Mass. health care spending rose 3.1% in 2018
Photo/Grant Welker
Saint Vincent Hospital in Worcester
Seven years after the passage of a landmark health care cost control law, total spending on health care in Massachusetts accelerated faster in 2018 than in recent past years, climbing 3.1% to $60.9 billion, according to a new report.
The Center for Health Information and Analysis plans to release its annual report on Tuesday and it will show total health care expenditures increased by $2.1 billion last year, with spending on prescription drugs accounting for the "majority of the growth."
The report also found that out-of-pocket costs and premiums for consumers have grown "substantially faster" over the past two years than overall commercial spending, increasing at twice the rate of inflation and wages.
The publication of the report comes as the Health Policy Commission (HPC) prepares for its annual hearing on health care cost trends later this month, and the Baker administration and legislative Democrats have both said they are working on separate, but undefined, legislation in the health care space.
The new report "identifies both positive trends and warning signs for the future affordability of health care in the Commonwealth," HPC Executive Director David Seltz said in a statement. "The fact that Massachusetts was at or below the health care cost growth benchmark for the third year in a row, and continues to increase more slowly than comparable national trends, is very good news."
However, over the past two years, Seltz said, growth in out-of-pocket consumer costs (6.1%) and premiums (5.2%) outpaced inflation (2.9%) and wage growth (2.8%). Seltz flagged spending on hospital services, pharmacy, and health plan administrative costs as among the top drivers.
"Overall, these findings indicate that further action and policy reforms are needed to maintain the nation-leading progress Massachusetts has made over the past seven years," Seltz said. "The HPC will continue to advocate for a more transparent, accountable, and affordable health care system for everyone in Massachusetts."
The report also shows that spending on MassHealth, the state's Medicaid program for low-income and disabled residents, was flat, while commercial health plan spending went up 3.3%.
Medicare spending grew 5.7%, climbing faster than the national average of 4.4% despite seeing slower growth in the Medicare population than the rest of the country.
The 2012 law focused, in part, on encouraging the adoption of alternative payment models to replace the fee-for-service system, but the CHIA report found that while global payment models are expanding at MassHealth their adoption continues to decline at commercial health plans.
Prescription drug costs also continue to be an issue.
After a fierce debate this spring, the Legislature adopted a set of reforms initially proposed by Gov. Charlie Baker that would allow the administration to negotiate supplemental rebates with certain drug manufacturers to drive down pharmacy costs at MassHealth.
This year's CHIA report found that pharmacy spending of $9.9 billion in 2018 was up 5.8%, or 3.6% after accounting for rebates.
The $2.1 billion in new overall spending eclipsed the rate of growth in each of the past two years, including last year when spending climbed just 2.8%. That rate was adjusted after CHIA preliminarily reported last year in its annual report that growth has slowed to 1.6%.
The growth rate in total expenditures equaled the benchmark set for the year by the Health Policy Commission, which for the first time since the 2012 law was passed lowered the benchmark from 3.6% to 3.1%.
CHIA said that expenditures were concentrated on hospital services, physicians and prescription drugs, and for the second year in a row commercial premiums and member cost-sharing both increased faster than overall commercial spending growth.
Total commercial health care spending grew 3.3% to $23.3 billion, while Medicare spending climbed to $18.1 billion.
MassHealth, which is one of the largest drivers of spending in the state budget, increased by less than one-half of a percent to $15.1 billion as enrollment also fell.
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