Drug expenses, cost sharing spike Massachusetts health spending
This spending, which authors described as 'unchecked,' is due largely to non-claims payments, pharmaceutical costs and outpatient care.
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Total Health Care Expenditures (THCE) in Massachusetts totaled $71.7 billion in 2022, and from 2021 to 2022, THCE per capita increased 5.8% to $10,264 per resident – far above the national rate of 4.1%, according to a new report from the Center for Health Information and Analysis.
This spending, which authors described as "unchecked," is due largely to non-claims payments, pharmaceutical costs and outpatient care, and the effect is beginning to be felt by Massachusetts residents, they said.
Between 2020 and 2022, member cost-sharing, premiums and claims covered by payers and employers increased faster than regional inflation and wages and salaries, numbers showed.
Pharmacy and non-claims payments were the largest contributors to the THCE increase in 2022. The non-claims growth was primarily driven by $621.5 million in new COVID-related supplemental payments that MassHealth made to support the financial stability of eligible providers pursuant to state and federal legislation.
Commercial enrollment in high deductible health plans (HDHPs) grew to 42.4% of members in 2022, continuing a growth trend that has more than doubled over the last 10 years. In 2014, 19% of members were enrolled in HDHPs.
WHAT'S THE IMPACT?
Total expenditures for private commercial health plans, which include self- and fully-insured coverage offered by employers as well as plans purchased individually – including those purchased on the Health Connector – increased 0.7% from 2021 to 2022. During the same period, commercial enrollment declined 3.2%, equating to a 4.1% increase in per-member, per-month (PMPM) spending.
Hospital outpatient and pharmacy spending were the largest private commercial service categories, with pharmacy gross of rebates surpassing physician spending to become the second-largest category. From 2021 to 2022, commercial hospital outpatient spending increased 2.0%, resulting in a 5.4% PMPM increase.
Total MassHealth expenditures, representing 27% of total THCE, increased 11.1% from 2021 to 2022. This increase was largely driven by a 9.2% increase in MassHealth enrollment during this time period due to federally mandated continuous coverage requirements. The enrollment increases in 2022 resulted in an overall MassHealth PMPM spending increase of 1.7%.
MassHealth spending growth was also driven by increases in non-claims spending, which grew by 28 .8% to $3.1 billion in 2022. Most of this non-claims increase was attributable to $621.5 million in one-time COVID-19-related supplemental payments made by MassHealth.
Despite near-universal health insurance coverage in Massachusetts, residents reported challenges affording necessary healthcare services. In 2021, more than four in 10 Massachusetts residents reported experiencing healthcare affordability issues in the past 12 months (41%), including more than half of Hispanic residents (54.9%) and non-Hispanic Black residents (50.8%).
From 2021 to 2022, fully insured health insurance premiums increased 5.8% to a market average of $595 PMPM, after increasing 6 .4% the previous year. At the same time, member cost-sharing for members of plans issued in Massachusetts increased 6% to $61 PMPM, surpassing pre-pandemic levels for the first time after fluctuating in 2020 and 2021. Notably, both member cost-sharing and fully insured health insurance premiums grew faster than wages and salaries and regional inflation from 2020 to 2022.
The statewide acute hospital median total margin decreased by 9.2 percentage points, from 5.0% in fiscal year 2021 to -4.2% in 2022; this was followed by an increase to a statewide median total margin of 1.6% in FY 2023, as of data reported through June 30, 2023.
In 2022, behavioral health spending represented 7.4% of private commercial health expenditures, 16.2% for MassHealth and 3.1% for Medicare Advantage, with a majority of behavioral health spending for mental health services.
THE LARGER TREND
In calendar year 2022, the COVID-19 pandemic began to wane following record-high case counts in the first quarter. But while case counts and the severity of illness declined throughout the year, the residual effects of the pandemic continued to challenge the Massachusetts healthcare system.
Providers faced negative margins and system-wide capacity strains, authors said. At the same time, Massachusetts residents and employers faced growing healthcare affordability concerns due to rising premiums and cost-sharing. Adding to financial pressures, inflation peaked in 2022, rising to the highest rate in decades.
Each year CHIA examines the performance of the Massachusetts healthcare system and reports on trends in costs, coverage, and quality indicators to inform policymaking. This report focuses on data through 2022, a period following two years of volatile utilization and spending due to the pandemic.
Jeff Lagasse is editor of Healthcare Finance News.
Email: jlagasse@himss.org
Healthcare Finance News is a HIMSS Media publication.
