BOSTON (SHNS) — A new report estimates that per capita health care spending in Massachusetts skyrocketed 9 percent in 2021 after falling 2.3 percent in 2020, and provides elected officials and politicians Policymakers two days ahead of the hearing have new data that could examine how health care costs will be monitored.
The Center for Health Information and Analysis, created under that 2012 law, released its annual report on Monday, which examined trends in health spending in 2021. The independent agency estimated total healthcare spending in Massachusetts at $67.9 billion in 2021 and per capita healthcare spending at $9,715 per resident.
Health care system use and spending was held back in 2020 as routine care and scheduled procedures were suspended to focus on responding to the pandemic outbreak. As society and the economy slowly opened up again in 2021, people were looking for more care and the intensity of the services they needed increased. CHIA said this has led to faster spending growth and a strain on capacities across the healthcare system.
“Adding to financial pressures was the expiration of federal utility funds in 2021 and payers recorded losses from claims costs that exceeded premium income. At the same time, Massachusetts residents continued to face the affordability of accessing the care they needed,” CHIA wrote in its report.
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 purchase at least a minimum level of insurance coverage or pay a tax penalty.
A 2022 survey found that nearly 90 percent of Bay Staters are satisfied with the quality of care, their own health plan, and ease of access to care, but cost remains a significant concern and a regular barrier to actual care utilisation .
Sixty-three percent said the cost of copayments and bills was a problem for their family’s finances, ranking third only to the cost of groceries and gas in the poll conducted by Beacon Research. Prescription drug prices and monthly health insurance premiums were each a concern for 57 percent of people. And 42 percent said they at least occasionally put off a doctor visit, test or treatment because of the cost.
CHIA Executive Director Lauren Peters said the report, released ahead of Wednesday’s hearing of the Joint Healthcare Financing Committee and Health Policy Commission, offers a snapshot of “a time of disruption and evolving challenges for patients, consumers and the healthcare system at large.”
“The unprecedented impact of COVID-19 is evident in the reversal of many historical trends associated with health care spending and utilization in 2020 and a rebound effect in 2021,” said Peters. Because of “the anomaly of this period,” the report released Monday by CHIA focused on the three-year period from 2019 to 2021 to “provide a more accurate and contextualized picture of the healthcare system in the Commonwealth,” Peters said.
CHIA said healthcare spending per capita grew at an annualized rate of 3.2 percent from 2019 to 2021, with increases across all benefit categories.
However, pharmacy spending outperformed all other categories, growing 9.6 percent from $10.6 billion in 2019 to $12.7 billion in 2021, before accounting for prescription drug rebates. In 2021 alone, gross spending on prescription drugs increased by 11.1 percent.
Discounts reduced pharmacy spending by $3.1 billion to $9.7 billion in 2021. Prescription drug rebates are estimated to have grown from $2.3 billion in 2019 to $3.1 billion over the past three years. After those rebates, prescription drug spending grew at an annual rate of 7.5 percent from 2019 to 2021, CHIA said.
Between 2019 and 2021, premiums grew at an annual rate of 4.7 percent and claims covered by payers and employers grew at a rate of 5.7 percent, outpacing wage growth (3.6 percent) and regional inflation (2.2 percent), CHIA said.
Member cost-sharing for private health plans increased 16.9 percent to $58 per member per month in 2021. Enrollments in high-deductible health plans, where patients pay more out of pocket before insurance kicks in, rose 4.1 percent and now accounts for 42.7 percent of enrollments in the private market, the report said .
The CHIA report found that acute-care hospital overall profitability, as measured by median overall margin, was 5.2 percent in the hospital’s fiscal 2021 — an increase of 2.6 percentage points from a year earlier. The nationwide average operating margin was 1.1 percent, down 0.2 percentage points, and the average non-operating margin was 3 percent, up 2.5 percentage points. Hospitals counted $386 million in federal and state grants among their operating income in 2021 HFY, compared to $2.1 billion in 2020 HFY, CHIA said.
Also on Monday, the Massachusetts Health & Hospital Association said its own recent survey found hospitals spent $1.3 billion more on temporary workers in fiscal 2022 ($1.52 billion) than they did before the pandemic in fiscal year 2019 ($204 million). Seventy-seven percent of expenditure was on temporary nurses.
Well below the number of workers needed, hospitals are also offering large sing-and-bond bonuses and have increased the average hourly wage for in-house staff from 13 percent to 20 percent, MHA said.
“The Massachusetts and US healthcare workforce market has been disrupted and it is unclear where the changes are taking us,” said Steve Walsh, President and CEO of MHA. “The trend toward travel agencies and temp workers has introduced a highly volatile variable into the budgeting and forecasting models hospitals use to remain financially stable and accessible to patients. Any government effort to analyze and contain healthcare cost growth must take into account this dramatic shift in the workforce that is now taking place. This is a trend that requires our shared policy focus.”
Massachusetts Association of Health Plans President and CEO Lora Pellegrini said insurers suffered financial losses in 2021 because premium income failed to keep up with claims costs as people sought personal care again and expanded coverage requirements persist stayed.
She specifically identified prescription drug spending as “a significant and ongoing challenge to health care cost containment” and lamented that the area was “lacking accountability to the government’s measure of cost growth.”
“As health insurance premiums reflect the cost of care, it is critical that governments take action to address these rising healthcare costs. Coupled with a strong benchmark, we call on the state to take steps to hold all companies accountable for growing costs, increasing competition and correcting market disruptions,” Pellegrini said.
Although the Legislature approved some key reforms in its most recent session, including a landmark Mental Health Access Act, the Governor, House and Senate each prioritized a different aspect of the health care world, leaving numerous loose ends that lawmakers will ditch between now and could pick up again in July 2024.
The last session of the House of Representatives passed legislation that would update the regulatory process for large healthcare providers trying to expand into markets served by smaller, financially vulnerable community hospitals. In part, the House Leadership Priority Bill would have allowed the HPC not only to study the costs and impact of mergers and acquisitions, but also to study the market impact of hospital expansions.
The Senate never took it up for debate or vote.
Meanwhile, the House of Representatives has never picked up a Senate-approved bill that would limit out-of-pocket insulin spending to $25 a month, require drug companies to notify the state of significant price hikes or new drug launches, and drug manufacturers and pharmacies subject benefit administrators to both the HPC’s annual cost trend hearings and the CHIA’s review.
The HPC itself has been vocal about its desire for lawmakers to increase their regulatory powers, subject medical industry power players to additional scrutiny and restrictions, and reduce the burden on residents of health insurance premiums and cost-sharing.
“As the new session begins, there is no real starting point for the next round of reforms, but there is a growing realization that action is needed to prevent system closures and rising costs,” the Massachusetts Taxpayers Foundation wrote in a preview memo earlier this year likely upcoming topics for discussion about Beacon Hill in this session.
(Michael P. Norton contributed to this report.)