Mass. Faces Growing Affordability Challenges as Health Care Costs Surge: Insights from Athol Daily News

Health Care Costs in Massachusetts Skyrocket, Squeezing Household Budgets

Health care costs in Massachusetts are surging at an unsustainable rate, placing immense pressure on household finances, according to new data from the Center for Health Information and Analysis (CHIA). In 2023, per capita health care expenditures jumped to $11,153, an 8.6% increase from the previous year. This sharp rise is the second-largest in the past decade, far exceeding the state’s 3.6% cost growth benchmark.

“For 2023, we are seeing unsustainable cost growth trends persist, putting increasing pressure on residents, employers, and the system as a whole, emphasizing the urgent need for bold and systemic solutions,” said CHIA Executive Director Lauren Peters.

The only time costs increased more was between 2020 and 2021 with a 9% boost.The affordability crisis extends beyond health care, with rising housing prices and energy bills compounding the financial strain on Massachusetts residents. State officials had warned about the potential impacts of rising health insurance costs on family budgets during a series of hearings earlier in the year.

matthew Veno, executive director of the Group Insurance Commission (GIC), which oversees insurance for 460,000 state employees and retirees, highlighted the substantial premium increases the GIC has experienced. He noted the difficult choices these increases force the state to make.

“So when we are facing rising pressures on affordability, rising underlying costs of health care, that has a notable burden on the state budget,” Veno stated. “And whenever we talk about health care, we should always talk in terms of tradeoffs. The dollars that we spend to provide essentially the same benefit going forward inhibits our ability to make progress in other areas, most notably health equity, behavioral health, but also to relieve the pressure as much as we can on our members who pay a significant portion of their premium, but also on the state budget.”

the CHIA report identifies pharmacy spending and new MassHealth supplemental payments to hospitals as key drivers of the 2023 cost increases.Net pharmacy spending rose by $1 billion, a 10% year-over-year increase. MassHealth also distributed approximately $1.5 billion in new payments to hospitals to bolster quality and health equity initiatives.

These rising costs are directly impacting patients. From 2021 to 2023, premiums went up by 12.1% and health insurance member cost-sharing by 12.9%, exceeding the 9.7% increase in statewide wages and salaries during the same period.

A significant portion of massachusetts residents are struggling with health care affordability. CHIA reports that over two in five residents have faced a health care affordability issue in the past year. These issues disproportionately affect specific demographic groups, with 58.2% of Hispanic residents and 48.7% of non-Hispanic Black residents reporting affordability challenges.

While hospital finances showed some improvement between fiscal years 2022 and 2023,they remain precarious. The median acute hospital operating margin increased from -1.3% to 0.2%. However, just over half of acute care hospitals reported positive operating margins in fiscal year 2023.

Steve Walsh, president of the Massachusetts Health and Hospital Association, emphasized the rapid changes occurring in the state’s health care landscape.

“Given the staggering pressures our health care providers are under, it is indeed remarkable that 2023 hospital spending still managed to mirror the state’s overall economic growth,” Walsh said. “There were serious costs associated with keeping patient care afloat for patients, most of which torpedoed hospital finances and still exist today — including fast-rising supply and pharmaceutical expenses, caring for sicker people in need of longer hospital stays, and taking sole duty for the state’s growing health safety net shortfalls.”

Dr.Hugh Taylor, president of the Massachusetts Medical Society, echoed the call for policymakers to reassess their approach.

“While the establishment of a target benchmark and collection and sharing of health care cost data was a well-intentioned practise at the time of its inception, a longitudinal approach, which could look at multi-year averages of growth, would capture more salient trends and allow for a more nuanced analysis of necessary growth of smaller entities,” Taylor said. “Due to the rigidity of the current benchmark formula, it cannot account for the real time-challenges facing the health care system or evaluating the value of investment. The benchmark formula needs to be revisited in order to account for both real-time economic factors, such as labor costs, the evolving federal landscape, and patient needs that impact the overall cost of the system.”

lora Pellegrini, president of the massachusetts Association of health Plans, stressed the unsustainable rate at which health care costs are rising.

“High health care premiums are a direct result of these underlying cost drivers. For too long, the responsibility for controlling health care costs has fallen primarily on the health plans, while other stakeholders — notably providers and pharmaceutical companies — have faced little accountability,” Pellegrini stated. “Without cost containment measures applied across the entire health care sector, premium expenses will continue to rise at unsustainable levels. MAHP and our member plans believe we are at a critical juncture. The state must take decisive action to ensure that all entities within the health care ecosystem share the responsibility for managing costs, fostering a system that is both affordable and lasting for employers and consumers.”

The GIC is already facing significant budget shortfalls. According to Veno, in January, the GIC was experiencing “significant budget shortfalls” midway through fiscal 2025, and was more than $100 million over budget.

“This is the largest variance that we’ve seen in at least a decade,and this is consistent across all of our plans,and is driven primarily by rising provider prices and a couple of other topics,” he explained. “We don’t know where this is going to head. My concern is that it is indeed a persistent and steady trend going forward.”

Veno later added that the GIC is projecting a 10.5% increase for fiscal year 2026.

Veno identified medical innovation, increased inpatient care utilization, and drug prices (including a surge in weight loss drugs) as factors driving up costs. He also noted a “steady trend” of 10% increases in pharmacy benefit costs, projecting a 14% increase in the “active spend” on pharmacy benefits at the GIC for fiscal 2026.

Health care providers are reportedly demanding higher prices in negotiations with insurers. Veno cited an example of a provider seeking a 50% rate increase over three years and a willingness to terminate contracts if demands aren’t met.

“I would say, over the last year, it’s been relatively non-stop that these rate negotiations have gotten extremely contentious,” Veno added. “We frequently see and hear about double digit increased demands from providers and a very aggressive posture.”

Insurance Commissioner Michael Caljouw acknowledged the uniquely challenging moment Massachusetts faces. In January, Caljouw said Massachusetts was at a “uniquely challenging moment.”

“It’s certainly a national issue in terms of scope, but the regional impacts and the impacts directly on individual purchasers, whether they’re businesses or individuals, is real and felt,” Caljouw said.

What specific policy recommendations, in addition to price transparency and revisiting the benchmark formula, does Dr. vance suggest to address the rising healthcare costs in Massachusetts?

Archyde Interview: Addressing Skyrocketing Healthcare Costs in Massachusetts

Archyde recently sat down with Dr. Eleanor Vance, a leading healthcare economist and director of the Center for Healthcare Affordability Studies, to discuss the alarming rise in healthcare costs across Massachusetts and potential solutions.

The Current Healthcare Affordability Crisis

Archyde: Dr. Vance, thanks for joining us.the recent CHIA data paints a stark picture. Healthcare spending in Massachusetts is soaring. What are your initial thoughts on the report and the state of healthcare affordability?

Dr. Vance: Thank you for having me. the report confirms what many of us already know: the current trajectory is unsustainable. The 8.6% increase in per capita healthcare expenditures to $11,153 is deeply concerning, especially when compared to the state’s 3.6% cost growth benchmark. This places immense financial strain on residents and the state budget.

Key Drivers Behind the Cost Increase

Archyde: According to the CHIA report, pharmacy spending and MassHealth supplemental payments are major factors. Can you elaborate on these and other significant cost drivers?

Dr. Vance: Absolutely. The $1 billion increase in net pharmacy spending is particularly alarming. We are seeing rising drug costs, including the impact of new, high-cost medications. MassHealth supplemental payments to hospitals, while intended to bolster quality and health equity, also contribute to the overall expense. Another significant factor is the rising cost of labor within the healthcare sector and the increased utilization of inpatient care.

Impact on Patients and healthcare Providers

archyde: The report highlights that premiums, and cost-sharing have outpaced wage growth. How are these increasing costs affecting patients, and what are the implications for providers?

Dr. Vance: Patients are directly feeling the pinch. Rising premiums, deductibles, and co-pays lead to delayed care, reduced medication adherence, and an overall decline in health outcomes for some. Healthcare providers are also under significant financial pressure. While hospital finances saw a slight enhancement, many still operate with tight margins or at a loss due to rising supply and labor costs. The whole picture highlights the need for a careful discussion of these factors.

Potential Solutions and Policy Recommendations

archyde: What measures can be taken to curb these rising costs? What policy changes do you believe are most crucial?

Dr. Vance: A multifaceted approach is necessary. firstly, greater price transparency across the healthcare sector is essential. We need clearer information on drug pricing, provider charges, and insurance plan costs. Secondly, we must revisit the benchmark formula to account for real-time economic factors, such as labor costs. Expanding healthcare access and improving the efficiency of healthcare delivery are vital. in particular cost containtment measures applied across the healthcare sector is a must.

The path Forward

Archyde: Insurance Commissioner Michael Caljouw described the current moment as “uniquely challenging.” Do you agree? What’s the biggest challenge or the greatest chance in addressing this crisis?

Dr. Vance: I do.The greatest challenge is aligning the incentives of all stakeholders – insurers, providers, pharmaceutical companies, and patients – to prioritize affordability and value. Innovation and the focus on health equity could provide a significant opportunity. It requires a collaborative effort, the willingness to make tough choices, and a commitment to long-term solutions. We need to move away from the current reactive approach toward a more proactive,preventative,and lasting healthcare system.

Archyde: Dr. Vance, thank you for your insightful perspectives. Our readers will there’s no doubt whatsoever be interested in these critical issues.what do you believe is the most important question facing Massachusetts residents regarding their healthcare in the next five years? let’s continue the conversation in the comments below.