Opinion

Healthcare Costs a Continuing Concern

Opinion

By Katie Holahan

Healthcare spending in Massachusetts grew less than a key state benchmark and less than the national average during 2017, but employers and workers are not yet seeing the benefits.

The annual Healthcare Cost Trends Report issued this month by the state Health Policy Commission (HPC) indicates that total per-capita healthcare expenditures in Massachusetts rose 1.6% during 2016, significantly less than the 3.6% benchmark set by the commission. The Massachusetts growth rate also fell below the national rate — 3.1% — for the eighth consecutive year.

But the health-insurance premiums paid by Massachusetts employers and employees increased 5.8% in 2017, leaving the average total premium for employer-based coverage among the highest in the country at $21,000 per year for a family plan and $7,000 for a single employee. These figures do not include out-of-pocket spending such as co-payments and deductible spending, which grew 5.9% in 2017 for commercially insured enrollees.

Premiums for smaller employers increased 6.9% and are now the second-highest in the country, according to the HPC. Fifty-seven percent of employees in small businesses are enrolled in high-deductible health plans.

Part of the reason employers are not seeing more benefit from moderating health spending may be the fact that commercial insurers in Massachusetts pay higher prices to providers than Medicare pays for the same services. For hospital inpatient care, average prices among the three largest Massachusetts insurers were 57% higher than Medicare prices for similar patients. Commercial insurers also paid much more for typical outpatient services, including brain MRIs, emergency-department visits, and physician office visits.

Premiums for smaller employers increased 6.9% and are now the second-highest in the country, according to the HPC. Fifty-seven percent of employees in small businesses are enrolled in high-deductible health plans.

The HPC attributed much of the overall increase health-care expenditures to spending on prescription drugs (4.1%) and hospital outpatient services (4.9%). The commission also found that medical bills can vary as much as 30% from one hospital or medical group to another with no measurable different in quality of care.

The HPC makes 11 policy recommendations to continue health spending moderation. Among the highlights:

• The Commonwealth should focus on reducing unnecessary utilization and increasing the provision of coordinated care in high-value, low-cost settings.

• Policymakers should advance specific, data-driven interventions to address the pressing issue of continued provider price variation in the coming year.

• The Commonwealth should continue to promote the increased adoption of alternative payment methods.

• The Commonwealth should authorize the Executive Office of Health and Human Services to establish a process that allows for a rigorous review of certain high-cost drugs, increasing the ability of MassHealth to negotiate directly with drug manufacturers for additional supplemental rebates and outcomes-based contracts, and increasing public transparency and public oversight for pharmaceutical manufacturers, medical-device companies, and pharmacy benefit managers.

Katie Holahan is vice president of Government Affairs for Associated Industries of Massachusetts.

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