Massachusetts regulators have issued one of their most forceful warnings that health care prices are spiraling out of control, mounting pressure on lawmakers who have been unable to buck the trend and implement a consensual view of cost control .
Health Policy Commission experts said Wednesday that the combination of total growth in Massachusetts health care spending and the increased financial burden on patients exposes Bay Staters to heartbreaking choices about which of their basic needs to prioritize.
Between 2019 and 2021, per capita commercial health care spending increased by an average of 5% each year, more than one point above the national growth rate and double the rate at which incomes increased during that period. HPC said Wednesday in a preview of its annual cost performance report.
The agency created more than a decade ago to curb rising health care costs has taken an even longer-term view to highlight the impact on families: between 2000 and 2021, premium payments employees must make to their workplace-sponsored health insurance plans grew 295 percent, more than three times the 88 percent increase in household income and 60 percent overall inflation.
“This trend of spending faster than income growth is unsustainable for governments, for employers, for residents, and we know that when premium growth grows faster than incomes, it erodes take-home pay, increases people’s avoidance of care worsens health outcomes and requires people to choose between health care and other basic needs,” said David Auerbach, HPC’s senior director for research and cost trends. “Given that we know we need to limit growth in health spending, and in light of the fact that we know we want to increase spending in some other areas such as primary care, behavioral health care and health equity in the workforce for providers with insufficient resources, we need to find areas where we can spend less quickly.”
The HPC previously said total health care spending per capita fell 2.3% in 2020, which officials described as an outlier due to the pandemic, before rising 9% in 2021. .
Auerbach said commercial health spending in Massachusetts grew more slowly than it did in the country as a whole from 2013 to 2018 before the Bay State topped the national rate in recent years.
Highlighting some of the key findings that will be featured in the full annual report expected in September, Auerbach identified a couple of drivers behind the significant cost growth: overspending and higher-than-expected use of healthcare services.
Commercial insurers often paid hospital providers far more than Medicare would pay for certain services, the HPC found, inflating total expenses. As evidence of this dynamic, the HPC said that the volume of non-maternity hospitalizations decreased by 16% between 2017 and 2021, but the commercial expenditure on fewer hospitalizations increased by 12% during the same period. time.
Analysts counted more than $3 billion in commercial “overspending” in 2021 across seven categories: prescription drugs, labs, specialty services, imaging, endoscopy and colonoscopies, hospital stays, and physician-administered drugs. That overspending, which Auerbach said in many cases referred to services charged more than twice what Medicare would “pay as a benchmark,” accounted for about one-eighth of all medical bills in Massachusetts.
Most of the overspending reported by the HPC was on prescription drugs. Commercial payers in Massachusetts overpaid nearly $1.9 billion in 2021 for drugs priced at least 20 percent above their international prices, the HPC said.
To understand the overutilization of health care services, such as hospitalizations for certain chronic conditions that could have been prevented or treated in a low-cost setting, the HPC compared its Medicare population data to that of other states.
“It’s not just hospitalizations that are avoidable, but it’s all hospitalizations where we’re extremely high,” Auerbach said.
Officials found that Massachusetts was at or near the top of the list in metrics reflecting how much its Medicare members used hospitals. Massachusetts had 247 hospital admissions per 1,000 Medicare beneficiaries in 2021, the most of any state.
The Bay State also saw about 67,000 more Medicare hospital admissions in 2021 than might have been expected based on its population and past trends, a roughly 20 percent increase that was also the most among all states.
“This is also a surprising finding. This would definitely reduce some of the strain on our workforce if some of those hospitalizations didn’t take place,” Auerbach said. “But we don’t have a lot of information about the real reason why that’s the case.”
One reason Auerbach suggests is that Massachusetts providers may be overusing imaging services compared to other states. Another is the relatively low availability of independent ambulatory surgical centers, or ASCs.
Auerbach presented data showing that some common surgeries such as lens and cataract procedures, colonoscopies and arthroscopy are on average about 75 percent more expensive in hospital outpatient departments than in outpatient surgical centers.
Massachusetts has 59 Department of Public Health-licensed ASCs, which is the sixth fewest on a per capita basis among all states, according to the HPC. Auerbach said the low ranking likely reflected a moratorium on construction of a new outpatient surgical center that was in place here from 1971 to 2017.
“The HPC’s preliminary findings from the Cost Trends Report illustrate what we already know that health care costs in Massachusetts are rising to levels unsustainable for households and businesses, and we need to act urgently to address them,” said Lora Pellegrini, president and chief executive officer of MAHP, who argued that lowering the prices of prescription drugs is “one of the most significant steps we can take.”
HPC wants lawmakers to give it new tools to enforce cost containment more strongly, including by imposing increasing financial penalties on industry players who contribute to excessive growth.
The Democrats who control the House and Senate have signaled a desire to keep health care costs down, but have been unable to get on the same page for years. The latest session of the House focused on putting major hospital expansions under greater scrutiny, the Senate pursued a prescription drug pricing reform measure, and former Governor Charlie Baker sought to increase primary care spending , among other measures. None of these proposals ultimately became law.
At a hearing on prescription drug pricing legislation on Tuesday, Health Care Financing Committee Senator Cindy Friedman compared the cycle of industry subsets blaming each other for rising costs to her own children arguing about who started a fight.
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