For the first time in years, health care spending fell in Massachusetts in 2020. But the drop may only be a temporary change driven by the pandemic, and there is still cause for concern in the state’s health system, a new report says.
Without intervention, the commonwealth’s health system is likely destined for a future that is “increasingly unaffordable” for residents and businesses, and rife with growing inequalities, the Health Policy Commission’s most recent report says.
Improved state oversight and accountability in limiting spending benchmark growth; constraining excessive provider and pharmaceutical prices; and limiting increases in insurance premiums and cost sharing are just three of the things the Health Policy Commission says the legislature should focus on this year.
“We believe that urgent action is needed by policymakers to strengthen and evolve our approach, or else we will continue to have a health care system that is increasingly unaffordable for Massachusetts residents and businesses and that will contribute to growing health inequities,” David Seltz, the commission’s executive director, said.
The Health Policy Commission, an independent state agency, was founded in 2012 and was tasked with monitoring health care spending growth in the state and providing data-driven policy recommendations. The commission’s annual report, released Tuesday, does just that.
The report first explores a number of facets of the industry, including trends in spending and care delivery and changes in ambulatory care during the pandemic, and then dives into recommendations for the legislature.
Spending went down — but not costs
The commission’s current benchmark for annual health care spending growth is set at 3.1% (though it is rising to 3.6% in 2023). In 2019-2020, the time frame a lot of the report focused on, total healthcare spending per state resident fell 2.4%, marking the first reduction in spending in the decade since the commission was established.
“Importantly, the decline in commercial spending in 2020 was the result of the reduction in use of care due to the COVID-19 pandemic, not a reduction in the amount paid for a given service (prices),” the report reads.
This trend was also evident nationally, but at a smaller scale — with national spending falling 0.3%.
Despite this decline in health care spending in the state, residents with health insurance from private and public companies (also called commercial health insurance) didn’t see a proportional decrease in personal costs. The average cost of health insurance for a Massachusetts family, including the part paid by the employee and their employer, was $22,000 in 2020.
The average monthly cost-sharing per person fell by $10, from $59 to $49, but it was a result of a reduction in medical encounters in 2020, not a reduction in price, the report said.
Simultaneously, family health insurance premiums grew by approximately $500 in 2020. This increase came as many residents faced pandemic-related hardships like illness, loss of income and exacerbation of mental health problems, hardships that were particularly pronounced for people with low to medium income levels, the report said.
For families of four with a household income between $83,000 and $139,000 annually, or between three and five times the federal poverty level, employer and employee payment for health insurance and out-of-pocket health care spending equals 22% of their total compensation. That is the fifth highest share in the United States.
“When combined with local costs for housing, child care and other expenses, a typical Massachusetts family of four with income in this range living in the Worcester metro area would have their entire income absorbed by housing, child care, food, transportation, health care and other necessities, with no money left over for emergencies, one-time expenses or other discretionary expenses such as vacations,” HPC wrote. “Such a family in the Boston area would be more than $1,500 in the red each month.”
A typical family in the Worcester area spends $1,821 on health care per month, including premiums, the report says, exceeding expected spending on housing, which totals $1,450.
“With Massachusetts family health insurance premiums now averaging $22,163 in 2021 — more than triple the cost of premiums in 2000 — the need to reduce unnecessary health care spending is imperative,” the report reads.
The pandemic disrupted nearly every element of life, and healthcare is certainly no exception — in the early stages of the pandemic, the shut down of in-person visits and elective procedures severely limited care. The report said this was mirrored in in-patient hospital care and emergency department visits, which gradually grew back to 2019 levels toward the end of 2021.
Even in the face of the pandemic, most children continued to receive the recommended preventative care visits, declining only 2.5% from 92% in 2019 to 89% in 2020 for children with commercial insurance.
While the overall decrease was small, the pandemic appears to have exacerbated existing disparities, the report says. Pre-pandemic, children living in lower-income communities were more likely to lack preventative care, and those children also saw the largest decline from 2019 to 2020, falling from 88% in 2019 to 83% in 2020.
However, Massachusetts residents are using psychotherapy resources more than they did at the start of the pandemic, the report found. Most of the mental health related appointments were done via telehealth.
So, what does the Health Policy Commission recommend?
At the end of the report, the commission breaks up its legislative recommendations into six main points.
First, it says that the Commonwealth should strengthen accountability for the health care cost growth benchmark, which would keep providers, payers and other actors responsible for health care spending performance.
The report goes on to endorse constraining “excessive” provider prices. Prices continue to be the “primary driver” of healthcare spending growth, the report says. Among other partial solutions, the report recommends installing price caps for the highest-priced providers in the state, limiting facility fees, and adopting a default out-of-network payment rate.
Similarly, the report calls for enhanced oversight of pharmaceutical spending — drug spending continues to rise in the state and residents are “acutely feeling rising out-of-pocket costs and other barriers to access” in their insurance plans, the report said. Ways to accomplish this include more transparency in data collection about drug prices, expanding reviews of drug pricing, and limiting out-of-pocket costs on high-value drugs.
The commonwealth should require greater accountability for affordability by making sure any savings accrued in the health plans trickle down to consumers, the report says. The commission proposes improving the health plan approval process, reducing administrative complexity of health care, and improving cost-sharing designs as ways to tackle this point.
Calling for an advance in health equity for all, the report says legislators should improve data collection and address social determinants of health — such as affordable housing — and improve food and transportation systems.
Last but not least, the report says legislators should “implement targeted strategies and policies” addressing primary and behavioral care, reducing low-value care, and improving the patient risk adjustment — i.e. the process that determines how much to compensate health plans for the costs of taking on members with chronic health conditions — to be more accurate.
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