Reimbursement News

Mass. Healthcare Spending Increases, Premiums, Cost-Sharing Slow

Massachusetts’ 2019 healthcare spending exceeded the annual growth benchmark, while premiums and cost-sharing decreased for commercial members.

Mass. Healthcare Spending Increases, Premiums, Cost-Sharing Slow

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By Hannah Nelson

- Massachusetts experienced higher-than-expected total healthcare spending growth in 2019, however rates of commercial insurance premiums and member cost-sharing decelerated from 2018, according to the 2019 Annual Report on the Performance of the Massachusetts Health Care System from the Center for Health Information and Analysis (CHIA).

For the second year in a row, Massachusetts Total Health Care Expenditures (THCE) have surpassed the Health Policy Commission’s annual cost growth benchmark of 3.1 percent.

THCE grew 3.6 percent from 2017 through 2018 and the most recent data from 2018 through 2019 shows that THCE grew 4.3 percent to $64.1 billion, or $9,294 per capita.

From 2018 to 2019, healthcare spending growth accelerated across each of the four largest service sectors; hospital inpatient, hospital outpatient, pharmacy, and physician services. As in previous years, the greatest share of growth in THCE was made up by gross prescription drug spending, which increased by 7.2 percent in 2019.

Total spending for private commercial plans, which accounted for almost 40 percent of THCE, increased 5.7 percent in 2019, a greater jump than the 4.3 percent seen in 2018.

Hospital outpatient spending increased the most compared to the other three largest commercial service sectors, with 8.1 percent expenditure growth, followed by gross pharmacy spending with an increase of 6 percent. The report noted that for the first time in several years, hospital outpatient spending accounted for the largest percentage of total commercial expenditures in 2019.

Premiums for fully insured plans increased by 2.2 percent between 2018 and 2019, a smaller jump compared to the previous year, which saw a 5.7 percent increase. Across the commercial market, premium retention (the portion of premium dollars not spent on beneficiaries’ medical expenses) fell, as claims costs grew quicker than premiums.

In turn, industry payers reported weakening profitability of fully insured stream of business in 2019 due to losses in the merged market (individual and small group).

Member cost-sharing growth also slowed in 2019, rising 2.8 percent to $53 per member, per month, opposed to 6.3 percent growth in 2018. However, the CHIA report found that there was substantial variation between the merged market and the employer-sponsored insurance market.

Members in the merged market experienced annual cost-sharing increases over 7 percent and had higher out-of-pocket costs, on average, compared to those members enrolled in large employer plans.

These trends coincided with a high prevalence of high deductible health plan enrollment among unsubsidized purchasers and small group beneficiaries.

In terms of public insurance, Total MassHealth expenditures increased 2.8 percent in 2019, accounting for one quarter of the Massachusetts THCE. MassHealth membership declined during this period.

Long term care, home health, and community health made up the largest service category for  MassHealth spending in 2019. Still, total spending for this category decreased for the third year in a row.  

Total spending for other services, like nurse practitioners and social workers, grew rapidly once again, with a 6.7 percent expenditure increase in 2019. Spending also increased for hospital inpatient, prescription drugs, and non-claims. However, MassHealth expenditures decreased for physicians and hospital outpatient services.

After a 5.8 percent increase in Medicare spending in 2018, experts expected a 6.7 percent increase in spending for 2019. However, the rate of increase slowed slightly to 5.2 percent growth.

Hospital inpatient services accounted for the largest service category in 2019 among Medicare enrollees, rising 3.6 percent in 2019.

However, total expenditures rose fastest for services provided by non-physician professionals, which saw a 10 percent leap, followed by prescription drugs and hospital outpatient spending, which both grew over 8.5 percent.

Due to the implementation of MassHealth’s accountable care organization (ACO) program, the number of Medicaid beneficiaries covered under an alternate payment method (APM) continued to increase. Over 80 percent of MassHealth members were covered under an APM arrangement in 2019.

This year’s report included findings from a patient experience survey that MassHealth issued to a sample of ACO members who had a primary care encounter in 2018. Overall, respondents expressed positive experiences, and the average performance of MassHealth ACO PCPs exceeded the minimum quality on all measures. The 2018 scores will be a baseline for evaluating progress towards MassHealth quality goals.