Report: Massachusetts spent $59B on health care in 2016

DATE: April 5, 2018

BOSTON - Increased health care expenditures in Massachusetts fell within a  targeted goal tied to the state's economic growth, according to a recently released report.

The Massachusetts Health Policy Commission's most recent cost trends report includes a range of recommendations for further cost savings, ranging from delivery of care, how it is paid for and who is allowed to provide it.

Massachusetts spent $59 billion on health care in 2016, or $8,663 per person.

In 2016, total health care expenditures in the commonwealth grew 2.8 percent per capita, as an analysis from the state's Center for Health Information and Analysis estimated in the fall. This is within the 3.6 percent health care cost growth benchmark set by the state through 2017.

"The persistent affordability concerns for individuals, families, businesses, and government remain our biggest concern. While health care spending overall in Massachusetts was below the 3.6 percent benchmark and national trends, continued challenges, including high hospital outpatient spending and avoidable hospital use, remain," said Stuart H. Altman, who chairs the commission and is a health economist at Brandeis University, in a release.

"The recommendations we make in the report - especially around enhancing transparency of pharmaceutical price growth, protecting consumers from outrageous out-of-network bills, and emphasizing the importance of social determinants of health - are critical to curbing this trend and ensuring the system works for everybody."

Massachusetts was within the benchmark in 2013 with a growth of 2.3 percent, but exceeded the benchmark in both 2014 and 2015 with growth of 4.1 percent and 4.2 percent, respectively, according to the cost trend reports the commission issues annually.

A state law was enacted in 2012 to establish a benchmark on health care cost growth to keep increases aligned with the state's projected economic growth. At the time, the state's per person spending on health care was found to be among the highest in the country.

Separate from the report, the commission outlined additional cost-savings "targets" that it said, if met, would save $4.7 billion over five years.

The Center for Health Information and Analysis as well as the state health policy commission were established the same year to track health care data and issue actual annual cost reports against the initial benchmark that projected economic growth at 3.6 percent.

The two work in tandem, and the commission this year created new committees to better address areas of focus.

Total health care expenditures in the state includes all medical expenses paid to providers by private and public payers, including Medicare and Medicaid (MassHealth); all patient cost-sharing amounts, such as deductibles and co-payments, and the net cost for providers of private insurance.

The recent report shows that over the last four years, state spending on health care grew at an average of 3.55 percent annually.

Last month, the commission established without modification the 2018 benchmark at 3.1 percent. The law allows the commission to make some modification to this benchmark over the next five years based on the state's potential economic growth rate.

Highlights, including recommendations, from the 2017 Cost Trends Reports include:

• Between 2011 and 2016, behavioral health-related emergency department visits in the state increased by 22 percent. Mental health-related related visits increased 9 percent; alcohol use disorders increased by 40 percent; other substance use disorder visits increased by 54 percent.

• Fall River, New Bedford, Lower North Shore exceeded the national average rate for potentially preventable inpatient admissions.

• From 2014 to 2016, enrollment in the commercially-insured market among smaller employer groups declined by 8 percent, and enrollment in individual markets, most of which is offered through the Massachusetts Health Connector, increased 183 percent.

• Massachusetts premiums for single-coverage in the employer market grew 8 percent from $6,121 in 2012 to $6,621 in 2016.

• Prescription drug and hospital outpatient department spending were the highest growth areas in 2016, with increases in spending of 6.1 percent net of rebates and 5.5 percent from 2015, respectively. State data showed spending for prescription drugs totaled $9.2 billion in 2016, but increased at a much slower rate than in 2015.

• Alternative Payment Method use among the three largest Massachusetts payers increased sharply from 46 percent to 56 percent of covered lives in 2016.

• Policymakers should authorize the Executive Office of Health and Human Services to pursue new strategies for maximizing value in drug spending for the MassHealth program, including the enhanced ability to negotiate directly with drug manufactures for additional supplemental rebates, impose robust transparency requirements, and the ability to exclude certain drugs from the MassHealth formulary, similar to standard practice in commercial plans.

• The Commonwealth should take action to equalize payments for the same services between hospital outpatient departments and physician offices. Specific actions should include establishing limits on sites that can bill as hospital outpatient departments and implementing site-neutral payments for select services.

• Policymakers and market participants should advance efforts to address social determinants of health, building on the leadership of the Executive Office of Health and Human Services through MassHealth's Delivery System Reform Incentive Program and other initiatives.

Separately, the commission released figures based on achieving seven recommendations in the report highlighted below:

• Hospital Readmissions: Reducing hospital readmissions by 20 percent would save $1.04 billion over five years.

• Post-Acute Care: Reducing institutional post-acute care discharges by 25 percent would save $1.37 billion over five years.

• Avoidable Emergency Department Use: Reducing non-emergent emergency department visits by 66 percent, including a 33 percent shift to other settings, would save $260 million over five years. Shifting 20 percent of emergent primary care treatable ED visits to other settings would save $91 million over five years.

• Community Appropriate Discharges: Shifting 25 percent of community appropriate inpatient discharges from teaching hospitals to community hospitals would save $211 million over five years.

• Hospital Outpatient Care: Implementing site neutral outpatient reimbursement for certain high-volume, "shoppable" conditions would save $1.05 billion over five years.

• Prescription Drugs: Limiting prescription drug price growth to 1.6 percent would save $230 million over five years.

• Alternative Payment Methods: Expanding use of APMs would save $494 million over five years.