Massachusetts: ACOs, global payments don’t lower costs

By Mass-Care staff
June 22, 2011

Today’s “Commonhealth” blog at WBUR, Boston’s NPR news station, has a flashy headline article titled “Massachusetts Attorney General Drops Health Reform Bombshell.”
What’s the bombshell? That the state’s proposal to control health care costs by moving people into accountable care organizations (ACOs) is unlikely to work, because patients who are currently covered by similar arrangements receive care that is just as expensive as everyone else.
ACOs are supposed to control costs using old managed-care tactics that led to patient and provider revolts in the 1990s: forcing patients into limited networks where they have a limited choice of doctors and hospitals, and paying providers on a “capitated” basis.
Capitation means that providers get paid a fixed amount for treating a patient for a whole year, regardless of how much or how little it ends up costing to treat them. The theory is that this will remove the incentives for providers to overuse certain types of care, since they actually lose money by providing more care. The reality is that it gives providers an incentive to avoid people with serious health issues, and to provide less care (appropriate and inappropriate) to those they do cover.
WBUR could have added a subtitle, “Commonwealth of Massachusetts Drops Health Reform Bombshell,” because the governor’s administration also just released a report showing that health care costs for people with private insurance is going through the roof -- a 10 percent increase from 2008 to 2009, more than twice the national average, and more than five times the rate of inflation.
Did the state find that these costs were due to over-use of care and growing utilization? No -- the report states that it is rising prices for receiving the same care, not growing use of care, that explains virtually all of the rising health care costs in private insurance. In other words, preventing overuse of care, which is what ACOs are supposed to do, will not address the problem of rising costs.
WBUR could have added yet another subtitle, “Massachusetts Attorney General and Commonwealth of Massachusetts Dropped Health Reform Bombshell Last Year, but We Weren’t Paying Attention,” because both of these agencies included the same finding when they released their annual reports in 2010. At Mass-Care, we were struck by how the state’s research was diametrically at odds with the direction the state was moving on health policy, and reported on it here:
Winston Churchill has a famous saying: “You can always count on Americans to do the right thing -- after they’ve tried everything else.” It would seem that when the state has to resort to trying to implement, again, the follies of managed care from two decades ago -- attempting to solve the cost problem by limiting patients’ use of care -- we have tried everything else but single payer.
You can find the WBUR article, which contains two graphs and a table, here:
You can find the state’s report on health care cost trends here:
Mass-Care ( is a grassroots organizing umbrella for more than 100 groups in Massachusetts, representing over 500,000 residents in the state, who are fighting to make health care a right, i.e. to establish a single-payer health care system.