Press Release  HEALTH CARE SPENDING BENCHMARK CONSIDERED AS MASSACHUSETTS RESIDENTS AND SMALL BUSINESSES CONTINUE TO FACE AFFORDABILITY CHALLENGES

BOSTON — Yesterday, the Massachusetts Health Policy Commission (HPC) held the Health Care Cost Growth Benchmark Hearing, an annual hearing that considers available data, information, and testimony regarding whether modification of the Health Care Cost Growth Benchmark is appropriate. As required by state law, for calendar year 2024, the HPC will set the benchmark equal to potential gross state product (PGSP), or 3.6 percent, unless the HPC’s Board of Commissioners finds that an adjustment to the benchmark is reasonably warranted. The HPC must establish the benchmark annually by April 15.

Ahead of the hearing, the Center for Health Information and Analysis (CHIA) issued its Annual Report on the Performance of the Massachusetts Health Care System, which focused on data through 2021 and examined trends in costs, coverage, and quality indicators to inform policymaking. Among its findings, CHIA found that total health care expenditures (THCE) per capita increased 9% in 2021 but increased at an annualized rate of 3.2% from 2019 to 2021.

“While there was expected fluctuation in health care spending in the Commonwealth over the first two years of the COVID-19 pandemic, health care spending has increased an average of 3.2% each year from 2019-2021, in line with the state’s Health Care Cost Growth Benchmark, and the average annual growth rate since the passage of Chapter 224 in 2012 is 3.52%. This shows that under the benchmark framework, Massachusetts has made progress in tempering the overall growth of health care costs over the past ten years,” said Chair Deb Devaux, HPC Board Chair.

“Continued oversight is necessary as concerning trends in pharmaceutical spending, hospital prices, and premium increases persist. Commercial spending growth in Massachusetts outpaced the U.S. average between 2019 and 2021, average out-of-pocket spending for prescription drugs for patients with chronic conditions has increased more than 60% since 2017, and premium growth for small businesses has outpaced the growth in employee wages by 10%. The factors underlying high spending growth must be addressed or they will severely hinder the Commonwealth’s ability to meet its cost containment goals and exacerbate the affordability challenges facing residents and employers in Massachusetts.”

At the hearing, the HPC and the Joint Committee on Health Care Financing heard testimony on health care spending and cost trends, and the affordability implications of these trends, from a variety of stakeholders. A recording of yesterday’s hearing is available on the HPC’s YouTube page. All of the presentations are available on the HPC’s website, along with CHIA’s 2023 Annual Report. All written testimony received will be posted to the HPC’s website on a rolling basis until the deadline of 5:00 PM on Friday, March 17, 2023.

“Today’s hearing and CHIA’s annual report reinforce the importance of policy action necessary to evolve the state’s cost containment approach to meet the current challenges facing our health care system. The HPC looks forward to working with all stakeholders to advance the Commonwealth’s affordability, equity, and cost containment goals,” said David Seltz, HPC Executive Director. The HPC’s 2022 Health Care Cost Trends Report details a set of six recommendations to improve state oversight and accountability of health care spending.

HPC Report on State Spending Performance

Key Findings:

Over the first two years of the COVID-19 pandemic, health care spending increased an average of 3.2% each year and in 2021, Massachusetts spending growth was below the national average. Other findings include:

• Rates of spending growth varied widely by market sector. Commercial spending per member grew 5% per year from 2019-2021 while spending per MassHealth enrollee declined 1%. In that time, commercial spending grew nearly twice as fast as the national average, driven primarily by prescription drug spending and hospital outpatient spending, with accelerating prices largely responsible for the increase.
• There are opportunities to reduce spending growth in the Commonwealth. Massachusetts has one of the highest rates of avoidable hospital use in the U.S. and second highest Medicare readmissions rate. Tens of thousands of residents receive care each year that is known to confer no benefit. Meanwhile, private insurers pay some hospitals 3 to 5 times what Medicare would pay for simple lab tests and more than double the hospital’s acquisition price for drugs administered in physician’s offices. Since 2013, commercial spending for a hospital visit in Massachusetts has increased 48%, exceeding $20,000 in 2021.
• In 2021, the average annual health care spending per family in Massachusetts, including insurance premiums and out-of-pocket spending, was nearly $25,000, more than the average price of a new compact car. From 2013 to 2021, the percentage of commercially insured Massachusetts residents enrolled in high deductible plans increased from 16% to 43%. Small employers have been hit particularly hard, with annual premiums for companies with fewer than 50 employees increasing 6-8% in recent years and premium growth outpacing wage growth by nearly 10% from 2012 to 2019. Nationally, the percentage of U.S. residents putting off care due to cost reached an all-time high of 38% in 2022, with 27% putting off care for serious conditions, a finding similarly reflected in Massachusetts surveys.

Center for Health and Information Analysis (CHIA) Annual Report Presentation

At the hearing, CHIA staff presented findings from their 2023 Annual Report, which examines trends in costs, coverage, and quality indicators to inform policymaking, and information related to provider and payer financials, commercial insurance enrollment, premium, and cost-sharing trends. The report focuses on data through 2021, during which policies to support Massachusetts residents and the health care system continued to evolve in response to the COVID-19 pandemic.  

Key Findings:

• From 2019 to 2021, pharmacy spending increased at an annualized rate of 7.5% net of rebates, and 9.6% gross of rebates.
• Between 2019 and 2021, premiums as well as claims covered by payers and employers increased at annualized rates of 4.7% and 5.7%, respectively, surpassing wages and salaries (3.6%) and regional inflation (2.2%).
• After growing rapidly due to the COVID-19 pandemic and resulting policy directives, telehealth spending declined slightly from $1.8 billion in 2020 to $1.7 billion in 2021. In both years, spending for telehealth services provided by non-physician professionals, such as nurse practitioners, physical and occupational therapists, and certain behavioral health providers, accounted for more than half of telehealth spending.

###