Bookmark and Share

April 2009

New Report Released on Health Care Cost Drivers in Maine

According to the Centers for Medicare and Medicaid Services, in 2004 Maine had the second highest per person medical spending in the United States. As part of Dirigo Reforms enacted in 2003, Maine is working hard to reduce its rate of growth.  In its recently released report, Health Care Cost Drivers in Maine, Maine’s Advisory Council on Health Systems Development (ACHSD) details numerous factors that contribute to high health care costs and lays out a set of strategies to reduce further cost increases. 

As part of their effort to better understand cost drivers in the state, the report begins by highlighting Dirigo transparency and quality initiatives that have already been implemented.  These initiatives include regulations that stipulate insurance companies report on how premiums are spent, hospitals report their financial information to the Maine Health Data Organization, providers report the prices of commonly offered procedures, and the Maine Quality Forum post provider quality data on its website.

The report proceeds to show that the high rate of medical spending is largely driven by health care that is over utilized, inefficient, and often unnecessary, and that there is significant variation in how it is delivered across the state.  The report summarizes studies that were developed to analyze three major cost drivers:

  • Health Care Variation: A study contracted by Maine Quality Forum and conducted by Health Dialog Analytic Solutions, analyzed Maine’s first-in-the-nation all-payer claims database and found significant variation in potentially avoidable utilization across 24 Health Service Areas (HSAs).  The study shows that potentially avoidable inpatient admissions coupled with high cost, high variation outpatient use of care is a significant cost driver.  If commercial payers potentially avoidable inpatient use and high cost/high variation outpatient use of care could be reduced by 50 percent commercial spending could be reduced by 11.5 percent  Similar reductions of inpatient admissions and outpatient care use in MaineCare (Medicaid) could reduce MaineCare spending by 5.7 percent.
  • Lack of Evidence Based Benefit Design: A report of Public Purchasers Steering Group, an organization created by the 2003 Dirigo Health Reform Act, explains that outpatient hospital services continue to be the largest driver of public purchasers’ spending (26 percent of total).  As a means to combat this, the report proposes the adoption of “evidence-based benefit design,” which would lessen the use of services that do not provide adequate value.  This approach would include tiering providers based on value metrics based on quality and cost and offering consumers who choose providers who perform well on those metrics with lower out of pocket costs.
  • High Emergency Department Use: According to a report by the Muskie School and Maine Health Information Center, Maine emergency department use was 30 percent higher than the national average in 2006.  Although the report states that spending on emergency department services is not a significant component of total health care spending in the state, it nonetheless has a number of negative effects including emergency room overcrowding, added costs, and fragmented care.

In response to these and other cost drivers, the report outlines a set of both long and short term strategies to control cost growth:

  • Pursue public health policies to reduce health care utilization and formalize the public health infrastructure implemented under the State Health Plan;
  • Support expansion of Maine’s interconnected electronic medical system pilot—which currently covers 40 percent of lives in the state—to improve quality and reduce costs;
  • Further develop value measures for providers so that purchasers can create incentive for patients to choose high value providers;
  • Pursue payment reform that will reward providers for quality of care rather than quantity of care and support a payment reform demonstration that emphasizes the role of a patient centered medical home to achieve this change;
  • Identify and implement strategies to reduce emergency department use by performing an in-depth analysis of six HSAs representing high use and low use areas—as well as rural and urban, and geographic proximity and diversity—to better understand what drives high and low emergency department use, and develop interventions accordingly;. 
  • Disseminate information from the report to the public to ensure they play a more active role in reducing health care costs;
  • Develop an insurance checklist for consumers who purchase in the individual market so that they can choose high quality providers;
  • Provide greater transparency to the public by having Maine’s Bureau of Insurance create and post on its web site consumer-friendly summaries  insurance companies’ premium, claims, and administrative cost information;
  • Revise certificate of need criteria to address care variation and high emergency department use, and to reduce thresholds for CON review so that the state can more closely monitor the need for new projects and their impact on costs.