Health care spending in Massachusetts rose 1.6% to $61.1 billion

Marcony Almeida

HEalth

Health care spending in Massachusetts rose 1.6 percent to $61.1 billion in 2017, increasing at the slowest rate tracked since the passage of a 2012 health care cost control law, according to the State House News Service.

The Center for Health Information and Analysis, in its annual report on the performance of the state’s health care system, logged a $1.3 billion increase in total health care expenditures from 2016 to 2017, representing a rate of growth more moderate than the 3 percent recorded the previous year.

The report also flagged continuing concerns about the affordability of care, despite a nation-leading health insurance coverage rate of 96.3 percent. CHIA executive director Ray Campbell told the Health Policy Commission on Wednesday that cost growth had been “decelerating” over the past two years, and called the 1.6 percent number for 2017 “particularly notable” and “well below the benchmark.”

“Just as a citizen and as a person that works in this space, I’d say 1.6 percent is a number that we should feel really good about,” Campbell told reporters. “That’s not the growth rate that we were experiencing when we started out on this path, so it feels like it represents progress but it also feels like there’s more work to be done.”

Commercial health care spending increased by 3.1 percent to $22.8 billion and Medicare spending increased by 1.9 percent to $17 billion, while MassHealth spending dropped slightly, according to CHIA — a 0.2 percent decline to $17.2 billion. The report attributes the drop in part to a 2.4 percent decrease in MassHealth enrollment.

“As you look at the commercial-Medicare-Medicaid, we should also celebrate the work of Medicaid because that’s usually the number that we see going up and here it’s the place where it’s going down,” said commission member Martin Cohen, the president and CEO of the MetroWest Health Foundation.

Campbell said MassHealth has been “working very hard at controlling the program costs,” but per member per month expenditures still increased despite the overall drop. “I don’t think there’s any sense that they’ve turned the corner or that they’ve put their cost issues behind them,” Campbell said.

Brendan Moss, a spokesman for Gov. Charlie Baker, said the administration has prioritized “managing down” MassHealth’s growth from “unsustainable” levels, and “is pleased to have saved taxpayers hundreds of millions of dollars by strengthening the program’s internal controls and improving caseload management, while still ensuring nearly universal health coverage for the people of Massachusetts.”

The 2012 cost containment law, which established CHIA, also created an annual benchmark against which medical spending growth is measured. Last year’s 1.6 percent growth rate falls well below the 2017 benchmark of 3.6 percent.

Health Policy Commission Chairman Stuart Altman, who was out of the country Wednesday and did not attend the meeting, said in a statement that Massachusetts is “leading the country” in lowering cost growth, but that some areas “require further examination.”

Altman pointed to the relatively more rapid growth of commercial health care spending compared to the “minimal expenditure growth” at public insurance programs, along with “concerning trends related to the affordability of care and coverage.”

The 5.7 percent increase in out-of-pocket consumer health care spending and 6.9 percent growth in small-employer premiums both outpaced the benchmark, wage growth and inflation, Altman said.

“Employers are getting hit with a 6 percent increase. At the same time, their employees are getting clobbered with cost-sharing,” said commission member Ron Mastrogiovanni, president and CEO of HealthView Services. “They’re getting hit on both ends, and given the increase in cost-sharing, utilization goes down.”

Those enrolled in high-deductible health plans had higher cost-sharing — $81 per member per month — while enrollees of lower deductible plans paid $40 per member per month in cost sharing. About 28 percent of members with private commercial insurance were enrolled in high-deductible plans, according to the report.

Wendy Everett, the commission’s vice chair, described the jump in high-deductible plan membership — up from 20.9 percent in 2015 — as “sort of startling.”

“It’s definitely not a niche phenomenon,” Campbell said. “It’s a significant part of the market.”

The report said 8.8 percent of respondents to CHIA’s health insurance survey were underinsured, spending 10 percent or more of their family income on cost-sharing expenses. Those findings, CHIA said, “suggest that affordability challenges remain.”

The Health Policy Commission will hold a hearing on Oct. 16 and 17 to delve further into the spending data and hear from industry leaders and policymakers.

This year’s report comes after lawmakers failed to reach a deal on sweeping health care legislation, and in the midst of a heated campaign over a ballot question that would set mandatory per-patient nurse staffing ratios in hospitals. Opponents of the Question 1 say the staffing requirements would increase costs, while its supporters say the measure would improve patient care and that most facilities could easily absorb the additional expense.

As in 2016, prescription drug spending, which climbed 5 percent to $9.7 billion, and hospital outpatient spending, which rose 4.8 percent to $10.6 billion, continued to be main drivers of cost growth. the report said. Hospital inpatient spending, which experienced a 0.9 percent increase, accounted for the largest portion of total health care expenditures, at $11.2 billion.

Hospital outpatient spending accounted for 38.4 percent of the new spending between 2016 and 2017, and pharmacy spending accounted for 36.5 percent of that $1.3 billion.

Robert Coughlin, president and CEO of the Massachusetts Biotechnology Council, said increases in drug spending “have reached new lows,” down to a 5 percent increase from the 6.4 percent recorded in 2016 and 12 percent in 2015.

“Massachusetts continues to serve as an example for healthcare innovation, both in terms of drug discovery but also in new innovative payment models for these therapies,” Coughlin said. “We’ll continue to work with payers and other stakeholders to ensure patients have access to lifesaving therapies and that our healthcare system can measure the value these drugs bring to patients and in lowering our overall healthcare costs.”

Massachusetts Association of Health Plans President Lora Pellegrini said the data highlights the need to address prescription drug pricing and the cost of outpatient hospital services. “While today’s news demonstrates important progress in bending the cost trend, Massachusetts’ health care costs are still among the highest in the nation, second only to Alaska,” Pellegrini said. “It is essential that all health care stakeholders remain focused on reducing health care costs and improving quality of care for patients.”

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