Health spending benchmark lowered to 3.1%

State has had trouble meeting old target of 3.6%

THE MASSACHUSETTS HEALTH POLICY COMMISSION voted unanimously on Wednesday to lower the state’s 2018 benchmark for health care spending growth from 3.6 percent to 3.1 percent, a move that some members worried might be largely aspirational.

The benchmark has been 3.6 percent since 2013, and the state has met that target only once, in 2013. Total healthcare expenditures were 4.1 percent in 2015, the latest year for which data is available.

Massachusetts is also facing some strong headwinds on health care spending. The state population is aging and requiring more health care, pharmaceutical spending is on the rise, the general inflation rate is inching upward, and federal leadership on health care is practically nonexistent.

Commission staff outlined a number of strategies to achieve health care savings, estimating the initiatives could reduce the growth in spending by anywhere from .5 of a percentage point to 1.3 percentage points.  The staff estimated the state’s aging population – in 2019, the average age will be 40 and those 65 or over will represent 17 percent of residents – will drive up costs .6 of a point each year through 2019.

What those numbers mean is that healthcare providers will have to attain nearly all of the savings to beat the 3.1 percent target. And that analysis doesn’t include the impact of pharmaceutical spending and inflation.

The 3.1 percent growth rate was the default position under state law, and the commission could only set the rate between 3.1 percent and 3.6 percent. The commission voted unanimously to go with the lower number.

The two Baker administration representatives on the board showed no hesitation in supporting the lower number. Marylou Sudders, the secretary of health and human services, said the state has an obligation to curtail health care spending and to send a signal to the market. Lauren Peters, sitting in for Baker’s budget chief, offered similar comments. “Right now is not the time to sit back and accept the status quo,” she said.

Martin Cohen, the president of MetroWest Health Foundation, noted the 3.1 percent is still a growth benchmark. “It’s not a cut in current spending,” he said.

Rick Lord, the president of the business group Associated Industries of Massachusetts, promised to work with employers to help reach the new target. “Some people will say it’s too ambitious, but we’ve always been ambitious in Massachusetts on health care,” he said.

Several members of the commission went along with the lower rate but made clear they had concerns. Carole Allen, a physician, worried healthcare providers would be shortchanged. Tim Foley, who comes from a union that represents many hospital employees, fretted about job cuts. And Ron Mastrogiovanni, president of HealthView Services, said he was concerned the quality of health care could suffer.

Close to half of the 11 board members said the commission itself would have to move from being a monitor of health care cost trends to more of an active player. Sudders urged the commission to move beyond the “dog and pony shows” it holds each year on health care cost trends and dig deeper into actually lowering costs.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

The commission took a step in that direction by taking a series of votes to move ahead with a process that would give the board a hands-on role in cutting costs. Under the new process, a healthcare provider whose total medical expenditures are “considered excessive and who threatens the ability of the state to meet the healthcare cost growth benchmark” could be ordered to come up with a “performance improvement plan” for reining in costs. The provider, under the watchful eye of the commission, would be required to achieve results in 18 months or face plan modifications or financial penalties.

The names of providers whose spending exceeds the state benchmark would not be released unless that are placed under an improvement plan.

David Seltz, the executive director of the commission, cautioned it will be some time before improvement plans could be implemented. He said a sister state agency is unlikely to have data on providers exceeding the benchmark until 2020.