Press Release  STATE LEADERS GRAPPLE WITH RISING HEALTH CARE COSTS AND AFFORDABILITY CHALLENGES

BOSTON — The Massachusetts Health Policy Commission (HPC) in conjunction with the Legislature’s Joint Committee on Health Care Financing held the Health Care Cost Growth Benchmark Hearing today, an annual hearing to assess performance against last year’s benchmark and consider the target for next year’s benchmark (calendar year 2025).

The health care cost growth benchmark is the key mechanism for the state’s cost containment efforts. The benchmark provides a statewide target for the rate of growth of total health care expenditures (THCE), the annual sum of all health care expenditures in the Commonwealth from both private and public sources, calculated on a per person basis.

The Center for Health Information and Analysis (CHIA) issued its 2024 Annual Report on the Performance of the Massachusetts Health Care System ahead of the hearing, which focused on data through 2022 and examined trends in costs, coverage, and quality indicators to inform policymaking. CHIA found that THCE per capita exceeded the 2022 benchmark of 3.1%, increasing 5.8% from 2021 to 2022 and totaling $10,264 in average annual health care spending per Massachusetts resident.

CHIA’s findings confirm the concerning trends that the HPC has identified in recent reports – health care costs are rising at a pace inconsistent with wage growth and are increasingly unaffordable for Massachusetts residents. CHIA’s data showing trends for premium growth and out of pocket costs are particularly concerning, with 5.8% growth in premiums in 2022.

In addition to rising premiums, costs are being shifted to residents when they can least afford it – Massachusetts has experienced a 26% increase in patient cost-sharing combined over 2021 and 2022. Notably, this is the highest shift to consumers in the 11 years the HPC has been tracking this data.

Rising pharmaceutical costs continue to be a major driver with 7.3% growth, more than double the state benchmark. The HPC found that if prescription drug spending grew at the benchmark rate of 3.1% from 2019 to 2022, rather than the actual rate of 7.3%, total commercial spending would have been nearly a billion dollars lower (-$978 million).

“Pharmacy has been the biggest contributor to health care spending growth for several years,” said Deborah Devaux, HPC Board Chair, “underscoring the urgent need for targeted policy action and increased oversight to address pharmaceutical pricing and value. Even accounting for rebates, prescription drug spending grew more than 7% per year from 2019 to 2022 for those with private health insurance, 10 times faster than in previous years. The HPC continues to be concerned that without action, these trends will continue and make care even more unaffordable and inaccessible.”

This year marks a critical inflection point in the Commonwealth’s ambitious journey of health care reform which has made it a national policy leader. As documented in this 10th annual HPC report, there are many alarming trends which, if unaddressed, will result in a health care system that is unaffordable for Massachusetts residents and businesses, including several areas of excess spending related to unreasonably high prices, avoidable use of high-cost care settings, and services that confer little to no benefit to patients – all of which have the potential to reduce total health care spending while maintaining the quality that residents deserve.

A renewed commitment by all stakeholders is needed to redirect resources away from unwarranted excess spending that benefits the few and towards efforts to revitalize the health care system that benefit the many, consistent with the Commonwealth’s values and goals. The nine policy recommendations issued in the fall call for legislative action that prioritizes modernizing and evolving the state’s policy framework, necessary to chart a path for the next decade to reducing health care cost growth, promote affordability, and advance equity.

These documented health care cost increases significantly impact Massachusetts residents’ access to care. The HPC has previously reported that nearly half of all Massachusetts adults reported delaying or skipping necessary care in 2021 due to cost, and 10% of adults were unable to pay for necessities like food, heat, or housing due to medical bills. These are unequal burdens, and disparities across income, racial, and ethnic groups persist.

“Considering both CHIA’s findings and the testimony from stakeholders across the health care marketplace today, it is imperative that we take action to enhance our high-quality health care system in Massachusetts such that it is also an affordable and equitable one,” said David Seltz, HPC Executive Director. “We pride ourselves in the Commonwealth as being nation-leading in our health care, yet nearly half of adults reported unmet health care needs due to cost. This is unacceptable, and we must work together to evolve our state’s cost containment efforts to ensure that all residents have access to health care.”

Massachusetts Cost Trends: Key Datapoints

Health care spending has exceeded the benchmark since 2017, with total health care expenditure (THCE) increasing 5.8% from 2021 to 2022, totaling $10,264 in average annual health care spending per Massachusetts resident. Other findings include:

• Average out of pocket spending for a 30-day supply of prescription drugs for several common chronic conditions doubled from 2017 to 2022. Average gross commercial spending per branded prescription fill increased 10% per year since 2017 (61% overall), from $684 to $1,103, with 5% of prescriptions exceeding $6,077 in 2022. Including rebates, prescription drug spending increased 7.3% per year from 2019 to 2022.
• Despite a slightly slower growth rate, annual health care spending per person in Massachusetts still exceeded the national average by more than $2,000 in 2022. While the gap has closed on a percentage basis from 2009 (36%) to 2022 (27%), the gap in dollars per capita has continued to increase, from $1,784 to $2,171.
• Costs were passed on to Massachusetts residents, with a 26% increase in cost sharing combined over 2021 and 2022. This is the largest shift in the decade this data has been tracked. From 2021 to 2022, premiums increased 5.8% and cost sharing increased 6%, averaging to $595 per month for fully-insured commercial member premiums in 2022 while cost sharing (including copays, coinsurance, and deductibles) averaged $61 per month.
• The percentage of commercially-insured Massachusetts residents enrolled in high deductible plans has increased from 16% to 42% from 2013 to 2022. Adults with high deductible plans were twice as likely to go without needed health care or prescription drugs because of cost. One in four residents with family coverage faced an annual deductible greater than $4,500 per year.
• Over 4 in 10 Massachusetts residents reported experiencing health care affordability issues in the past 12 months in 2021 (41%). Affordability burdens and foregone care were even greater for residents of color, with more than half of Hispanic residents (54.9%) and Black residents (50.8%) reporting affordability issues. Among all residents, 31.2% reported unmet health care needs in their family due to cost in 2021.

As required by state law, the HPC will set the 2025 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’s Board will vote to determine the benchmark at their meeting on April 11. Learn more about the benchmarking process by watching the HPC Short: The Massachusetts Cost Growth Benchmark.

A recording of the hearing can be found on the HPC’s YouTube page and presentation materials from the hearing, including CHIA’s 2024 Annual Report and all written testimony, are available on the HPC’s website.

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