Health spending spikes in Massachusetts amid high drug expenses, unprecedented patient cost sharing, regulator warns

Pharmaceutical costs, non-claims payments and outpatient care fueled “unchecked” healthcare spending in Massachusetts that's increasingly being felt by its residents, according to new findings from the state’s healthcare regulator.

The Bay State's total healthcare expenditures per capita increased by 5.8% from 2021 to 2022, well above the national rate of 4.1% and nearly double the 3.1% benchmark set by the Massachusetts Health Policy Commission (HPC) based on prior years’ compounded growth.

The jump translates to a new total of $10,264 in average healthcare spending per resident, according to a report (PDF) issued by the commission’s Center for Health Information and Analysis on Thursday. Healthcare spending in the state has consistently exceeded prior years’ benchmarks since 2017.

The center’s data include a “particularly concerning” 5.8% growth in premiums in 2022 and a 26% increase in patient cost-sharing combined over 2021 and 2022, which the commission noted is the highest shift in the 11 years it’s been tracking statewide trends.

The findings highlight “concerning trends that the HPC has identified in recent reports—healthcare costs are rising at a pace inconsistent with wage growth and are increasingly unaffordable for Massachusetts residents,” HPC wrote in an accompanying release.

National wage and salary growth from 2021 to 2022 was 5.1%, according to federal data.

Within individual categories of spending, pharmaceutical costs led the pack with a gross 8.8% increase (8.3% net of rebates) and represented over a fifth of overall health spending growth. Here, the state noted that prescription drug spending within the commercial market alone was almost $1 billion above the 3.1% benchmark.

“Pharmacy has been the biggest contributor to health care spending growth for several years … underscoring the urgent need for targeted policy action and increased oversight to address pharmaceutical pricing and value,” HPC Board Chair Deborah Devaux said in a statement. “Even accounting for rebates, prescription drug spending grew more than 7% per year from 2019 to 2022 for those with private health insurance, 10 times faster than in previous years. The HPC continues to be concerned that, without action, these trends will continue and make care even more unaffordable and inaccessible.”

Non-claims payments followed pharmaceuticals as the highest driver of spending increases due in large part to one-time COVID-19 supplemental payments. Hospital outpatient spending was the next highest category with a 5% ($627.6 million) year-over-year increase, whereas physician services and hospital inpatient spending each declined by 0.1% (-$5.6 million) and 1.4% (-$174.4 million), respectively.

The state’s report also pointed to a decadelong rise in the percentage of commercially insured residents enrolled in high-deductible plans, from 16% in 2013 to 42% in 2022, and noted that these enrollees were twice as likely to go without care or prescriptions due to cost. Forty-one percent of all Massachusetts residents reported a healthcare affordability issue within the preceding 12 months.

Massachusetts has a reputation for high-quality healthcare delivery and has served as the test bed for state or national policy changes—most famously 2006’s “Romneycare” mandate requiring minimum levels of insurance coverage upon which similar requirements in the Affordable Care Act were modeled.

In this case, Massachusetts led eight other states in establishing a healthcare cost growth benchmark program back in 2012, according to the National Academy for State Health Policy. It’s also one of the few with a program that has the authority to enforce policies to limit spending growth, as it did in 2022 with Mass General Brigham.

Massachusetts set up the program to address healthcare spending that was 39%, or $1,784, higher than the national average in 2009.

The latest numbers, however, show that the state’s average annual spending still exceeds the national average (reported by the Centers for Medicare & Medicaid Services’ National Health Expenditure Accounts) by 27%, or $2,171 per person.

The top-line 5.8% per capita increase from 2021-22 is also higher than the 4.1% reported nationwide. The report’s authors noted that both state and national health utilization and spending are coming off of two years of volatility due to the COVID-19 pandemic, but that national trends again resemble those seen prior to the pandemic.

The release of the health spending report coincided with an annual hearing assessing the state’s performance on cost growth. David Seltz, HPC executive director, said the day’s findings and testimonies show it is “imperative” that the regulator take action on cost and access.

“We pride ourselves in the Commonwealth as being nation-leading in our health care, yet nearly half of adults reported unmet health care needs due to cost,” Seltz said. “This is unacceptable, and we must work together to evolve our state’s cost containment efforts to ensure that all residents have access to healthcare.”