BOSTON — A new report released today by Attorney General Maura Healey’s Office studies how a commonly-used calculation for determining health care payments does not fully capture health needs for residents who have barriers to accessing health care services. This incomplete picture of community health means that health care funding is diverted away from low-income communities and the health care providers who serve them.

This is the latest report from the AG’s Office in its ongoing work to promote health equity and examine health care cost trends in Massachusetts. Today’s report looks at different ways to estimate the health needs of a population and the unintended consequences of allocating health care funding based on a group’s history of using health care services.

“To really improve health equity in Massachusetts, we need to distribute health care dollars in a more equitable way,” said AG Healey. “Our report shows that we need to take into account the social determinants of health and a community’s barriers to accessing care when we decide where to direct health care funding.”

In deciding how to allocate health care funding, government agencies, insurance companies, and health care providers frequently use statistical tools that try to account for the health or sickness of a patient population to direct those funds to the sickest patients that need them most. This process is called health status adjustment and is an important part of efforts to allocate funds and control health care costs, because sick patients need more health care resources than healthy ones.

However, this report finds that the current approaches to health status adjustment have led to a shift in health care resources away from low-income communities as a result of how population health status estimates are calculated. Most methods for health status adjustment look at a patient’s historical use of health care services (such as information taken from health insurance claims or patient medical records) and demographic profile (such as age and gender).

The report’s central finding is that estimating a group’s health needs by its history of using health care services worsens existing resource disparities and entrenches barriers to accessing care. Factors outside of the health care system, like access to transportation, housing, childcare, or broadband, affect how easily a person can access needed health care. So, communities who face barriers to accessing care like these factors have a history of using less health care services and, therefore, appear “healthier.” This contributes to a cycle of underfunding for their health care services.

In the Massachusetts insurance market for individuals and small businesses, the report finds that insurers who serve populations labeled using current health status adjustment as “lower risk”—meaning they are less likely to have expensive health care needs—actually serve communities that are sicker. Those communities have higher neighborhood stress scores, worse self-reported health scores, more barriers to accessing health care services, and lower rates of preventive care. As a result of these population health estimates, a federal program implemented as part of the Accountable Care Act has shifted hundreds of millions of dollars from insurers serving lower-income communities to insurers serving higher-income communities.

This report also documents how this redistribution of dollars away from insurers that contract with low-cost hospitals correlates with – and may compound – barriers to accessing health care services that low-income communities face because of hospital essential health service closures and lack of capital investment by hospitals that serve those communities.

The AG’s report includes four recommendations to address these findings:

• First, payers and providers should incorporate social determinants of health, such as access to transportation, housing, childcare, and broadband, into health status adjustment calculations.
• Second, payers and providers that benefit from the new approaches suggested in the first recommendation should use the additional resources they receive to help patients overcome any social and economic barriers to accessing health care services.
• Third, Massachusetts state agencies should partner with the U.S. Centers for Medicare & Medicaid Services to scrutinize the health equity implications of the individual and small group risk adjustment methodology, including by examining opportunities to include social determinants of health and modify the use of the statewide average premium.
• Finally, Massachusetts policymakers should pursue fundamental changes to cost containment policy with the goal of preserving safety net providers which are so critical to lower-income residents in high-stress communities.

Prior cost trends reports from the AG’s Office have focused on inefficiencies in the distribution of health care dollars, including provider price variation unexplained by differences in quality, complexity of services, and other common measures of consumer value. Prior reports have also documented higher per capita spending on commercially insured people in more affluent communities as compared to less affluent ones, despite the higher sickness burden found in less affluent communities

Today’s report was prepared by Deputy Chief Sandra Wolitzky, Assistant Attorneys General Ethan Marks and Chloe Cable, and Health Care Analyst Maeva Veillard, all of the AG’s Health Care Division.

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