One-third of health care spending in Massachusetts is 'wasteful'

A significant chunk of the money that the state of Massachusetts spends on health care is wasteful, according to a new report from the state’s Health Policy Commission (PDF).

Since Massachusetts was the first state in the U.S. to institute universal health care and its system inspired President Barack Obama’s signature health care law, the Affordable Care Act, the state is often viewed as a bellwether in terms of the future of health care spending.

The commission, an independent agency formed in 2012 to analyze the state’s progress on health care reform, found that between 21 and 39 percent of Massachusetts’ spending on health care in 2012 was “wasteful,” which it defined as spending that could have been eliminated without harming customers or lowering the quality of health care.

That’s anywhere from $14.7 billion to $26.9 billion.

The report offered specific examples of what constituted health care waste, such as $550 million the state spent on unnecessary visits to the hospital emergency department and $700 million on hospital readmissions that it said were preventable.

It did note, however, that wasteful health care spending occurs, on average, around the same rate at the national level.

The HPC crunched health care claims data from the state’s claims database for the first time to examine spending, which it determined made up 16.6 percent of Massachusetts’ total expenditures, making it the state with the highest per capita health care spending in the U.S. The national average, the report said, is about 15.1 percent.

The reason for this, according to the HPC, is that Massachusetts residents were more likely to visit hospitals and utilize long-term care than people in the rest of the country. In comparison to the U.S. average in 2011, after statistically accounting for their age, people living in Massachusetts were admitted to the hospital 10 percent more often and visited the emergency room 13 percent more often. They also used long-term-care services 31 percent more often and outpatient services at hospitals 72 percent more often than the national average.

Another reason for higher spending is that the cost of health care in Massachusetts is between 3 and 5 percent higher than the national average, according to recent analyses.

The authors wrote that health care spending in Massachusetts grew faster than both the national average and the state’s economy from 2001 to 2009, but that since then, the state’s health care spending has slowed.

Among its recommendations, the HPC said the state could improve its health care system by making spending more transparent and by rewarding alternative payment methods like the bundling of payments to doctors or hospitals for a range of services, rather than the traditional fee-for-service model that has driven up costs.

“Massachusetts has better overall health care quality performance and offers better access to care than many other states,” the report said. “However, considerable opportunities remain to further improve quality and access as well as population health.”