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May 13, 2019

Report: Drivers of health care spending still drugs, provider pricing

Health care spending in Massachusetts has grown at a slower rate than the national average every year since 2013, but with prices of care continuing to increase, the state still ranks among the top for overall health expenses, according to a new report.

In an analysis released last week, Freedman HealthCare researchers concluded that increases in spending are driven mostly by increasing prices rather than greater use of health care services, the continuation of a trend the company found in 2014 and 2016 reports.

Pharmaceutical spending is a factor, too, although that rate of growth has slowed in recent years, the report found, while hospital outpatient services have become a more prevalent driver of overall state spending on health care.

In 2016 and 2017, total health care expenditures grew 3 percent and 1.6 percent, respectively, falling below the 3.6 percent benchmark the state's Health Policy Commission set. However, the report found that overall, the major health care cost drivers identified in the first iteration of the research have not changed in nearly a decade. 

"While progress has been made in reducing health care cost growth, our state still has among the highest health care costs in the nation," said Massachusetts Association of Health Plans President and CEO Lora Pellegrini in a press release. "This report highlights recurring findings including provider prices, not utilization of services, as a key cost driver, as well as the impact of high pharmaceutical costs on spending. All stakeholders must work together to help contain health care costs for employers and consumers while improving quality of care for patients." 

The latest Freedman project — co-sponsored by the MAHP as well as the Associated Industries of Massachusetts, the Retailers Association of Massachusetts, the Massachusetts Association of Health Underwriters, and the National Federation of Independent Businesses — reviewed a decade's worth of past state agency reports on health care as well as nine new documents.

Lawmakers should focus their efforts on minimizing outpatient prices, pharmaceutical costs and by reducing the gap in prices between different providers, the report recommended. 

Earlier in the day, Senate President Karen Spilka told small business owners that the Senate would take another pass at omnibus health care legislation this session after last year's effort fell short.

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