Is Massachusetts Too Generous When It Comes To Health Benefits?

Generosity is good, right?

Sure. But given the skyrocketing cost of health care here, should the state of Massachusetts continue its far-reaching mandatory insurance coverage, for instance, requiring that fertility treatments and chiropractic services be covered by every health insurance policy?

In an opinion piece in today's Boston Globe, Robert C. Pozen, a senior lecturer at the Harvard Business School says "No."

He writes:

Massachusetts has one of the longest lists of mandatory insurance coverages of any state. There is no option for forgoing any mandatory coverage and paying a lower premium. The total incremental cost of mandatory benefits in Massachusetts was over $300 million during 2004-2005.

Pozen also suggests that a new system of co-payments — one that took into account the vast price differences for services delivered by different hospitals and providers — would also stabilize overall costs.

For example, the price charged by Massachusetts General Hospital for a normal delivery of a baby is at least $1,000 more than the price of a similar service at a high-quality suburban hospital. Similarly, the price of a magnetic resonance imaging test is $300 to $500 higher at Mass. General than at other Massachusetts facilities.

However, patients do not know about these large price differences and have no incentive to seek out a lower cost provider. By contrast, suppose patients were charged a $100 copayment for a normal baby delivery at Mass. General, and only a $30 copayment for a normal baby delivery at other high-quality hospitals. We would likely see a stampede to these other hospitals.

These are not isolated examples of cost differentials. According to a recent study by the attorney general, the difference in payments made to the lowest-paid versus highest-paid hospital in one major insurer’s local network exceeds 300 percent. Similarly, the price paid by another major insurer to the highest-paid group of doctors was 224 percent higher than the price it paid to the lowest-paid doctor groups.