Billions In “Excessive” Health Care Spending Flagged


The premium payments that employees make for employer-sponsored health insurance have increased far more than income or overall inflation in the past two-plus decades, according to research by the Health Policy Commission. [Courtesy/HPC]

Chris Lisinski|SHNS

Massachusetts regulators delivered one of their most forceful warnings yet that health care prices are spiraling out of control, ramping up the pressure on lawmakers who have been unable to wrangle the trend and fulfill a consensus vision of cost control.

Experts at the Health Policy Commission on Wednesday said the combination of total health care spending growth in Massachusetts and greater financial burden on patients exposes Bay Staters to harrowing choices about which of their basic needs to prioritize.

Between 2019 and 2021, per-capita commercial health care spending rose an average of 5 percent each year, more than a full point above the national growth rate and twice the rate by which incomes increased in that span, the HPC said Wednesday in a preview of its annual cost trends report.

The agency created more than a decade ago to contain health care cost growth took an even longer-term view to highlight the impact on families: between 2000 and 2021, the premium payments employees must make for their workplace-sponsored health insurance plans grew by 295 percent, more than three times as much as the 88 percent increase in household income and 60 percent general inflation.

"This trend of spending growth faster than income 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 HPC Senior Director for Research and Cost Trends David Auerbach. "Given that we know that we have to limit the growth of health care spending, and in light of the fact that we know that we want to increase spending in some other areas such as primary care, behavioral health care, and health equity in the workforce for under-resourced providers, we have to find areas where we can spend less quickly."

The HPC previously said total per capita health care expenditures dropped 2.3 percent in 2020, which officials described as an outlier due to the pandemic, and then increased 9 percent in 2021. The 5 percent average annual growth for 2020 and 2021 figures presented Wednesday refer specifically to commercial spending per capita.

Auerbach said commercial health care spending in Massachusetts grew more slowly than it did in the country as a whole from 2013 until 2018 before the Bay State overtook the national rate in recent years.

Highlighting a few of the major findings that will feature in the full annual report due in September, Auerbach identified a pair of drivers behind the significant cost growth: higher-than-necessary spending, and more use of health care services than expected.

Commercial insurers often paid hospital-based providers far more than what Medicare would pay for certain services, the HPC found, swelling the total pot of expenses. As proof of that dynamic, the HPC said the volume of non-maternity inpatient stays dropped 16 percent between 2017 and 2021, but commercial spending on the lower amount of stays increased 12 percent in the same span.

Analysts counted more than $3 billion in commercial "excessive spending" in 2021 on seven categories: prescription drugs, labs, specialty services, imaging, endoscopies and colonoscopies, inpatient stays, and clinician-administered drugs. That excessive spending, which Auerbach said in many cases referred to services charged more than twice as much as what Medicare would "pay as the benchmark," represented roughly one-eighth of all medical expenditures in Massachusetts.

A majority of the excessive spending the HPC flagged was on prescription drugs. Massachusetts commercial payers in 2021 paid nearly $1.9 billion in excess on medications with prices at least 20 percent higher than their international prices, the HPC said.

To understand excess utilization of health care services, such as hospitalizations for certain chronic conditions that could have been prevented or treated in a lower-cost setting, the HPC compared data from its Medicare population to other states.

"It's not just the avoidable hospitalizations, 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 inpatient hospitalizations per 1,000 Medicare beneficiaries in 2021, the most of any state.

The Bay State also saw about 67,000 more Medicare hospital stays in 2021 than might have been expected based on its population and past trends, an increase of about 20 percent that was also top among all states.

"That's a striking finding as well. That would certainly 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 insight into really why this is."

One reason Auerbach suggested is that Massachusetts providers might be making excessive use of imaging services compared to other states. Another is the comparably low availability of independent ambulatory surgical centers, or ASCs.

Auerbach presented data showing that some common surgeries like lens and cataract procedures, colonoscopies, and arthroscopies are on average about 75 percent more expensive in hospital outpatient departments than they are in ambulatory surgical centers.

Massachusetts has 59 ASCs licensed by the Department of Public Health, which is the sixth-fewest number on a per capita basis among all states, according to the HPC. Auerbach said that low ranking likely reflects a moratorium on new ambulatory surgical center construction 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 at unsustainable levels for families and businesses, and we need to act urgently to fix them," said MAHP President and CEO Lora Pellegrini, who contended that lowering prescription drug prices is "one of the most significant steps we can take."

The HPC wants lawmakers to grant it new tools to more strongly enforce cost containment, including by imposing escalating financial penalties on industry players that contribute to excessive growth.

Democrats who control the House and Senate have signaled a desire to rein in health care costs, but for years they have been unable to get on the same page. The House last session focused on subjecting large hospital expansions to greater scrutiny, the Senate pursued a prescription drug pricing reform measure, and former Gov. Charlie Baker sought to increase spending on primary care, among other steps. None of those proposals ultimately became law.

At a hearing about prescription drug pricing legislation Tuesday, Health Care Financing Committee Sen. Cindy Friedman likened the cycle of industry subsets blaming one another for spiraling costs to her children arguing about who started a fight.

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