Massachusetts and Maryland: A study in health price contrasts

Maryland and Massachusetts: an exercise in opposites.

Maryland has consistently had the lowest increase in health costs, while Massachusetts has consistently, well, not.

Why is that?

Here’s a government spreadsheet showing the size of average deductibles. VT $1,570, CT $1,331, NY $908 TX $1,374, ME $1,408 MD $787, with Maryland hanging around North Dakota.

Meanwhile, Massachusetts — home of Romneycare — is the place where Gov. Deval Patrick signed a bill in August to control health costs by restricting growth on health spending.

So what is  Maryland doing right?

Maggie Mahar, the gimlet-eyed health reporter, covered this problem in a series of blog posts on HealthBeat in 2010: “In 1977, Maryland decided that, rather than leaving prices to the vagaries of a marketplace where insurers and hospitals negotiate behind closed doors, it would delegate the task of setting reimbursement rates for acute-care hospitals to an independent agency, the Maryland Health Services Cost Review Commission,” she wrote.

“When setting rates, the Commission takes into account differences in labor markets and how much a hospital pays in wages; the amount of charity care the hospital does; and whether it treats a large number of severely ill patients. For example, the Commission sets the price of an overnight stay at St. Joseph Medical Center in suburban Towson  at $984,  while letting  Johns Hopkins, in Baltimore Maryland, charge  $1,555. For a basic chest X-ray, St. Joseph’s asks  $81 and Hopkins’ is allowd to  charge  $155.The differences reflect Hopkins’s higher costs as a teaching hospital and the fact that it cares for generally sicker patients.”

She also referred to the Massachusetts study by Attorney General Martha Coakley, which found that health-care providers with clout in Massachusetts routinely demand higher prices and threaten to leave a health plan if they don’t get that higher price.

The report, Mahar writes, cited these points:

  • “Prices paid by health insurance companies to hospitals and physician groups in the Commonwealth vary significantly within the same geographic area and amongst providers offering similar levels of service.
  • “Price variations are not correlated to (1) quality of care, (2) the sickness or complexity of the population being served, (3) the extent to which a provider is responsible for caring for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or research facility. Moreover, (5) price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities.
  • “Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers.”

In fact, the report says, “Price increases, not increases in utilization, caused most of the increases in health care costs during the past few years in Massachusetts.”