expensive health care gets, the more other priorities in Massachusetts suffer. If we don’t control our out-of-control health care costs, it is likely Massachusetts will reduce investments in education or transportation, employers could lower salaries or hire fewer employees, and consumers will spend less on goods and services or reduce savings to their college or retirement accounts. It’s time for Massachusetts to take the lead once again: we can and must control health care costs.

Experts estimate that thirty percent of spending on health care is wasted on ineffective care, pointless red tape, and counterproductive treatments that can actually harm patients.[1] Costs soar because we are not spending on or measuring health outcomes effectively, too many people are filling out multiple and inefficient forms, and we’re delivering uncoordinated, low-quality care where multiple specialists order duplicative tests  and fail to coordinate care—in some cases even providing contradictory treatments for the same patient.

In May 2012, the Massachusetts  House and Senate each released bills aimed at reducing costs and improving health care, with savings estimates ranging from $150-160 billion over the next 15 years. This legislation, combined with the Governor’s commitment to reform, presents an opportunity to take a significant step forward in lowering the cost of healthcare in Massachusetts. It won’t be easy: for every proposed change there is a special interest invested in keeping the status quo. Nor is there just one fix, or one magic bullet that will solve the problems of cost and quality. Now, with commitments from key state leaders coupled with the tremendous cost of inaction, we can once again lead the nation in reforming health care.

Six Steps to Health Care Savings and Improved Care:

1-Payment Reform

Perhaps the single factor most responsible for runaway health care costs is  that high-quality, cost-effective treatments are not incentivized – instead, most doctors and hospitals are paid according to the quantity, not the quality, of care that they provide.

Our current “fee-for-service” model incentivizes specialized procedures over wellness. "Fee-for service" allows health care providers to receive payment for each visit with a patient, each test ordered, and each procedure performed. This system rewards hospitals and doctors who rely on a higher complexity and quantity of tests and treatments, with no connection to quality of care, patient satisfaction or outcomes. 

Successful reform must include plans to shift from “fee-for-service” payment models to other models. For example, global payment is the practice of insurers’ providing a lump sum for each insured member. This rewards or incentivizes quality, well-coordinated care that delivers results instead of the current system where clinicians and institutions are paid based on the number of tests and procedures they perform.

The final Health Care Cost Control Bill should allow for different models but must require all insurers and providers (not just those administered by the state) to move to better payment models.  All shifts in payment models must incentivize patient health and satisfaction while insuring quality care. The models must be evaluated on wellness measurements including patient satisfaction and outcome data. All payment models and evaluations must be fully transparent and available for consumer review and comparison on the internet.

(For more details, see Payment reform, 10 Patient Principles)

2-Streamlined Billing and IT

In our fractured, balkanized health care system, administrative inefficiencies abound.  One of the most pointless of these is the array of different forms, codes, and billing procedures insurers require doctors to use.  These systems are different for each insurer and often rely on paper records.  As a result, some doctors spend up to 45 minutes on paperwork for every hour of care they provide. 

Further, today’s health care system is far behind virtually every other American industry in integrating productivity-enhancing information technology systems.  Electronic storage and sharing of clinical, administrative and financial health information can both streamline administration and assist doctors in providing better care.

Increased use of computerized systems integrating all of a patient’s health care data reduces medical errors and improves coordinated care as consumers often see more than one physician and may have tests or lab work done at different locations.

The final Health Care Cost Control Bill must include commitments to simplified and standardized administrative and reporting forms and provide for a significant commitment to using and developing interoperable electronic health records.

3-Investing in Public Health and Prevention

Investments in public health will lower health care costs by preventing people from developing costly health conditions that drive up health care spending, such as diabetes, heart disease and asthma. Data shows that upfront investments in prevention will reap significant savings throughout the health care system.

For example, reducing the prevalence of diabetes and hypertension by just 5% would lead to significant decreases in medical costs within a few years. Much of the high costs of these diseases lie in treating their complications – such as heart disease, stroke, and renal disease. By avoiding these complications, Massachusetts could begin to save $450.4 million per year within 5 years.[2]

The final Health Care Cost Control bill must include dedicated funding for cost-saving public health and prevention programs.


When empowered with clear, comparable, timely and meaningful cost and quality data, health care consumers are better able to leverage appropriate care and at lower costs.

The final Health Care Cost Control bill must include the establishment of a fully transparent, easy-to-use and comprehensive health care website.  Information about costs, including out of pocket costs; payment methods and incentives; health outcomes and consumer satisfaction by hospital, procedure and medical group; and insurers’ progress toward controlling costs, for example should be included.   All governing and oversight boards must also be fully transparent and comply with open meeting laws.

5-Consumer Protection

The final Health Care Cost Control bill must provide consumers and patient representatives a meaningful role in guiding payment reforms and controlling costs and be provided a voting seat on any boards or agencies making payment reform decisions. The bill must retain the current consumer rights to an independent external review when a health plan denies care and timely access to an appeal process. The final bill should also have explicit requirements that savings are passed on to consumers.

6-Fair Payment: Effective Public Oversight of Health Care Costs

Unregulated, private market negotiations have resulted in our highest-in-the-nation health care costs.

The final Health Care Cost Control bill must provide state government the authority to reject unreasonable charges by insurers, hospitals and other medical providers and include an effective, enforceable provision to hold down the cost of medical care. A target growth rate for medical spending should be established and if spending exceeds the target, then providers and insurers who are responsible for the excessive costs should be required to lower their prices.

For more information please see MASSPIRG’s report, The $3 Trillion Dollar Question.

For more details, see Payment reform, 10 Patient Principles
[1] Donald M. Berwick, MD, MPP; Andrew D. Hackbarth, MPhil, JAMA, Eliminating Waste in US Health Care,

[2] Ormond B, Spillman C, Waidmann T, Caswell K, Tereshchenko B. Potential national and state medical care savings from primary disease prevention. American Journal of Public Health. 2011;101(1):157‐164.

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