News  Health Care Cost Growth Benchmark

Background

Chapter 224 of the Acts of 2012 established the health care cost growth benchmark, a statewide target for the rate of growth of total health care expenditures. The HPC Board sets the benchmark for the following calendar year annually between January 15 (when the potential gross state product is established) and April 15. CHIA reports annually on the Commonwealth’s performance against the benchmark. Massachusetts met the benchmark in 2013 with THCE growth of 2.3%, but exceeded the benchmark in both 2014 and 2015 with growth of 4.1% and 4.2%, respectively.

2018 Health Care Cost Growth Benchmark 

For the first time in 2017, the Board may modify the statutory annual health care cost growth benchmark (for calendar year 2018), pursuant to a public hearing process and engagement with the Legislature. The Board held a public hearing on the potential modification on March 8, 2017. All testimony has been posted on the HPC's website. A video of the hearing can be found here.

At the March 29, 2017 meeting, the HPC's Board unanimously established the 2018 benchmark at 3.1%. 

Letter on Benchmark Modification to Chairman James Welch, Joint Committee on Health Care Financing  
Letter on Benchmark Modification to Chairman Jeffrey Sánchez, Joint Committee on Health Care Financing  

What is the measure of Total Health Care Expenditures? 

Total health care expenditures (THCE) is a per-capita measure of total state health care spending growth. THCE includes three components:

1. All medical expenses paid to providers by private and public payers, including Medicare and Medicaid (MassHealth);
2. All patient cost-sharing amounts (for example, deductibles and co-payments); and
3. The net cost of private insurance (for example, administrative expenses and operating margins for commercial payers).

THCE is calculated on a per capita basis to control for increases in health care spending due to population growth. The inclusion of public and private payers in the measure is intended to reduce the likelihood of “cost-shifting” among different payer types and ensure that gains are shared with both public and private purchasers.

The Commonwealth’s THCE is measured annually by the Center for Health Information and Analysis (CHIA). This data is then used to measure the state’s health care expenditures against growth of the Commonwealth’s economy.

Measuring performance against the Health Care Cost Growth Benchmark

Chapter 224 defines three multi-year targets for THCE growth: 

1. From 2013 through 2017, the benchmark must be set equal to the growth rate of potential growth state product (PGSP), or 3.6%.
2. From 2018 through 2022, the HPC must set the benchmark equal to PGSP minus 0.5% (or 3.1% in 2018). During this time period, the HPC has limited authority to modify the benchmark back up to PGSP if it determines, after consideration of data, information, and testimony, that an adjustment is reasonably warranted. Click here for more information on the process of establishing the 2018 benchmark.
3. For 2023 and beyond, the benchmark will again be set equal to PGSP.