Fewer hospital stays not leading to overall cost savings

BOSTON -- Health policy experts on Wednesday flagged an acceleration in private health care spending and rising prices specifically as challenges to keeping health care costs at or below the state's cost growth benchmark.

The Joint Committee on Health Care Financing met with the state's Health Policy Commission (HPC) for an annual hearing, part of the process the commission uses to set a target for measuring health care spending growth.

Total spending on care in Massachusetts accelerated faster in 2018 than in recent years, rising 3.1 percent to $60.9 billion, a Center for Health Information and Analysis annual report released in October found. That rate matched the benchmark set last year for the maximum allowable increase in health care spending, 3.1 percent.

From its establishment in 2013 through 2017, the benchmark for spending growth was set at 3.6 percent annually and has been set at 3.1 percent for the last three years. HPC Research Director David Auerbach said annual health care spending growth in Massachusetts has averaged 3.38 percent from 2012 through 2018.

"We have made considerable progress and, notably, progress in bending the health care cost curve since the benchmark was established," HPC Executive Director David Seltz said. "We haven't seen as much in the form of savings truly being passed on to individuals through lower premiums or lower deductibles or lower copays, so as we'll talk about a little later, there continue to be real affordability challenges for businesses, for individuals and for families in the commonwealth."

On the commercial side, Auerbach said, inpatient spending grew at an 11 percent clip between 2013 and 2018 even though the number of hospital stays fell 14 percent during the same period of time.

"Utilization or the number of hospital stays paid for by commercial insurers has dropped ... from 2013 to 18 it dropped from about 240,000 to about 215,000 stays," he said. "But the total spending for those stays has grown. We have not reaped the savings from moving people out of the hospital or fewer hospital stays."

One leading factor contributing to the overall spending growth is the average price of a hospital stay. Auerbach said that cost rose 29 percent from 2013 to 2018, from $14,500 in 2013 to $18,700 in 2018.

Auerbach said that unit price increases have been driving most of the spending growth among the largest insurers in Massachusetts over the last three years and that price is expected to continue to drive future spending growth.

Seltz said the figures Auerbach reported were "a little bit of a warning" of what could be to come.

"We see that the pressure is going to be increasing in the future nationally on health care spending growth and ... there may need to be new or stronger tools in our Mass. toolbox if we're going to be able to continue to bend the cost curve and to be able to hold spending to a more affordable and sustainable level," Seltz said. "So we have made a number of recommendations to try to think about what are the right types of legislative changes that will help us meet that trend in the future."

Rep. Christine Barber asked Seltz what things the HPC would recommend to address pricing because "the trends going forward are pretty frightening given where health care costs are already at for affordability."

Seltz said the HPC wants to be able to make changes to its accountability measures "to be able to bring in other types of metrics like price growth," and would like to address out-of-network billing and restrict facility fees.

"I don't have one silver bullet here, I think it's a combination of different tools," he said.

After Wednesday's hearing, the HPC board plans to reconvene on April 1 to vote on whether to set the benchmark at 3.1 percent again for the coming year, or whether to increase it to a new number between 3.1 percent and 3.6 percent.

"If the board does decide to modify it to something other than 3.1 percent, that does trigger an additional legislative review," he said. "In that case, the Joint Committee on Health Care Financing must then also hold a hearing and can make recommendations basically to the General Court and allows for some time where the General Court may take action before the benchmark would go into effect."

That extra review step has never happened, Seltz said. Over the last few years, the HPC board has gone through the modification process only to opt to set the benchmark at 3.1 percent, which Seltz described as "kind of the most aggressive rate allowed under the law."

At a state budget hearing Feb. 28 in Duxbury, Seltz flagged administrative complexity, unnecessary spending, and surprise billing problems as underscoring the need for a more rational health care system. Seltz told lawmakers they have an opportunity to be "proactive this session" to act on bills addressing health care costs.