State health care spending spike comes with call for ‘bold action’

Massachusetts Residents Face Unaffordable Healthcare Costs

Healthcare spending in Massachusetts continues to grow faster than household incomes, leaving many residents struggling to afford essential medical services. The latest data from the Massachusetts Health Policy Commission (HPC) reveals that total healthcare expenditures per capita have increased by 5.8%, outpacing the national rate of 4.1% and nearly doubling the 3.1% benchmark set by the HPC based on prior years' compounded growth.

Rising Costs: A Growing Concern

The average healthcare spending per resident in Massachusetts now stands at $10,264, a stark contrast to the national average. This surge in spending is fueled by several factors, including skyrocketing pharmaceutical costs, non-claims payments, and outpatient care. Prescription drug spending alone has increased by 8.8%, representing over a fifth of overall health spending growth. Even accounting for rebates, prescription drug spending grew more than 7% per year from 2019 to 2022, 10 times faster than in previous years.

Pharmaceutical Costs: A Major Driver

Pharmaceutical costs have been a significant contributor to health care spending growth for several years, underscoring the urgent need for targeted policy action and increased oversight to address pharmaceutical pricing and value. The HPC continues to be concerned that without action, these trends will continue, making care even more unaffordable and inaccessible for Massachusetts residents.

Non-Claims Payments and Outpatient Care

Non-claims payments, largely driven by one-time COVID-19 supplemental payments, have also been a major driver of spending increases. Hospital outpatient spending saw a 5% year-over-year increase, adding $627.6 million to overall expenditures. However, physician services and hospital inpatient spending declined by 0.1% and 1.4%, respectively.

Affordability Issues Mount

The state's report highlights concerning trends in healthcare affordability. The percentage of commercially insured residents enrolled in high-deductible plans has risen from 16% in 2013 to 42% in 2022. These enrollees are twice as likely to go without care or prescriptions due to cost. A staggering 41% of all Massachusetts residents reported a healthcare affordability issue within the preceding 12 months.

Policy Reforms Needed

To address these issues, policy reforms are urgently needed. The HPC has identified several key areas where action is required:

• Pharmaceutical Pricing Reform: Targeted policy actions aimed at reducing pharmaceutical costs could significantly alleviate the burden on residents. This includes increased oversight and negotiations with manufacturers to secure better prices.
• Healthcare Cost Benchmarking: The current benchmarking system must be revamped to better reflect near-term spikes in spending due to inflation or specific events like pandemics. This would help hospitals and payers plan more effectively.
• Enhanced Oversight: The HPC should be empowered to enforce policies limiting spending growth. This includes stricter regulations on mergers and acquisitions, as well as closer monitoring of non-hospital providers like clinical labs, imaging facilities, and urgent care centers.

Existing Reforms and Challenges

Despite these challenges, Massachusetts has a reputation for high-quality healthcare delivery and has served as a test bed for state and national policy changes. The state's "Romneycare" mandate requiring minimum levels of insurance coverage was a precursor to similar requirements in the Affordable Care Act. The healthcare cost growth benchmark program, established in 2012, has been instrumental in addressing spending growth.

However, existing reforms face numerous challenges. The recent data shows that the state's average annual spending still exceeds the national average by 27%, or $2,171 per person. The high cost of pharmaceuticals remains a persistent issue, with many residents struggling to afford essential medications.

Call for Bold Action

Given these trends, it is imperative that policymakers take bold action to address the spiraling healthcare costs in Massachusetts. This includes:

• Legislative Reforms: The Massachusetts House has proposed an ambitious healthcare reform bill that seeks to rebuild the healthcare cost growth benchmark process, segment health insurance companies from Division of Insurance oversight, and empower the HPC to create a rate equity target to improve insurer reimbursements to hospitals serving priority populations.
• Collaborative Efforts: All stakeholders—providers, insurers, state government, patient advocates—must collaborate to find solutions. The report from MHA highlights the importance of addressing workforce shortages, which can significantly impact healthcare delivery and costs.
• Public Information Campaigns: Educating residents about available resources and affordable care options is crucial. Public information campaigns can help inform people about the programs and policies aimed at making healthcare more affordable.

Massachusetts's healthcare system is at a critical juncture. The state's commitment to high-quality care must be balanced with the need to control costs. Bold policy reforms are necessary to ensure that all residents can access affordable healthcare.

---

References

• https://www.commonwealthfund.org/sites/default/files/2020-03/Waugh_Massachusetts_hlt_policy_comm_cs.pdf
• https://www.mhalink.org/mondayreport/governors-budget-and-a-system-at-risk/
• https://www.mhalink.org/mondayreport/mha-report-health-system-challenges-solutions/
• https://www.fiercehealthcare.com/regulatory/health-spending-spikes-massachusetts-amid-high-drug-expenses-unprecedent-patient-cost