Health Spending Surpasses Benchmark

Posted by Katie Holahan on Sep 2, 2015 7:10:00 AM

Health-care spending growth in Massachusetts surged past the commonwealth’s cost-control benchmark in 2014 as the MassHealth program for the poor spent billions to care for people left without coverage by problems at the Health Connector.

MassMedSpending2015The Massachusetts Center for Health Information and Analysis (CHIA) will today report that total health-care expenditures rose 4.8 percent in the Bay State last year. The increase far exceeds both the 2.4 percent increase for 2013 and the 3.6 percent benchmark for 2014 established under the state health cost-control law, which seeks to limit increases in health spending to the overall economic growth rate.

Total medical spending among commercial payers rose a more modest 2.9 percent. Health-insurance premiums for fully insured employers increased at the inflation rate of 1.6 percent, while premiums for self-insured companies jumped 3.4 percent.

Massachusetts patients spent $54 billion - that's $8,010 per person – on medical care last year, according to the CHIA report. Massachusetts employers, meanwhile still pay some of the highest health-insurance premiums in the country.

The overall 4.8 percent growth rate allows the Massachusetts Health Policy Commission (HPC) to require performance improvement plans from doctors, hospitals or insurers that “threaten the Commonwealth’s ability to meet the benchmark.” The commission will make final decisions on requiring any performance improvement plans during the next several weeks.

Richard C. Lord, President and CEO of Associated Industries of Massachusetts, serves as a member of the Health Policy Commission. 

The report was the second indication in as many weeks that the health insurance premium costs paid by employers may be accelerating after several years of moderate increases. The Massachusetts Division of Insurance last month approved premium increases averaging 6.3 percent for the first quarter of 2016 for companies with 1 to 50 employees - more than double the 3.1 percent average increase that small business saw in the first quarter of this year.

Health spending nationally is projected to grow from about 17 percent of US economic output in 2013 to nearly 20 percent in 2024, according to federal government estimates.

“The spending increases in the commercial sector were modest, but the cost of health insurance remains a key challenge for Massachusetts employers,” said John Regan, Executive Vice President of Government Affairs at AIM.

“We remain concerned about the acceleration of costs in the next several years."

MassHealth spending grew 19 percent, or $2.4 billion, last year as enrollment increased 23 percent. Persistent problems with the Health Connector in 2014 led to more than 325,000 residents being enrolled in a “transitional” MassHealth program without the normally required eligibility determinations.

Spending increases in the commercial sector were driven by rising pharmaceutical expenditures. The CHIA report says that pharmacy spending grew at 12.5 percent for commercial full-claim and 14.4 percent for MassHealth.

Topics: Health Care Costs, Health Insurance

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