BOSTON (SHNS) – Regulators and industry groups are hopeful lawmakers will prioritize action to slow down sharply rising costs for healthcare services, medications, and other major needs after the COVID-19 pandemic exacerbated long-standing pressure points and ripped open new affordability issues.
The Health Policy Commission, created in a 2012 healthcare cost containment law, and the Legislature’s Joint Committee on Health Care Financing set out Wednesday to consider what figure they will set as the benchmark for total healthcare spending growth in 2024, even as several policymakers questioned whether it’s even useful to set a forward-looking target based on actual spending data from several years earlier.
For 2023, regulators agreed to a goal of limiting total healthcare spending growth to 3.6 percent, though it could be a challenge to accomplish that amid high inflation, staffing shortages, and other pressures fueling higher costs and greater expenditures. State analysts on Monday estimated that per capita healthcare expenditures grew 9 percent in 2021 after dropping 2.3 percent in 2020 due to the pandemic.
Sen. Cindy Friedman, who co-chairs the Health Care Financing Committee, pondered toward the start of Wednesday’s hearing if the benchmark process as designed more than a decade ago is still the right approach.
“Do we need a new goal? Are we counting the right things?” Friedman said. “If our goal is to actually keep costs accessible to people, if you look at the cost of health care and you talk to the people out there who are buying and using health care and health insurance, there is such a discrepancy. They just can’t do it anymore. They can’t pay for it.”
“I completely appreciate the incredible complexity of this, but they’ll look at something and say, ‘the cost has gone up 3.6 percent, but my premium has gone up 11.5 percent and my copays are out of sight,'” she added.
HPC Executive Director David Seltz replied that he agrees, saying the commission is interested in supplementing the healthcare cost growth benchmark with additional information that can better capture cost concerns on an individual household level.
“We have been at this for 10 years. We have made important progress, but there are real affordability challenges that remain,” Seltz said. “How do people feel about health care costs? It’s premiums, copays, and deductibles. All of those have continued to go up and up. They don’t feel it in the way we measure total health care expenditure growth, and they’re not always one-to-one.”
Voices representing different, sometimes competing interests across the healthcare landscape largely agreed that costs are ballooning and creating more pressure on individual consumers than zoomed-out snapshots might indicate.
When it comes to bending the trend line downward, many of the ideas that regulators, hospital and insurance industry groups and business leaders floated Wednesday are familiar ones that Beacon Hill Democrats have yet to fully embrace.
HPC officials reiterated recommendations they have offered for months, many of which call on lawmakers to sharpen the tools regulators can deploy.
The commission wants the ability to impose escalating financial penalties on healthcare providers, payers, and other industry segments found to be contributing to excessive spending growth.
Currently, the HPC’s primary option to hold entities accountable is to subject them to a performance improvement plan (PIP) process that can result in mandatory spending cuts, and the commission has only taken that full action once before involving Mass General Brigham in 2022.
Seltz said he also wants regulators to have greater leeway over determining which spending increases are allowable and which need to be reined in to help the state meet its benchmark.
“Right now, we are very restrained in the statute in terms of how that benchmark is set and how it is used. I think more flexibility and more figures that we can bring into that process can help send a signal to the marketplace about areas we want investment in and the areas where perhaps, over time, we want to be able to restrain growth,” he said.
The HPC’s legislative recommendations also include action to limit excessive prices for both healthcare services and prescription drugs, cap hospital price growth, subject the pharmaceutical sector to more scrutiny, and hold health insurers accountable for passing along savings to consumers.
Representing insurers, Massachusetts Association of Health Plans Senior Vice President Liz Leahy said rising healthcare spending is driven by “persistent increases in the prices that doctors, hospitals and other providers charge,” concentration of services in higher-cost areas, and “excessive spending growth for prescription drugs.”
The organization endorsed the HPC’s push to subject pharmaceutical manufacturers and pharmacy benefit managers to additional data review and to bring that industry into the fold for the annual cost trends hearing.
“It is a grave disservice to our state’s cost containment efforts for pharmaceutical companies to continue to be absent from the conversation, particularly as prescription drug prices continue to outpace inflation and price increases for any other medical commodity or service,” Leahy said.
Seltz, hitting on a similar theme, said pharmaceutical spending “is a large part” of the state’s healthcare footprint but is “exempt from all of the other accountability and transparency mechanisms.”
Last year, the Senate approved a wide-ranging bill aimed at lowering prescription drug costs and boosting access to medications, building on similar legislation the chamber advanced in 2019. In both sessions, the measure died in the House.
Leahy said MAHP supports pharmaceutical spending oversight reforms included in that bill, a version of which Friedman refiled this session (S 749).
Pharmaceutical industry groups did not testify at Wednesday’s hearing.
In its annual report published Monday, the Center for Health Information and Analysis said pharmacy spending outpaced all other categories and grew from $10.6 billion in 2019 to $12.7 billion in 2021 before accounting for rebates.
Massachusetts Biotechnology Council Chief Corporate Affairs Officer Zach Stanley said in response to the report that “increases in utilization are the most likely cause, not increased cost of drugs.”
“During a pandemic, an increase in the utilization of medicines that can keep people healthy and out of the hospital should be viewed as money well spent,” Stanley said.
While hospitals and other providers grapple with potent staffing shortages that could put services even further out of reach, Massachusetts Health and Hospital President and CEO Steve Walsh said he is concerned the state’s approach to controlling health care spending “has not adapted at the same pace as our approach to building our workforce and changing our delivery system.”
“The benchmark simply wasn’t designed to measure the biggest cost drivers in today’s market. Healthcare providers have done whatever it takes to adjust to those cost pressures and remain accessible for their patients, and those measures have come with staggering prices,” Walsh said.
He cited several factors behind the trend, including surging inflation, Bay Staters seeking the care they delayed during the pandemic, and high pharmaceutical prices, but the workforce challenges were top of the list.
Walsh said in the fiscal year 2022, Massachusetts hospitals spent more than $1.5 billion on “travel labor” to fill necessary openings with temporary workers, reflecting a 610 percent increase from before the COVID-19 pandemic.
“If you back that out of the equation to create the benchmark, we absolutely crush it,” he said. “This is the single biggest cost pressure for every hospital and health system as we speak, and there’s no way to account for it in the current way we approach the benchmark.”
The HPC plans to vote on April 12 on whether to modify the benchmark for 2024, ahead of an April 15 statutory deadline to set the target.