Health Care spending “blips” create headaches on Beacon Hill
BOSTON, Mass. (SHNS)–As lawmakers and policymakers try to chart a course for the state’s health care sector moving forward, they began Wednesday to try to discern what in the state’s data is reflective of the actual reality of health care costs and what are pandemic-specific “blips” that say more about the past than the future.
The Joint Committee on Health Care Financing, chaired by Rep. John Lawn and Sen. Cindy Friedman, met Wednesday with the state’s Health Policy Commission for an annual hearing that kicks off the process the commission uses under a 2012 cost control law to set a target for measuring health care spending growth in the next calendar year.
Massachusetts considers itself a model for health care reform, and since a 2006 law signed by Gov. Mitt Romney, the state has required most residents to obtain at least a minimum level of insurance coverage or pay a penalty.
But the cost of care remains a significant issue for Bay Staters. More than half of Massachusetts adults who responded to a 2021 survey said they had experienced a health care cost hardship in the last year, and about three-quarters said they worry about the ability to afford health care in the future.
Health care spending in Massachusetts increased each year from 2013 through 2019, but the Center for Health Information and Analysis reported Monday that health care expenditures actually decreased by 2.4 percent in 2020 to a total of $62.6 billion, or $8,912 per capita. CHIA Executive Director Ray Campbell said the 2020 data should be considered with a grain of salt because of the “unprecedented disruption COVID-19 caused to the Commonwealth’s health care system” and because initial 2021 data shows a rebound in health care utilization.
“I’m also especially looking forward to trying to understand how much of this we can take away in terms of any kind of projectory,” Friedman said. “Are we seeing some kind of true progression in costs or is this actually a one-time blip that’s reflecting an amazing last two years in which our health care system was — to say significantly impacted would be would be an understatement.”
“I’m looking forward to understanding what is giving us, showing us a pathway and what is just something that is a blip. And it’s amazing to see what happens when a pandemic comes your way, but is it really reflective of what we’re seeing as true cost trends?” she added.
David Auerbach, the HPC’s director of research and cost trends, pointed out that while overall health care spending may have declined in 2020, the prices that patients paid for care went up. “A key point about what happened in 2020 is that the drop in spending that we saw was entirely due to a drop in use of care,” he said. “Prices, or the amount paid for a given episode or service of care, continue to go up. And in fact, in 2020, they went up a little bit faster than they had in years before that.”
One factor that contributed to the higher prices, Auerbach said, was the shift in where people sought care. He said community hospitals with high public payer numbers saw larger drops in patient volume in 2020 than other types of hospitals. “That means that relatively more care was delivered in some of our more expensive hospitals,” he said.
Massachusetts families also saw their health insurance premiums grow in 2020 by an average of $500 annually, bringing the average family’s annual premium costs to $21,965 — the seventh-highest in the nation. As it has since 2017, the cost of Massachusetts family health insurance premiums outpaced the national average cost of a brand new compact car ($20,998), Auerbach said. That sparked the same question from Friedman, HPC board member Don Berwick and others. “So utilization went down, prices went up, the insurance premium rate of rise stayed about the same, but the proportion of insurance retained as surplus went up,” Berwick said. “So where’s the money?”
Auerbach, responding to a substantially similar question from Friedman, said that “some of it has gone into higher gains and surpluses for payers [and] some of that will come back through [medical loss ratio] rebates over the next several years.”
HPC Chair Stuart Altman asked Auerbach to put his head together with Ashley Storms, CHIA’s director of health informatics and reporting, to take a deeper dive into the question to present either at a future HPC board meeting or in a report. “I think it’s a very important question, both for us and for the Legislature, because it sort of leaves a kind of gap in our knowledge base,” Altman said.
Looking ahead at what the 2021 data could reveal about Massachusetts, Auerbach reviewed national data that showed spending growing at a 5.1 percent rate in 2019, a 0.2 percent rate in 2020 and a 9.5 percent rate in 2021. “So essentially, it’s almost as if spending were just 5 percent growth each year — ’19, ’20 and ’21 — and you end up in the same place. So that’s something to keep in mind,” Auerbach said. “And I am expecting that next year when we’re sitting down for this hearing, we’re going to have spending probably at a level in that ballpark.”
State budget writers set the potential gross state product growth rate at 3.6 percent for 2023, which becomes the default health care cost growth benchmark under the 2012 law that created the HPC and the health care spending benchmark process. However, starting with the 2023 benchmark, the law gives the HPC the flexibility to set the benchmark at any rate it chooses, subject to legislative approval.
If the HPC board opts to stick with the 3.6 percent benchmark, the annual process is complete. But if the board decides to modify the benchmark in either direction, it must submit notice to the Joint Committee on Health Care Financing. That panel would then be required to hold a hearing on the HPC’s chosen benchmark within 30 days and then would have to submit findings and recommendations to the Legislature within 30 days of its hearing.
If the Legislature as a whole does not act on the committee’s findings within 45 of the committee’s hearing, the HPC’s modified benchmark would automatically go into effect.
The HPC faces a statutory deadline of April 15 to set the benchmark and plans to vote on the 2023 health care cost growth benchmark at a meeting planned for April 13.