With health care spending rising, 7 policy wishes for 2022

Some require legislative action, some require agencies to do their job

AS THE YEAR draws to a close, with COVID still raging, the sad reality is that the next weeks to a few months could be quite challenging. The hope here is that those who become infected do not get seriously ill (whether fully vaccinated or not) and that our health care system, its workers, and first responders do not get overwhelmed.

Our focus is understandably on the clinical and public health issues tied to COVID, but there is another emergency associated with this pandemic — the rising cost of health care.

I was blown away last week to learn that the US experienced an overall 9.7 percent increase in total US health care spending in 2020. With a net decline of 2.2 percent in total US GDP from the COVID-caused recession, health care spending rose to be about 19.7 percent of our total US economy (likely higher here in Massachusetts)—the most ever on a percentage basis.

With the 2020 COVID shutdown, including for all non-essential health care services, a good number of health economists were predicting an actual decline in health care spending for the year. Instead, total national health care expenditures for actual care (as opposed to aid to hospitals) increased by a very modest 1.9 percent in 2020. Government spending drove that increase, with Medicaid leading the way, growing 9.2 percent; private health insurance spending actually decreased by 1.2 percent as compared to 2019.

But because of all of the COVID-related federal government dollars that got pumped into the system – a whopping 36 percent increase over the prior year, with much of it going to hospitals as part of the bailouts—that led to the overall 9.7 percent increase in health care spending for the nation in 2020.

2021 and 2022 will also likely both show a continuation of much higher growth in health care spending when all the numbers are in. In Massachusetts, for instance, average premiums in the individual and small group market were nearly 8 percent higher in 2021, and another average 7 percent increase has been approved for 2022, evidencing that commercial spending is also on a significant upswing.

Our local insurers are reporting double-digit price increase demands from health care providers, and members of the Health Policy Commission have been publicly sharing their fears about a new wave of health care spending growth affecting all payers.

Meet the Author

Paul A. Hattis

Retired associate professor, Tufts University Medical School
With these spending concerns as backdrop, here is my state policy wish list for 2022:

  1. When all of the data is in, the Department of Public Health’s Public Health Council must do its job by using the official record to decide whether or not Mass General Brigham has shown by clear and convincing evidence that its proposed ambulatory care expansion in Westborough, Westwood, and Woburn “meaningfully contributes to the Commonwealth’s goals for cost containment, improved public health outcomes, and delivery system transformation.” The Public Health Council is waiting for more data, first from an independent cost analysis paid for by Mass General Brigham and second from the Health Policy Commission. Attorney General Maura Healey’s analysis, drawn from internal Mass General Brigham planning documents, indicates the expansion will yield almost $400 million in additional annual operating profits, which raises very serious concerns about additional total state health care spending. This is not a situation where a set of conditions can be tacked on to the expansion plan to make it more palatable. If Mass General Brigham does not meet the standard, the application must be rejected.
  2. The same standard should apply to Boston Children’s Hospital and its $400 million-plus proposed ambulatory care expansion. That project deserves equal scrutiny by the Public Health Council to see if it meets state cost containment goals by clear and convincing evidence. In addition, DPH and the hospital will likely need to resolve how many new beds should be allowed in the rebuilt hospital. As I have written, Children’s promised that those beds would be filled with non-Massachusetts patients, and data from recent years suggest that will be very hard to do when the new hospital opens next summer.
  3. I hope the purchase of Atrius Health by Optum will not only occur in such a way that  the historic Harvard Community Health Plan values and norms that have governed Atrius operations over many years as a charitable, independent, non-profit group practice will continue, but the value paid for the conversion to for-profit status will be at a price that fully values the assets being converted. In 2018, Atrius had net assets of about $270 million; whatever the value is some 3-4 years later, the attorney general must insist that full value is paid into the surviving foundation that will be carrying on that mission—with a hope that cost containment efforts can be a key focus for grant funding.
  4. The House has passed a bill to greatly improve the way that the state handles determination of need applications tied to provider expansions, including giving the Health Policy Commission the power to conduct a detailed review and empowering the attorney general to challenge decisions under consumer protection laws. The Massachusetts Senate has passed important behavioral health care legislation which supports greater access and affordability to behavioral health services. My hope is that very early in this next year the leadership of the House and Senate will come together and make sure that both of these bills–in more or less their current form—are enacted into law. We need both of these pieces of legislation as soon as possible.
  5. Many leaders from our state’s diverse group of primary care providers have been working for a few years to help bring forward legislation that could facilitate greater movement away from paying fee-for-service, and instead pay primary care providers by capitation. I would like to see this approach married to Gov. Charlie Baker’s 2019 request that both primary care and behavioral health receive 30 percent more in total resources as a way to help deal with some of the underfunding of these services.
  6. For almost 10 years, the Health Policy Commission has set a per capita state growth target and then encouraged private actors to do their best to make their spending grow at or below the target. That approach, which lacks regulatory teeth, is starting to fray, particularly as we enter a period where spending is truly trending up—far above the benchmark. The commission has made a number of very important recommendations to add some additional regulatory power to the state scheme, including price caps on some providers and enhanced ability to use the performance improvement process to check hospital spending. The commission has also suggested that there needs to be a way to assure that risk adjustment metrics affected by enhanced medical coding should not unduly reward providers with higher payment levels. It is my hope that these and other recommendations that the Health Policy Commission brought forward in its 2021 Cost Trends Report all given their due attention by the Legislature.
  7. One additional area of concern is drug pricing. The Health Policy Commission is particularly concerned about high-cost specialty drugs as well as others under patent protection that are priced way beyond their true value to patients (e.g., witness what just happened with aducanumab a new drug recently approved for Alzheimer’s disease that experts have criticized as not having clinical value). Building on the commission’s current authority on Medicaid drug spending, the agency is asking that it be given drug pricing review authority for medications which can significantly impact spending for privately insured patients. Health Care For All and others are also calling for the law to include provisions for cost assistance for certain chronic disease medications that disproportionately impact people of color or those who are at increased risk if they become sick with COVID. My hope is that Senate Bill 771, sponsored by Sen. Cindy Friedman of Arlington gets due consideration to advance all of these important goals.

Paul A. Hattis is a senior fellow at the Lown Institute and a former commissioner of the Health Policy Commission.