Rising costs discussed at health care hearing as hospitals say recovery from COVID pandemic continues
Photo | Courtesy of Commonwealth of Massachusetts
Massachusetts State House
It's harder to get a doctor's appointment, hospital stays are longer and cost more, pharmaceutical prices are up, health plans' overhead is ballooning -- there was plenty to talk about at this year's annual health care cost growth hearing, and fingers were pointing at others in the room.
As care costs have grown significantly for Bay Staters over the past five years, legislative solutions are hard to come by when hospitals, insurers, patients and businesses all have different sets of priorities and ideas for what will drive the price tag down.
A report released Wednesday estimated total health care spending in Massachusetts at $71.7 billion in 2022, and a per capita health care expenditure of $10,264 per resident, according to the Center for Health Information and Analysis. That was a 5.8 percent increase over 2021 on a per capita basis -- far exceeding the benchmark growth the state's Health Policy Commission had deemed would be reasonable that year (which they set at 3.1 percent.)
Those who testified at Thursday's cost growth benchmark hearing, representing insurers, hospitals and care providers, small businesses fronting the burden of high-cost insurance plans for employees, and health equity advocates, were all passionate in their point that the price of health care is too high -- though they had different opinions on who or what was to blame.
"We must confront the pressing challenges that Massachusetts faces when it comes to access to care that's driven by misaligned incentives, workforce challenges and bottlenecks in the system," said Alex Sheff of Health Care for All.
The state should focus on redirecting resources and changing payment structures for primary care and behavioral health, Sheff said, to relieve pressure points in emergency departments and hospitals by increasing access to primary care.
More people became reliant on hospitals for care needs they would have addressed with their primary care physician during the pandemic, Health Policy Commission Director David Seltz said during the hearing. At the same time, primary care is shrinking.
Fewer medical residents are choosing internal or family medicine as it's less lucrative than specialty medicine, Seltz said.
"We spent seven cents of the health care dollar on primary care in Massachusetts, and that percentage is going down. So I do think we need to change the financing of the system to make primary care more attractive to residents at that front door," Seltz said.
With more people turning to hospitals rather than the doctor, a workforce shortage leaving hospitals without enough nurses, and delays in outpatient settings, long stays in hospitals are growing. Between 2020 and 2023, the percentage of emergency department patients who stayed longer than 12 hours increased from 6.1 percent to 10.2 percent, according to the HPC.
Hospitals and commercial health plans negotiate the price of care for insured patients, and often point to the other when the question of rising costs comes up.
The Center for Health Information and Analysis found that between 2021 and 2022, premiums for commercially insured residents rose 5.8 percent, while cost sharing -- copays, coinsurance and deductibles -- were also on the rise, growing by 6 percent.
Almost half of Bay Staters (42.4 percent) with private insurance were also on high deductible plans in 2022, while 31.2 percent reported they had unmet health care needs in their family due to high costs.
Meanwhile, health plans' net worth swelled during the pandemic years, growing 20 percent from 2019 through 2022, according to the Massachusetts Hospital Association. The insurers say their increasing net worth is partially thanks to some good years in the stock market, and that surpluses and reserves are important for stability in uncertain times -- especially after insurers gave payers breaks during the COVID-19 pandemic.
The HPC also reported on Thursday that health insurer administrative costs have risen over 50 percent since 2017.
Asked about the swelling administrative overhead, Massachusetts Association of Health Plans Senior Vice President of Advocacy and Engagement Elizabeth Leahy said this spending has been driven by inflation and salary demands, as well as investments in IT infrastructure.
"Included in that chunk of administrative spending is also all of the stuff that health plans have to do to meet the needs of their consumers as directed by the Legislature. So for example, we have laws that have required the standing up of robust provider directories. We have requirements around automating prior authorization, we have requirements around how claims are transferred and sent to folks. And all that requires significant IT investments," Leahy said.
Leahy pointed to providers, calling for lawmakers to rein in the highest cost hospitals.
"We routinely hear from health plan CEOs about negotiations with hospitals and providers seeking rate increases upwards of 20 to 30 percent year after year. I recently heard an anecdote about a provider group seeking a 50 percent rate increase," she said.
Steve Walsh, president of the Massachusetts Health and Hospital Association said hospitals still have not recovered from the COVID-19 pandemic.
Saying the state's health care landscape is "in a moment of deep crisis, deep fragility, and extraordinary change," Walsh said health care providers are still trying to make up losses taken during the pandemic and recover from the workforce shortage that has hurt the industry.
"As you pour over the thousands of metrics included within CHIA and HPC's annual reports, I ask that you think about some of the metrics that really matter and keep them top of mind -- 19,000 job vacancies across Massachusetts hospitals. 1,500 patients stuck in hospitals because they cannot access specialized care they need. One in seven [medical surgical] beds currently tied up with patients who no longer need acute level care, but can't be moved. All five regions of the state at elevated risk at this moment because of capacity constraints, nine local hospitals' immediate future in doubt, 20 percent of behavioral health beds offline due to staffing shortages," Walsh said.
He added that "100 percent of hospitals" are becoming "financially weaker by the day."
The number of people employed in all nursing facilities is 20 percent below pre-pandemic levels, said David Auerbach, senior director of research and cost trends at the HPC.
Thursday's hearing was an annual event held to help inform the Health Policy Commission's health care cost growth benchmark for fiscal year 2025 -- a measure that has had some lawmakers and industry representatives wondering if it's even useful to set a forward-looking target that "doesn't have any teeth" to actually rein in spending. It is usually set at 3.6 percent growth.
Walsh strongly rebuked whether the benchmark, which was created in a 2012 law, was effective.
"The statutorily required discussion that's taking place right here today at this moment is a relic of the past and it no longer serves our patients. Let's work together to create a transformative, sustainable patient-centered system for the future," he said.
Insurers doubled down on the necessity of such a measure, saying it gives them more leverage in negotiations with hospitals.
"Without a strong benchmark, and without accountability to that benchmark, health plans will have little leverage to constrain provider rates without cost sharing, particularly for prescription drugs," Leahy said.
Meanwhile, as hospitals and health plans disagreed, small business groups argue that they and their employees are shouldering the costs of increasingly high costs.
Jon Hurst, president of the Retailers Association of Massachusetts, has spoken in the past about small businesses disproportionately impacted by the "death spiral" of rising care costs.
The pool of people insured in Massachusetts' small group marketplace (for businesses with 50 or fewer employees) has shrunk significantly over the past few decades as employees move onto spouse's plans or public insurance options -- leaving a dwindling number of older employees, who may be prone to more health issues, left to pay more.
"We come before you today because we're asking you to, rather than keep the 3.6 percent benchmark, to lower it once again to 3.1. Because the 3.6, frankly, is not working," Hurst said Thursday. "The providers are ignoring it. They can ignore it because there's no teeth to it, there's no ramifications. They're getting away with it."
One of the biggest leaps in health care spending has been in the cost of prescription drugs.
Prescription drug spending grew 10 times faster from 2019 to 2022 as it did from 2017 to 2019 -- compared to office, urgent care and retail clinics, which actually saw a decline in cost growth over the last available three years of data.
The HPC recommended policymakers do more to oversee pharmaceutical spending, citing it as a major and growing expense for families.
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