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Tackling Rising Health Care Costs in Massachusetts



The Issue

In 2006, Massachusetts passed a landmark health care law that expanded Medicaid eligibility for low-income residents, provided subsidies to make insurance more affordable for people with moderate incomes, and created health insurance exchanges to help residents and businesses purchase private health insurance. Despite rising numbers of uninsured individuals nationally, the number of uninsured residents in Massachusetts dropped from 10.9 percent in 2006 to 6.3 percent in 2010. However, the state was still faced with a significant policy challenge: controlling rising health care costs.

What the Study Found

On August 6, 2012, Massachusetts passed a new law designed to contain health care costs. Elements of the law include:

  • limiting the growth of health care spending to growth in the state’s economy, as measured by the gross state product;
  • replacing traditional fee-for-service payment of providers with alternative models, including shared-savings programs, global budgets, and bundled payments; 
  • supporting the formation of accountable care organizations and patient-centered medical homes to promote the delivery of well-integrated, coordinated, and cost-effective care; 
  • promoting transparency through expanded public reporting of quality and cost data; and 
  • addressing the high volume of medical malpractice claims by instituting a 182-day cooling-off period before patients can file a lawsuit and making providers’ apologies inadmissible in malpractice proceedings.

Massachusetts has several distinct advantages that could facilitate cost savings, the authors say. These include a high rate of insurance coverage, which alleviates the burden of uncompensated care, and a statewide all-payer claims database, which enables state officials to monitor and report on variations in payments and volume of services.


Massachusetts legislative leaders project the law will save up to $200 billion in health care spending over the next 15 years. As with the state’s earlier health insurance expansion law, the new law will serve as a test case and be closely watched by other states and the federal government.

Publication Details



J. Z. Ayanian and P. J. Van der Wees, "Tackling Rising Health Care Costs in Massachusetts," New England Journal of Medicine, published online Aug. 15, 2012.