2025-03-13 00:00:00 - Joint Committee on Health Care Financing

DEBORAH DEVAUX - HPC CHAIR - Welcome all. The Health Policy Commission convenes10 this hearing each year in partnership with the Joint Committee on Health Care Financing. We're excited to welcome the new members of the committee and welcome back the members who have participated in past years. I'll turn it over to the chairs shortly to introduce their members. Today, we're going to discuss the growth in health care spending over the last year using information provided by the Center for Health Information Analysis, CHIA, in their annual report, as well as cost trends across the Commonwealth of Massachusetts and the United States to assess where the health care cost growth benchmark should be set for calendar year 2026.
The HPC and CHIA work together to monitor health care spending growth relative to the benchmark, which is indexed to a projection of the Commonwealth's long term economic growth. Rising health care costs have a significant everyday impact on residents. And when health expenditures surpass the economy's growth rate, it exacerbates affordability challenges that residents are already facing. The Massachusetts health insurance survey found that over 41% of Massachusetts residents reported health care affordability issues in 2023. As health care spending grows as a portion of household income, more and more families are incurring medical debt and delay or skip needed care. These are unequal burdens as disparities across income, racial, and ethnic groups persist.
The cost of living in Massachusetts is among the highest in the US. And with the second highest commercial premiums in the country, cost of living exceed income for average families across the state. The benchmark is a critical tool for the state to recognize and react to these concerning trends and to work towards more affordable, accessible, and equitable health care for all residents. At today's hearing, the HPC's board of commissioners and the Joint Committee on Health Care Financing will consider data, information, and testimony regarding whether modification of the health care cost growth benchmark is appropriate. As a reminder, the board will not take action on setting the benchmark today. The vote to establish the 2026 benchmark will be taken during the HPC's board meeting on Thursday, April 17, which will be live streamed on the HPC's website.
Today we look forward to hearing the presentations from HPC executive director, David Seltz, Lauren Peters, who is the executive director of CHIA, and the HPC's senior director of research and cost trends, Doctor David Auerbach, and senior manager, Yue Huang, with Doctor David Auerbach. We also look forward to receiving public testimony on this matter. Now it is my pleasure to introduce Senator Cindy Friedman, chair and Representative John Lawn, chairs of the Joint Committee on Health Care Financing to provide opening remarks on the benchmark modification process today. I want to particularly thank the chairs for their incredible work leading the House and Senate in passing the critical new health care legislation at the end of the year. Those new tools are really important to this conversation today as we work together to constrain the growth in health care costs. We're grateful to chairs Friedman and Lawn for their leadership and look forward to continuing to work together to identify opportunities to address our health care affordability challenges. I will now turn it over to you for opening remarks.
SEN FRIEDMAN - Thank you very much. Good afternoon everyone. I'm Senator Cindy Friedman. I'm the cochair of the Joint Committee on Healthcare Financing. I want to extend a very warm welcome welcome to Chair Devaux,259 to259 David Seltz and the board and staff of the Health Policy Commission. Warm welcome to Lauren Peters and the Center for Health Information and Analysis. To the273 House and Senate members of the Joint Committee for Healthcare Financing and other legislative277 colleagues in the audience, and to all the patients, advocates, the healthcare providers, health plans, and other key stakeholders who've joined286 us today to participate in this important discussion
Is there a way we can stop that? Thanks.
Thank you.
SPEAKER3 - I'm
SPEAKER2 - trying to yeah. Is it way better? Okay. And you all can hear me? Okay. Great.
FRIEDMAN - And I wanna thank Chair Devaux for her very kind remarks. We are very happy to partner with the HPC always. And I think the key word in her kind words was start. It's a start. And I know that, along with my co chair, we are committed to addressing the affordability and access issues that all of our residents face in seeking healthcare. This is an important topic. It touches everyone in the Commonwealth. The health care cost growth benchmark was established under the Acts of 2012, so we've been here before. As you know, and as was stated, the HPC board has to set a benchmark annually pursuant to a public hearing process and engagement with the legislature. I look forward to hearing from HPC, CHIA, and healthcare stakeholders today as we evaluate the state's healthcare spending.
According to CHIA's annual report released yesterday, total healthcare expenditures increased380 by 8.6% from 2022 to 2023, which is386 more than double the cost growth benchmark, which is set at 3.6%. Here's an interesting list. As a cochair of this committee, I396 have heard from providers and398 health systems that reimbursement rates are too low, from health plans saying that reimbursement rates and pharmacy spending are too high, from independent pharmacies telling me they are struggling with low reimbursement rates and clawbacks, from PBMs that say that independent pharmacies are stable and they do not claw back claims. From pharmaceutical manufacturers saying discounts to 340B covered entities are too high. And from community health centers and safety net hospitals telling me they cannot operate without full 340B margins and so on.
Now there's a lot of nuance to these statements, and they can all be true to an extent. But it begs the question of where our healthcare dollars are really going if everyone says they do not have a big enough slice of the pie. At the end of the day, it is patients, consumers, and taxpayers who foot the bill. Healthcare premiums and cost sharing are increasing faster than wage growth. And it's getting harder every day for our residents to get the care they need. We hear about a system in crisis, we're beyond that. It is now falling apart. It is imperative for us to dig into which services and entities are siphoning the most healthcare dollars and returning the least value. As well as those that offer more value at a lower cost.
And it's time for the state, including the administration and legislature, to take bold steps to rein in costs and refocus the healthcare system on the patient and the delivery of quality care to those patients rather than money502 and profit. I look forward to working with many of you in the months506 ahead on pressing issues of healthcare cost, access, and quality. It is511 more important than ever for us to come together as we face significant, serious, devastating cuts in federal funding for health care and other challenges from the federal government. So again, welcome. I would like to acknowledge my Senate colleagues on the Joint Committee on Health Care Financing who are with us today, senator Paul Feeney, Senator Pavel Payano, and Senator Kelly Dooner. And I will now turn it over to Chair lawn.
REP LAWN - Thank you, Senator Friedman, and welcome to members of the Health Policy Commission, colleagues, and distinguished guests. And thank you for being here today for our annual meeting on the health care benchmark. At this point, I'd just like to acknowledge my House colleagues who are attending and present today. Representative Diggs, Representative Frost, Representative Garcia, Representative Markey, Representative Moran, Representative, Meridian, Representative Sabadosa, Representative Tyler, and Representative Vitolo. I'd like to also thank David Seltz and his entire team at the HPC as well as Lauren Peters and her team at CHIA. We as a Commonwealth are very fortunate to have such dedicated and knowledgeable leaders who work with us to try to606 continue to move health care policy forward here in Massachusetts.
As Senator Friedman said, we are at a pivotal moment in in health care, both here in Massachusetts and across the nation. There is no denying that the health care sector is facing immense uncertainty and frustration. Locally and nationally we are grappling with the Trump administration's fiscal policy upheaval. We639 may reasonably expect that Massachusetts will see a reduction in funding for critical health care services, a blow to our residents and our economy. But this is not a momentary shake. The generational health crisis caused by COVID-19 exposed and exacerbated a multitude of long standing challenges, challenges that continue to affect our health care system today. From rising inflation, to shifting patterns in care, ongoing supply chain disruptions, and workforce shortages, these issues are not only persistent, but continue to evolve.
We are also confronting deep systemic problems including unacceptable686 health disparities that persist across communities in our commonwealth. Our healthcare workforce system is facing critical shortages that leave facilities understaffed and unable to operate at full capacity putting even more strain on an already burdened system. Community hospitals and health centers continue to struggle while many are forced to reduce or close services and some are on the brink of shutting their doors entirely. Pharmacy prices, particularly for specialty drugs, continue to rise, creating additional barriers to access to life saving medications. The question before us here is, how do we move forward while containing costs? How do we address these persistent issues and modernize our healthcare system to meet the needs of today's Massachusetts residents?
Since the last time we were here at this hearing, the legislature passed two major bills, the PACT Act and the hospital oversight legislation that will continue to constrain or remove certain prescription medication administrative costs in hospitals. But this progress has not come easily and the road ahead will be no less challenging, especially under the Trump administration. The future of affordable and accessible and equitable health care in Massachusetts774 depends on776 our ability to act with urgency, collaboration, creativity, and boldness. The path forward requires all of us, legislators, industry leaders, health providers, and businesses, to remain steadfast in our commitment to solutions that prioritize people over profits,797 transparency over799 bureaucracy, and long term stability over short term fixes. I805 thank you again, all of you, for being here, and I look forward to your presentation today and working together with all of you this next session. Thank you.
SPEAKER1 - Thank you so much, senator Friedman and representative Lan.
Great remarks to frame our discussion today. I'll now turn things over to David830 Seltz, our executive director at the health policy.
DAVID SELTZ - HPC - Mission and is not triggered automatically just if we go above the benchmark in any one year. It is not a measure of a provider's internal operating costs, it is a measure of patient spending. And finally, I should note that the benchmark is not the single solution to make sure that we have an affordable healthcare system. The benchmark process provides the critical data and information needed to inform other policy initiatives such as the very important legislation that was passed earlier this year that directly addressed some of the trends that we have been seeing over and over again in these settings. The law,
Thank you.
SPEAKER5 - Sorry.
SELZ - The law establishes in law some parameters for how the benchmark can be set and modified every year. So for the first five years, the benchmark was set by law directly at that potential gross state product measure of 3.6%, and the Health Policy Commission did not have an authority to modify. For the next five years, the law stated that the benchmark would be set at PGSP minus a half a percentage point, but also allow the Health Policy Commission to modify that up to the full PGSP marker or 3.6%. During this time period, the Health Policy Commission did default to the rate and set in law of PGSP minus half a percentage point. Now after year 10, we are in a new phase as prescribed by the law, where again the default rate for the benchmark to be set every year is still tied to that long term economic growth rate. But it does allow broad discretion to the HPC board to either raise or lower the benchmark if it feels that it is warranted to do so. And that really is the information that we're here today to discuss and collect to inform that board decision about whether raising or lowering the benchmark is warranted and appropriate.
Part of that process is this important public hearing and the ability to consult with the Joint Committee on Health Care Financing. If we go into our meeting next April and decide to keep the benchmark stable at 3.6%, this annual process is now complete for the year. However, if the Health Policy Commission board does decide to modify either going up1785 or below, that will require additional steps including legislative oversight by the Joint Committee on Health Care Financing to be able to also weigh in on that decision by the board around whether to modify. I think it's important on the right hand side of the slide to note that while we're gonna be hearing a lot today about CHIA's latest report on our health care spending, that is not the sole piece of information that HPC uses to determine whether a modification is appropriate or not.
We are looking at a broad range of current health care trends, trends on pricing, trends on patient acuity, trends on capacity, and the financial performance of our health care system. All of the most recent data that we can get our hands on is under review as we consider whether or not to modify. We're also looking at our current and forecasted economic trends in this state and in the country. And finally, in addition to all of those economic measures and health care data measures, we also look at measures of health care affordability for residents. What are the people of the Commonwealth saying? Can they afford their care when they need it? And unfortunately, the answer to that question is that far too many residents are now saying they cannot afford the care they need and forego that care.
All of these are factors for consideration in our process. This slide just lays out that timeline that I've just reviewed, again, with some additional steps for review by health care financing, if there is a decision to modify. Just to take a few moments of my final time here to talk a little bit about that accountability process that I talked about around the potential for the Health Policy Commission to require a performance improvement plan if a health care provider or a payer is identified for having excessive spending growth. This little road map really charts out the multi steps in this annual process. First, we begin with setting the benchmark. Second, CHIA will collect a great deal of information directly from health1922 plans around health care spending growth, which we measure with a metric called total medical expense. Then CHIA will refer to the HPC confidentially a list of health care providers and health plans that have had growth that exceeds the benchmark.
Following, the receipt of that referral list in step 4, the Health Policy Commission undertakes a significant comprehensive review of that list to try to understand if a performance improvement plan is warranted. And if so, then goes into public session and votes to require a performance improvement plan. As we're considering whether to require a performance improvement plan, I do want to note that we look again at a broad range of metrics to try to understand the context of what is happening with these institutions. So we'll look at things like, what is their pricing? What is their pricing over time? Not all of our providers are equal. And part of our review process is understanding what are those differences between differently situated organizations. We'll look at the populations they serve. Are they treating a greater proportion of Medicaid or government pay patients? And what are the types of services that they are providing?
Finally, we'll also look at financial condition of those organizations, and we'll look at things that may be outside of that entity's control that may have contributed to their spending growth in that particular year. Only after weighing all of these factors does the Health Policy Commission then determine whether or not a performance improvement plan is warranted. The commission has required2033 one2033 performance improvement plan in our history. This was voted on at the beginning of calendar year 2022 after identifying that2046 Mass General Brigham had2048 excessive spending growth over time, and that their current strategies were unlikely to be able to bring them down below the benchmark. So we engaged directly with Mass General Brigham, really, over the course of two years to develop and to work with them to implement this performance improvement plan to generate the goal of $170 million 000,000 in savings in just short 18 months.
This was done with a collaboration and cooperative compliance by this organization who embrace the opportunity to identify areas where they could improve care for their patients and reduce total medical expense for those patients. And I will note, you can see on the right hand side of the slide the many strategies that MGB put into place. And I just wanna highlight, the integrated care management program, which is a program that MGB has had in place for many years. It's an evidence based proven program for providing additional supports and care management to particularly high risk, high need patients. And that by providing that additional care management support, it has been demonstrated to reduce unnecessary emergency department visits, unnecessary hospitalizations, and unnecessary readmissions for that patient cohort. And in so doing, save the system money.
I raised this particular strategy here because I want to impart that strategies to control or to improve health care spending do not need to be cuts to services or cuts to benefits or restrictions. In this particular case, they were improving the care for their patients, improving the quality of care, helping them manage their diseases and conditions. And in so doing, being able to eliminate or reduce unnecessary acute utilization. I would also note here that there is no strategy here about layoffs or cuts in salaries. That is not what we are here about. We are about trying to moderate the overall spending for patients. And how can we do that and how can we find these opportunities? Layoffs, cuts to salaries, for an organization will not directly impact their total medical expense. Managing patients and putting in innovative strategies will. And MGB proved that they could do this, and we ultimately deemed that this performance improvement plan was successful.
Finally, on my last slide, I just want to highlight that once again, Massachusetts was a leader in thinking about this process for measurement and transparency in2226 our health care system. We were the first state2228 to establish an idea of a health care cost growth benchmark or target, but now there are seven other states that have adopted this exact same approach. And many of these other states have even gone further than we have. Some of these states have also said, we wanna have a target for increasing spending in areas of2248 high value, such as primary care. How can we do that and also2252 moderate total spending over2254 time? And there are many other states as highlighted here that2258 are also doing different aspects of increasing transparency and measurement of our health care system. So we are not alone.
I will note I didn't do a full scan of these states, but just to give you a sense of where some of these other states have set their targets and benchmarks. In most recent year, Oregon set their target at 3%. California is working towards a 3.5% benchmark. Rhode Island is working towards a 3.2% benchmark. And Connecticut in their most recent year is working towards a 2.9% benchmark. I'm happy now to take any questions about the law, the process, and the health care cost grown benchmark before I turn it over to my colleague from CHIA. Alright. Hearing none, I'm very happy to turn it right over to my friend and colleague, Executive Director Lauren Peters, who's gonna walk you through some key findings, from this year's CHIA's annual report.
LAUREN PETERS - CHIA - Thank you, David. And good afternoon, Chair Devaux, Chair Friedman, Chair Lawn, and other distinguished members of the legislature and HPC board. Thank you for the opportunity to come before you today and share some key findings from CHIA's annual report. But first I'll start with a brief overview for those less familiar who may be wondering, what is this agency, CHIA, and what it is that it does? As David mentioned, CHIA was created in 2012 as an independent agency to serve as the HPC's data counterpart, charged with collecting, analyzing, and reporting out health care information to serve policy makers, our sister agencies, researchers, and the health care system more broadly.
CHIA relies on multiple data sources including the All-Payer Claims Database, which is the state's largest health care data asset, Hospital Case Mix and financial reporting, survey data, and aggregate payer data, which sources many of the spending figures I'll be presenting today. We rely on this data to carry out our work, most of which is prescribed in statute, things like measuring health care spending trends, hospital utilization and financial performance, mandated benefit reviews referred by the legislature, and other priority initiatives such as comprehensive reporting on the health care workforce and trends in primary care. As part of our statutory obligations, each year CHIA issues its annual report. It issues its annual report, which represents our most comprehensive cost2447 cutting publication.
Core to the annual report, CHIA calculates total health care expenditures, or THCE. And measures the Commonwealth's performance as well as individual payers' and providers' performance against the benchmark. This step in the process, shaded here in orange on HPC's road map that David showed earlier, provides the necessary fact base to both evaluate the Commonwealth's overall performance and also kick start the HPC referral process for individual payers and providers exceeding the benchmark. Alright. So turning now to key findings from the annual report. I'll start by reviewing the top line total health care spending figures or THCE, which includes2494 all medical expenses and non claims payments to providers, member cost sharing, and the net cost of private health insurance.
Alright. So in 2023, total health care expenditures increased to $78.1 billion equating to $11,153 per Massachusetts resident. This put the per capita growth rate at 8.6%, more than double the health care cost growth benchmark, which was set at 3.6 for 2023. The 8.6% growth rate is the second highest growth rate since measurement began in 2013, second only to that seen in 2021 when there was a sharp rebound in health care spending in the wake of the pandemic. This graph breaks down spending for what we consider to be the major components of THCE. In between the two bars we show the aggregate spending growth rate as the top number and the enrollment changes year over year as the bottom number. So on the right side column we call out the per member per month growth reach rates, which I will refer to as PMPM, to account for the dynamic shifts in enrollment during this period when looking at each of the insurance categories' spending numbers.
Diving into the major components of THCE, in '23, total commercial2577 spending increased 7.2%, while membership continued to decline by 1.5%, resulting in an 8.9% increase on a per member per month basis. Medicare expenditures increased by 7.1%, while membership remained relatively stable with only an 8.8% growth. This resulted in a 6.3% increase in PMPM spending and MassHealth spending. MassHealth grew 14.8% in '23 with2609 a 4.4% growth in enrollment equating to a 10% PMPM.2613 This growth2615 was largely driven by $1.5 billion in new supplemental payments to hospitals to support key initiatives such as performance based incentive programs focused on quality and health equity and Medicaid hospital base rate increases. I would note that these supplemental payments were largely financed by a combination of an updated hospital assessment and federal matching funds, which were then
These supplemental payments were financed by, sorry, a combination of hospital assessment and federal matching funds. So when we exclude these supplemental payments, MassHealth spending grew 7.2% total or 2.7 PMPM. This next slide breaks down THCE by service category and reveals some of the key cost drivers in 2023. So hospital outpatient and inpatient had a combined growth rate of 6.3% to $26.6 billion in '23, representing the largest share of THCE. Pharmacy spending net of rebates saw an accelerated growth rate of 10% in 2023, accounting for over $11 billion of spending. And finally, I would call out the nonclaims spending at the top, which experienced the fastest growth rate in '23, increasing by 40.6%.
The nonclaims category includes spending for capitation payments, care management programs, and the MassHealth supplemental payments mentioned on the prior slide. Notably, this category also includes payments made for MassHealth's new primary care sub capitation program, which began in April 2023 and shifted payments from claims spending primarily from the physician category to nonclaim spending. So in sum here we see nonclaims hospital outpatient pharmacy were the top drivers of spending growth with each2739 of these categories increasing by at least $1 billion in 2023.2743 So this next section is focused on health care affordability with the goal of translating these high level numbers to better understand how these trends impact individuals and employers on the ground.
This slide provides a two year look back to put health care spending into a broader affordability context. And so at a high level, we look at the cumulative growth of the health care costs borne by individuals and employers compared with economic metrics metrics. Premiums and member cost sharing increased faster than Massachusetts wages and salary and regional inflation between '21 and 2023. Also of note, paid medical claims, the portion that plans are responsible for paying, grew more slowly than member cost sharing, indicating that health care costs borne by individuals and families grew faster than the costs borne by their health plans. And when we put these figures into a broader context, health care affordability concerns are further pronounced and compounded by growth and spending for other household necessities such as food, housing, and child care.
So drilling down into premium trends, this slide breaks down premium growth rates in dollar amounts on a PMPM basis by market sector. You'll see at the bottom in orange that the statewide average premium in the fully insured market increased 6% to $631 PMPM in 2023. However, premium trends varied by sector with unsubsidized individuals and small groups experiencing the fastest growth rate while mid sized groups have the highest premium amounts.
This next slide looks at member cost sharing or what a member spends out of pocket per month on co pays, coinsurance, and deductibles. 2023 cost sharing trends show a similar story to that of premiums. While the average cost sharing amount increased 5.9% to $68 PMPM, cost sharing grew the fastest among unsubsidized individual purchasers in the small and midsize groups, which we know can largely be attributed to higher enrollment and high deductible health plans among these sectors. This next slide uses data from our household insurance survey and shows the prevalence of affordability issues across the state. Affordability issues include problems paying family medical bills, family medical debt, spending a high share of family income on out of pocket health care expenses, and any unmet need in the family for health care due to cost.
So in 2023, we see over 40% of Massachusetts residents reported having at least one health care affordability issue in the past 12 months, and over one in four residents reported they or a family member had an unmet health care need due to cost. Further, we see these affordability issues and unmet care needs disproportionately burden non Hispanic black residents and Hispanic residents. So switching gears here, this next section looks at how these statewide spending trends vary among individual health plans and provider organizations. CHIA examines total medical expenses on a health status adjusted basis for each payer's member population, which accounts for differences in member illness burden and medical costs. This year over year growth rate is then compared against the health care cost growth benchmark.
From '22 to '23, 10 of the 11 commercial payers shown here reported health status adjusted TME growth above the 3.6 benchmark. CHIA also examines HSA TME trends for managing provider groups. Similar to trends on the last slide, on a health status adjusted basis, 9 of the 10 largest physician groups reported HSA TME trends above the benchmark in at least two of their largest payer networks in 2023. Finally, I'll round out the presentation with some hospital utilization and financial trends. This slide details trends in hospital inpatient discharges from October 2018 through June 2024. Shown in blue is the quarterly trend for inpatient discharges and the line in orange is the average inpatient length of stay in days. Inpatient discharges at hospitals have risen over the past several quarters but remain almost 5% lower than pre pandemic levels.3042 Conversely, the average length of stay rose during the pandemic. And while it has slightly decreased in recent quarters, it3050 still remains higher than pre pandemic levels at 5.5 days as of June 2024.
In sum, the key takeaways here is that while the number of people receiving inpatient care at Massachusetts Hospital is below pre pandemic levels, the average length of stay remains more than 10% higher than pre pandemic levels, which we know is a big contributor to our health system's capacity challenges. This next slide looks at the same utilization metrics but for emergency department visits. Similar to the inpatient setting, ED visits are lower overall, but the average length of stay is still more than 10% higher compared with pre pandemic levels. Moving into finances, hospital profitability trends from hospital fiscal year 2019 through June '24 are included here as reflected by total margin, operating margin, and non operating margin. So while we don't yet have a full year's worth of data for 2024, the data that we do have through June is often representative of the hospital's financial position at the close of the fiscal year, which for most hospitals is September 30.
Looking at total margins, which include both operating and non operating investment activities, the statewide median total margin increased by 6.4 percentage points from negative 4.2% in '22 to 2.2% in fiscal year 23. However, our most recent quarterly data through June of 24 shows total margins trending back downwards to 1.4%. When looking at operating margins, the statewide median operating margin increased by 1.5 percentage points from negative 1.3% in FY 22 to 0.2% in FY 23. However, it has since decreased back into the negatives to negative 0.9% with only 25 of 58 hospitals or 43% reporting a3188 positive operating margin as of June 24. And lastly, the median non operating margin, largely reflective of investment activities, has steadily increased in recent years to 1.9% as of June 24.
3209 Finally,3209 this slide presents a system level view to compare hospital aggregate3213 operating revenues and expenses and the key components within each of these categories. In fiscal year 23, total operating revenues increased by $3.6 billion or 9.4%, with net patient service revenues, the most significant component of operating revenue, increasing by $2.8 billion or 8.9% compared with the prior fiscal year. On the expense side, in FY 23, expenses increased by $3 billion or 7.6%, with workforce spending inclusive of salaries, benefits, and temporary staffing costs increasing by 5.8% to $18.4 billion and representing over 40% of total expenses in FY3263 23. So in sum,3265 these various inputs and outputs resulted in hospitals' aggregate operating3269 revenues exceeding aggregate expenses by $190 million in FY 23. So with that, it concludes my presentation for today, again, on just a few of the key findings from CHIA's 20 25 annual report. But I'm happy to take any questions, and revisit any3292 of the slides as needed.
REP MARKEY - There's a decrease in commercial insurance that seems to be prevalent over the last number of years since this came into existence, which means that there's less people using commercial and more people using public pay. Is that fair?
SELTZ - Yeah.
MARKEY - If that and then commercial insurance covers or subsidized to some degree the public pay because it's getting a little bit more than the services that they provide depending on where you are and depending on the degree you get, right?
PETERS - You said covers?
MARKEY - Yes.
PETERS - The commercial does not, It includes3350 connector care subsidized programs. They aren't including the commercial, no.
MARKEY - But commercial, if you go to a hospital, the hospital is getting reimbursed more than their expense, correct? If you go to the hospital on public pay, Medicaid, Medicare, you're getting less than what you would get. You're getting reimbursed less. Is that right?
PATERS - I think it's varied. I think generally, yes. Commercial reimbursement is higher than Medicaid.
SPEAKER7 - And those are things
SPEAKER2 - that you Excuse me. Can you repeat the question or statement? Because we can't understand. It's not you. It's the, the sound, but we can't we can't understand what the the rep is saying.
PETERS - The question was around then Medicaid and Medicare.
MARKEY - The commercials are higher?
PETERS - The commercial reimbursements are higher. Yes. Generally.
MARKEY - So if that number of people who are involved in commercial lowers, their rates are gonna go up over time. And it would seem to make sense that the gap between the reimbursements over or for the hospitals or for the physician groups, the gap between the higher or disproportionately paid hospitals would be lower, and it would continue to grow. That gap would continue to grow. Is that fair?
PETERS - Yes. I think that that is a potential concern with the growing trend that we're seeing. I will note that there are some nuances to the enrollment trends that we saw in 2023. While the commercial decline has been a steady ongoing trend that we've seen for years now, even prior to the pandemic, there was sort of an acute shift of lives from commercial to, MassHealth and in some of the other public programs just given the federal requirement for continuous coverage. And so under Secretary Walsh and the administration's tremendous efforts to take on redeterminations, we are going to see enrollment shift from MassHealth to commercial, but it's not necessarily reflected in the 2023 data because redeterminations ended in 2024. I think we're gonna see much of the results of that sort of in the 2024 data. But I think that your premise around the more that we see lives leaving the commercial market, moving on to public programs for insurance, I think it is fair to say that there will be a financial impact on hospitals and our providers community.
MARKEY - In particular, the areas where we have the disproportionate hospitals, that gap is going to be much more significant, if first, they don't have the leverage with the insurance companies to negotiate or they have less leverage, so that's a factor, right? And then they have, you know, vast majority of their people who are on public pay. And so that gap, is there something that you see as a trend or a policy that we could have without subsidizing it every year depending on what happens here, like a system in place to make sure that the gap either shuts or it doesn't get any wider? And I'm just curious as to if there's something out there. I'm new to this so I don't, but it just seems to me that that gap is gonna get wider and there's no way of stopping it unless we do something.
PETERS - Yep. I have one thought, but then I'll turn it over to my policy counterpart here. I think as we think about the commercial declines and the declines in employer sponsored insurance, I think that one of the primary reasons we're seeing that trend is costs. And so as we saw in some of the slides, the small group market, mid size, they have some of the highest premiums, the highest member cost sharing. Many of them are going to high deductible health plans. And I think if we can tackle costs and affordability, particularly, for the merged market and for that segment of the commercial market, I think that is one strategy to sort of mitigate or at least slow down this growing trend of enrollment shifts from commercial into public programs. But I don't know if you have anything to say.
SELTZ - Yeah. Just to add, you know, I think the dynamics you're talking about are really interesting. You know, I think, we often hear that, you know, providers need to charge these much higher commercial rates to subsidize, you know, potential losses from the public programs. But you're absolutely right. Actually, when you look at who has the highest commercial pricing, it tends to be the providers with the least amount of government program patients because they have that additional leverage and the insurance companies want them in network. So it's actually not the providers that are treating the greatest proportion who are getting the higher commercial rates. And this, you know, this price variation, this unwarranted price variation that we see just among the commercial rates, is something that can, you know, further destabilize some of those institutions, that we most count on for treating these patients and populations.
So I think you raise, I think, an important dynamic that we3717 always think about at the Health Policy Commission when we're thinking about how do we look across the system, is that there is a lot of variation. And when we look at medians and averages, sometimes those medians and averages can really mask important differences. And just to note on, you know, Lauren's slides on the hospital financial picture, you know, those are all medians. If you look across, you'll see a lot more variation in terms of what the actual performance is. And so, as we think about, you know, when we're looking at an organization, we're looking at, you know, where are their baseline pricing? How has that grown over time? What are the populations they're serving? All of which may, you know, lead us to say, you know, maybe we need to support this institution more. But also there may need to be a rebalancing of those commercial rates in terms of, again, variation that is not really tied to value.
MARKEY - I guess, my question is when you set this benchmark, you mentioned earlier that it's not a cap. And the idea that are we setting an artificial cap that gives leverage to the people who are insurance providers with providers, and giving them greater leverage. And again, negotiations is all about leverage. And if they have less people coming into the smaller hospitals, the smaller hospitals have less leverage. So what is there that we can do? I mean, in my mind, I just think that it doesn't seem fair that the bigger hospitals get paid more for doing the exact same thing, not the big stuff, but the regular everyday stuff. Doesn't seem right considering that those commercial reimbursements are really what drives the opportunity to have hospitals in smaller communities.
SELTZ - Yeah. It's a great point. I would suggest that for the institutions that have lower leverage, I don't know that the benchmark changes that dynamic. But we have recommended, as we think about potential changes and evolutions to this law and to this process, that there may be a need for some differential benchmarking or differential viewing of looking at different cohorts of providers. That's something that California has done in their approach. They actually, have a statewide benchmark, but then also empower the government agency to set sector specific benchmarks. And so one of the things that they're proposing right now is a sector specific benchmark for high cost and high priced hospitals that would be lower than the total statewide benchmark.
And so there are ways that we could think about better incorporating that known variation so that we're sending the right signal to the market in terms of where we want the investment to go. I will say, for our side, on the HPC side, when we're looking at whether a performance improvement plan is warranted, these are the exact things that we're looking at. And we'll look at things differently based on, you know, where their starting position is and what their patient population served, and payer mix and things like that.
MARKEY - Awesome. Thank you very much. Appreciate it.
SPEAKER1 - Thank you. Very helpful discussion. And we have a question from chair Lawn and then chair Friedman.
LAWN - Thank you both for your presentation. On the benchmark process, last session both the House and Senate had proposed changing the benchmark to a multiyear benchmark. While we both had differences in how we're doing, it was like a two year or three year fixed versus rolling, both parties proposed this multiyear benchmark and to better capture, you know, expenditure trends. As we begin this legislative session, let me just get your thoughts, both of you either wanna comment on it, is do you have any thoughts on the multi year benchmark to capture more of these trends? And I guess too, what I was thinking about this morning is, you know, we talked about coming out of COVID-19.
No one knows how long that takes, right? I think clearly the challenges we have, whether it's workforce and inflation, supply chain, like, to think that we're just gonna snap back that quickly is probably very, and we can realize now, very unrealistic. So I just I think that probably plays into more of, you know, trends. And then also, I guess, that can trend into drug costs and, you know, certain I think we talked about last year at this hearing about RSV and, you know, the year before when that, you know, we had a big spike in that and, you know, utilization of certain drugs. And now we see GLP1S that are gonna come really into effect and some of the benchmark stuff. So I guess just, I know it's a little long question, but what your thoughts are around the multi year benchmark and capturing the trends?
SELTZ - Yeah. I'll share a few thoughts. Thank you, Mr. Chair for that question. You know, we have, in our cost trends reports, made recommendations about how we think this process could be improved, and I and welcome, you know, the conversation around how we can evolve this structure. I think it's a hallmark of what we do in Massachusetts that we learn over time and we look at the data and we consider whether we have the right approach. And so, I won't go through what our some of our suggested changes are. But specifically on the concept of a multiyear benchmark, this is not uncommon among the states that have done benchmark programs. So for example, California, set at the outset and said, we're going to give a trajectory of where we want our system to go over the next, I don't know, the exact number of years, but over a course of a number of years, and said, we're gonna start at 3.5, and then we're gonna slowly ratchet4093 down to a 3.3% benchmark. That's what they're working towards.
But they basically wanted to kind of lay out that pathway for the system so the system knew, okay, we're have, you know, stronger, or, you know, more aggressive targets that we wanna try to hit,4112 but let's do that over a period of time. I think something like that, you know, can make a lot of sense. I think that's part of why the benchmark tied to PGSP has been stable and predictable to be able to, you know, provide some, you know, clarity to the market about, you know, what these expectations, what we are gonna be measured against. And that's really all this is, is a measurement tool. And so I do think it's important to do an annual measurement, and that to have this annual process where we're looking each year to see how we have done as a state, where are those opportunities, where can we dig in deeper on our drivers. I think the annual process is very, powerful and important, in my opinion. Whether you, you know, set a benchmark, you know, for, you know, a year 1, year 2, year 3, that could be, you know, certainly reasonable.
And, you know, in terms of, you know, thinking about some of the pressures that we've seen in recent years, those things like increased labor costs, increased supply costs, when we at the Health Policy Commission every year have been reviewing that list of entities that have had excessive spending during this time period and considering whether a performance improvement plan is warranted, those are factors that the board weighs heavily to try to understand, you know, was this really something that was in their control to be able to manage in this given year. And if it's not, then that weighs against taking that that further action. And so that consideration of those factors is baked into this process. Unfortunately, that part of the process, I would say, is a confidential process. That would be another one of my recommendations is that, we move away from a confidential referral list and we make all of this public and have these conversations in public.
FRIEDMAN - Thank you. First of all, I just need to acknowledge the incredible work that you do. And I point back to an audit that was recently done and I realized the only thing that the audit could find was a couple discrepancies in the website. So, I just want to acknowledge all the work you do and how extraordinarily well you do it, and to you both. So I'm a little confused but that's not an abnormal state for me. First of all, the MassHealth, so the MassHealth increase was 1.5 billion?
PETERS - Yes.
FRIEDMAN - Now if you talk about health equity programs, etcetera, were those things that were already built in and expected, or were there other factors in that increase in MassHealth?
PETERS - So the 1.5 million in new supplemental payments in 2023 included the payments that went out under the equity and quality incentive programs. So those were not baked in, those were new in 2023. It also included a number of the targeted relief payments to hospitals that were distributed in
FRIEDMAN - The additional 70 million and stuff that we did?
PETERS - Spend of '22 and '23. Yes.
FRIEDMAN - Okay. Okay. So do you have a projection or an understanding of what we might see given that 2024 is gonna capture the state's investments in the Steward changes? Because we added, the state invested a considerable amount of money to hospitals. Is that gonna, will we see that as a extent, you know, as an increase? One of the things that you had said is we're gonna see redetermination take effect, so some of that cost enrollment is gonna go down. But do, we haven't yet seen anything that accounts for this investment that we've made in hospitals to mitigate the Steward crisis. Is that correct?
PETERS - That's correct. That those will be reflected in some of the 2024 numbers and probably even 2025, but it's
DEVAUX - I would say that the Steward cost would follow patients on MassHealth who went to Steward hospitals. So if they weren't related to a Steward facility, presumably those patients would have shown up someplace else. So I think that was kind of in the base rate. I think, though, for the first time and particularly as we look ahead, MassHealth is experiencing and unable to manage the cost trend growth that commercial insurers have seen. So if you look at, membership is higher than we expected. We expected post redetermination for membership to be about 1.8 million people and it came in at4431 about 2.01 million, so that was one factor driving growth. The other is the acuity of patients we're seeing and the spend per patient is up.
So I think the, I get confused on what year Lauren's talking about, so I should probably stop. But typically, you know, MassHealth has been ticking along at 1% and insurers have been ticking along at 4%. This is simple CAPE math and we presto changed it, we landed at 3, which was the benchmark. And I think that those economics aren't working anymore because the comment that was made earlier about more people being on government paid insurance is more on Medicaid, a lot more on Medicare. So the commercial book is smaller and we're just seeing acuity trends that nobody predicted. And on the commercial side, it was largely fueled or fueled in part by GLP1s but not exclusively. And so, as we think about next year and where we set this rate, I think we're gonna get a lot more information in a lot more cogent fashion than I just presented it. I think that there are aspirations to control and manage costs and the reality of the trends.
FRIEDMAN - Yeah. That makes a lot of sense to me. And we have invested state dollars into hospitals who are4513 gonna be receiving these patients, and I'm just wondering, like, how that, you know, we know there's been a significant number of supplemental payments, which is all no judgment here, but I just wanna know if we're gonna see that those costs increase.
KATE WALSH - HPC COMMISSIONER - You're saying, did we overpay for Stewart and is that direct
FRIEDMAN - No. No. No. No. I'm just trying to capture the money that we invested in that. It's not, we did what we needed to do. I'm just wondering where those
WALSH - I'm sure that was in these data.
FRIEDMAN - It's not yet, right?
PETERS - It would not appear in 2023 but I think sort of categorically, supplemental payments paid by MassHealth are included in the spending that we, in our spending total in the non claims bucket, and to the extent there aren't any adjustments in rates, those will also be reflected in the numbers in 2024 and some even in 2025.
FRIEDMAN - Yeah. Just one other question. You brought up a really interesting point when you talked about the cash or out of pocket that is happening probably quite a bit that we don't capture. Is there or could you think of ways that we could capture that? Because I'm concerned that that is a huge amount of money that we're not capturing just because people say, here's my x amount of you know, so I don't know if you have an answer right now, but is there a way that we can, somehow that we would direct you in some coherent way to capture that?
SELTZ - Yeah. It's a problem that I'm concerned about too, Chair Friedman. You know, we have seen the growth in this, you know, concierge medicine, which sometimes again operates outside of, you know, the regular insurance channels people are paying 5,000, 10,000 dollar cash memberships. We also see it, I think, sometimes in the mental health space and behavioral health space, where patients can't find a provider in their insurance network to meet their specific needs. And so they end up going and finding someone and paying out of pocket. And so I do think we need to keep our eye on this. I think, you know, some of the survey work that we do that tries to get at, you know, kind of what is the overall affordability burden that residents are feeling, will4668 kind of pull that in. But I think it might be important to maybe4672 more granularly understand where for what types of services, and do we see that trend going up4678 because, you know, we don't wanna have this whole other shadow health care system that we're not even seeing, where people have been moved to and are paying out of pocket for.
DEVAUX - Yeah. Good point. It's gonna illuminate some other disparities around access and affordability to better understand that.
Other questions or4702 comments? Please. Representative Tyler.
REP TYLER - Thank you so4708 much. I just wanted to just hear a little bit about if there's been any efforts to be able to freeze costs as it relates to seniors or persons with disabilities. We all know that they're not gonna make very much. They're pretty much frozen where they're at as far as workforce and development. I just wanna hear a little bit about how this presentation relates to that.
SELTZ - Yeah. So, you know, we do, are able to break down some of these different spending trends by different, you know, population cohorts. I think, you know, there's a, you know, an overall question for the state as it's an aging state, and we're gonna have more and more older adults in these areas. We've seen in the data that Lauren presented and that we'll present, we're seeing more and more of these seniors moving into Medicare Advantage products versus4755 Medicare products. And so, you4759 know, I do think we need to keep an eye on what the overall supports for that particular population are. And also, as I just said, to recognize that affordability challenges may be different for different populations and for someone on a fixed income. That may be increasing at a rate that is, you know, lower than the benchmark, certainly lower than the cost of health care. You're gonna see this unfortunate just crowding out effect of people not being able to pay for their prescription drugs, being able to go to the doctor. We unfortunately see that in the data. So, I don't know that I have specific, you know, numbers here in terms of where I might see, you know, greater investments in those areas. But I think that the larger question of how we're tracking and how we're ensuring that we're not having disproportionate affordability challenges for different populations4820 is, I think, important.
SPEAKER1 - Thank you. And chair 1.
LAWN - Thank you. In terms of what is driving the pharmacy price increases, is CHIA able to determine is that more from pricing or can it be broken down? Does it have to do with more utilization or the difference between pricing and utilization?
PETERS - Yes. And I would note that while in our annual report we don't get that granular to look at price versus utilization, last year, we did put out a report that does show it's really prices versus utilization driving with higher utilization on some of the highest cost brand. Immunosuppressants, I believe, was the sort of highest cost category. So it's a combination of price and higher utilization of those higher cost drugs.
SELTZ - And I'll just add, we have a section in our next part of the presentation specifically on looking at some of those prescription drug trends in more granularity. I agree with Lauren in terms of the overall analysis. But then there are, you know, there's other new categories like the GLP1s where, you know, that is a utilization increase that we're seeing. And so it kind of depends on the different class of drug. But overall, our analysis shows that it's price increase as well.
SPEAKER1 - Thank you. And 1 final question before we'll move to the next segment. Please, representative.
REP SABADOSA - Thank you so much. I appreciated the comment about how presenting the hospital operating revenue and expenses in aggregate can mask data. So I sort of had a two part question. First of all, is there anything that is really skewing the data that we should be aware of? Like, is there one system that is, you know, really pulling it? Is that a factor? And then the second, I'm just noting that there's been a number of hospital closures and I wonder how that's accounted for within the data.
PETERS - Yeah. Sure. I'm happy to follow-up with more specifics but I will say that given the period that we're looking at, mostly through 2023, we do see some of the Steward Hospitals that were sort of in their wind down. Their margins, both total and operating, are going to skew to some degree the median. We have a more detailed breakdown, so I can share, in a follow-up, if it would be helpful to sort of see to what degree they're skewing the data. But, I can say that there are some outliers that are driving some of the numbers. There was another question.
REP DIGGS - On the discharge, in hospitals, you know, at five o'clock or 5:01 a discharge can happen. Let's say a doctor says, hey, you're okay. You can leave. But the insurance companies aren't open at five o'clock on a Friday, and they're not5022 open till nine o'clock in the morning until Monday. So that whole weekend, they could actually go home. So if we could have someone with either Blue Cross or any of the insurance companies be there on a 24 if the hospitals are open, why wouldn't we have a Blue Cross Blue Shield, somebody open there? Because I'm sure there's a lot of money that's being wasted in that time too, that we have people kind of in hallways not being able to go into a bedroom. And then also somebody ready to leave that hospital that could go either home or to a nursing home, or a recovery center, whatever. Do we know the data that there is there and how much it would cost and how much we're losing?
SELTZ - It's a great point. Not specifically on the cost, but we validate all of that. We see in the data, as Lauren mentioned, you know, overall hospital visits are down pre pandemic but length of stay is up. And when we dug a little bit deeper into why is length of stay up for patients staying longer in the hospital, as you just said, we found that it's the cohort of patients that ultimately end5101 up in a skilled nursing5103 facility or in a post acute facility setting that are driving that or that are going home with the need5111 for home health that are really driving the length of stay increase. Patients who are being discharged at home, their length of stay has increased a little bit but not very much as much as those other cohorts.
And what that suggests to us and validates to us is that there is a problem and a bottleneck at the discharge stage. To get these people into the appropriate home health, or skilled nursing facility, or rehab setting that is contributing then to the longer length of stay to increase capacity within the hospitals, backs up, you know, back up in the inpatient floor, back up to the ED. And so if we can do something to speed up that discharge process, we could do a lot to impact our capacity challenges that we see in our hospitals right now. Getting people to that next setting of care quickly and appropriately would have a huge impact.
DEVAUX - Thank you. Great discussion and many thanks for the presentation and the responses from Director Seltz and also Director Peters. I want to move to the next segment in our afternoon knowing that as various of the attendees digest the results, you may have other questions for either of our directors. But I'd like to introduce our next topic, which will be Massachusetts spending trends and drivers and implications, which will jump off nicely from the discussions that we just had. Doctor David Auerbach is the senior director of HPC's research and cost trends department, and Yue Huang is our senior manager. They're going to present findings on Massachusetts recent health care spending trends and share an overview of health care spending drivers and implications for affordability. Welcome.

SHOW NON-ESSENTIAL DIALOGUE

DAVID AUERBACH - HPC - Alright. Thank you very much.5238 Good afternoon, everyone. The outline that I'm gonna talk5244 from today will include some overall broad trends in spending, then we will specifically focus on drivers of spending in the commercial market. And as you see here, we'll spend some time on overall drivers as well as some deep dives into the hospital outpatient department and pharmacy, which we continue to see are the biggest categorical drivers. And Yue Huang will join me for the prescription drug section. Then I'll talk about a few other trends in the commercial market. Thank you. And then finally, I'll talk about affordability as the last section.
Okay. Let's start off with the broad trend of our performance against the benchmark over the past 11 years of experience. Here you can see, as we know, we exceeded the benchmark in 2023, that's on the far right, at 8.6%. And if we divide up this experience from the 2012 to 2019, just before the pandemic, verage growth was about 3.1, 3.2% over that time. Then since 2019 to 2023, we've been growing faster. The average is about 5.2 over those last four years, where we have exceeded the benchmark in three of the four. Taken together, the entire 11 year period, average annual growth has been 4.1%. Now when we compare that performance to the rest of the country we see, again through 2012 to 2019, we tended to have growth below the US average after the time in the early 2000s where we were considerably higher. Then in the last four years, again, we've been tracking more towards that US average with we were higher two out of the three last years.
And if we think about that across the different broad market sectors, commercial, Medicare, MassHealth, that's what's shown on the next graph here. In the blue is the performance of these sectors in just 2022 to '23, the very last year, all above the benchmark, all sectors. In the orange, we're showing the average annual growth from 2019 to 2023, so including the last year, last four years' average growth together. You can see commercial is the highest. And because the commercial sector has the highest growth and is also the largest,5411 about 60% of Mass residents have commercial coverage. The commercial sector has contributed to most of the above benchmark spending in the last four years, about three fourths of5423 it. It. So for that reason and others, that's where we're going to focus really for the rest of the day.
Here is our commercial growth trend compared to the US average. And we do our best to make this apples to apples but it's not perfect. Again, a similar pattern where in the mid 2010s, we tended to be growing more slowly than the rest of the country. Since then, we've been fairly similar. Both Massachusetts and the rest of the country had a spike in commercial growth in 2023, so it's not just here. And with that, that leaves our premiums still to be quite high. As you can see, this is the average annual family premium for health insurance in 2023, all the states lined up. And our average is $26,355, second highest in the country. And consider that, again, that's the average. 10% of people have premiums over $36,000 a year. Okay.
So let's understand what's driving the commercial cost growth and what is leading to these high costs. Overall, just two slides here, I'm gonna break it down a couple of ways. Prices and utilization, which we've talked about. Same story it always is. It's mostly prices. It's mostly prices. This is one very broad way to break down prices and utilization, and we're gonna dive5508 more into this into specific things. But you can see the price trend in the orange. That's the amount more that we pay each year for the same care. The blue is the utilization. That's just how much more care we are using in this aggregate sense. And you see those wild pandemic swings of the utilization, but overall it's mostly the orange, a little bit of the blue. It is noteworthy that the utilization had a slight increase in 2023. And in some of those areas of increase, some of them are high cost items. So we'll see a bit of that.
Okay. So that's prices utilization. Now, as Lauren did, we can look by commercial category by sector. Here are the four broad categories of commercial spending. And I want to note on the bottom, you can see how big each of them are. There's hospital inpatient, which is an overnight stay in the hospital, about 20%. Hospital outpatient, ED, and ambulatory surgery center. This is mostly the hospital outpatient in that bin. That's 35%. That's the biggest commercial bin of spending. So we're gonna talk about that more because it's a mixed bag of a lot of different services. Then office urgent care retail, that's about 20% of the commercial spend, and pharmacy is another 20%. Again, if you see in the blue, that's spending growth by category. All of these categories grew far over the benchmark in 2023. And the orange shows, again, their four year average growth. And we see this pattern year after year that the highest growth categories are the hospital outpatient and the pharmacy.
So for those reasons, we are then now going to delve a little deeper into what is driving the growth within those broad categories. Okay. First, hospital outpatient department spending. What the heck is this? Let's talk a little bit about what it even means. So we understand a hospital inpatient stay. You go to the hospital, usually, it's through an emergency department visit. You're admitted to the hospital. You're there for several nights. As Lauren showed, an average stay is five nights. And typical things that might bring you there, heart attack,5648 a septic shock. Okay. Inpatient stay.5650 A hospital outpatient department, even physically, there's a variation. Sometimes it is part of that same hospital campus, maybe right next door, maybe attached. Sometimes a hospital outpatient department is not on the hospital campus. It could be miles away in a standalone building that might look just like a regular physician office to you but it's part of that hospital's license and it bills as that hospital. Okay.
Then we have our traditional physician offices on the right of this diagram, and that's what we know. We go for our, you know, for our standard visits, immunizations, or all kinds of things. Okay. So those are these three types of settings. The hospital outpatient department, kind of in the middle in terms of intensity, and the services it provides overlaps with the inpatient side on the left and with the office on the right. You can get the same types of services sometimes in both places, so it's confusing, and their prices are different. So for example, what overlaps between this inpatient and outpatient side, a hip replacement you could have in both. Hysterectomy, bariatric surgery, it could be in both. They'll tend to be cheaper in the outpatient setting, and I'll talk about that in a minute.
Then on the right side of that continuum, there's what overlaps between the hospital outpatients and the office. There we have things like drug infusions, imaging, a regular doctor visit, a lab test. Those can be in both places. And when those types of services happen in the HOPD, they're about twice as expensive or more because of the addition of a facility fee, the hospital additional charge to that service. Okay. So there's a continuum of cost here, higher on the left, lower on the right. And a key feature to know about Massachusetts is, of those overlapping HOPD office things on the right, like your lab tests and your infused drugs, we do more of them in the hospital outpatient, a lot more. More than most states and this is partly why our costs are high.
Other things to note on this slide. Again, a patient who winds up in a physician office or a hospital outpatient, they might not always know. They might not always know, and their cost sharing is often higher in that hospital outpatient department. Okay. So with that bit of context, let's understand what's driving this hospital outpatient spend. Here's the hospital outpatient spend divided up into eight subcategories. And we looked at within each of these, the height of the bar is how much spending is in these categories. And we're looking at 2019, '21, and '23. And we've highlighted the fastest growing subsectors of HOPD spending. They are major surgery, chemotherapy and radiation oncology, and drug infusions. And we'll talk about those.
Let's start with major surgery. All of these have 10% spending growth per year, which is pretty high. That's driving that HOPD spend. Major surgery. This one is a weird one because most of the growth is from the shifting of things like knee replacements from inpatient to outpatient. So that is a money saving shift when you consider just one surgery. That's what this graph shows. If you take all of our hip and knee replacement surgeries, look at the trend on the inpatient side on the left in the orange, dropping. The volume is going down. And the hospital outpatient side in the blue, total parallel increase. It's just a shift, okay? We also see some of these showing up in ASCs, ambulatory surgery centers, which is a freestanding place that does a lot of outpatient surgery as well, generally for less price than the hospital outpatient.
And I've shaded these bars as well to show when they occur out of state. And you'll notice that a lot of those ASC surgeries are out of Massachusetts. We don't have a lot of ASCs in this state. So you see this shift and you see in the total, the volume has also gone up. But this shift itself explains about almost 1 percentage point of the HOPD growth. And if you remember, the HOPD growth back here was about 6.6% per year, so one of it is from this shifting phenomenon, removing this site of care. Okay. So that's one. It's something, it's not everything. Now let's talk about what else is driving that HOPD spend. Infused drugs, injected drugs, chemotherapy. That's a big driver of increased HOPD spend. I'm gonna here show an example of the second highest cost drug in this space, Keytruda. It's a drug used in chemotherapy. And what we're showing here is this is a price graph. The average price at each of these different hospitals in 2019, in the blue, in 2023, in the orange. And what you see is higher prices for a lot of the hospitals for this same drug.
That is also driving this HOPD spending, is increases in prices and increases in use of this drug. The indications expand. People use it for more and more different types of cancer. So add it all up together, just this one drug accounts for about 0.4 percentage points of that 6.6. Okay. There's not gonna be one single smoking gun because this HOPD category is so broad but that's another example of it. And you also just you notice the variation in prices. What insurers are paying for this drug based on what hospital is delivering the service. Okay. And finally,6003 a third driver is just this phenomenon of us using more care in the HOPD setting versus the office setting than the rest of the country. And one way you see this is in the Medicare data, which I'm showing now. This is our Medicare spending trend from '19 to '23. Massachusetts is in the orange. And you can see that we have more growth in the HOPD category than in the physician category on the right. That is opposite the trend line for the rest of the country where the growth is faster in that physician sector, again, the HOPD sector is more expensive. Whether it's Medicare or private insurance, you're paying more there. So that covers the HOPD section. Are there questions before I transition to
SPEAKER1 - Yeah. That's a good idea. Let's pause there for questions on this section. We I know we have 1 from chair Friedman, and then I have a question.
SPEAKER2 - Get the answers first.
DEVAUX - Thank you. So I understand what you're saying about the growth in the spend for outpatient, but when we think about something like hip or knee replacement, when it moves from inpatient to outpatient, it's less costly. So what I'm trying to do the math is, would you say that overall, the cost for that type of care decreased even though in that segment we see significant growth?
AUERBACH - Yes. Overall, costs for that type of care decreased. But if you see here the total number of those operations also grew, so that offsets a lot of6101 the savings that we would get. But still, there's a net savings, that's right, from that shift.
DEVAUX - Thank you.
FRIEDMAN - Sorry. I'm sorry that I'm not hearing it completely because that was very similar to my question. So is the inpatient going down and the outpatient going up?
AUERBACH - Yes. So
FRIEDMAN - But the prices are, what's the price variation?
AUERBACH - A hip and knee replacement in an inpatient setting averages probably around $30,000 and more like 20 in the outpatient setting. That's a very broad view. So when you look at this slide as the drivers by category, you see the inpatient number is low and the outpatient number is high. This shift is kind of like taking 1 percentage point off the inpatient and sticking it onto the outpatient. That's about how big that shift is.
FRIEDMAN - Okay. So you would expect that that would, so when the hospitals talk about moving to outpatient and that that is a money saver, is this showing us that it's a money saver, or is it, it is, right?
AUERBACH - It is. If I shift one surgery from inpatient to outpatient, absolutely, it's it saves money. Yes. Not talking about an increase in in volume or anything. I would say that that dynamic is confounded a little bit because we are also seeing ever increasing prices for hospital stays. So, even there's that shift, the hospitals for the care that they continue to provide are increasing pricing at a high rate, such that that overall category isn't going down. And those hospitals also backfill that capacity with other types of care that will also then just show up in that category.
FRIEDMAN - Okay. But we can say that outpatient, okay. And then can we go to the pharmacy? So we've got a shocking discrepancy in the price variation of the average commercial price of cancer drugs. Is there any specific reason, it's the same exact drug?
AUERBACH - Same drug.
FRIEDMAN - So one, the highest 22,392, and the lowest is 11,099.
AUERBACH - That's right.
FRIEDMAN - Is that right?
AUERBACH - Yes.
FRIEDMAN - Okay. So that sort of says to me that there's a discrepancy in what the insurers will pay for that drug?
AUERBACH - Yes. This is the same dynamic when we show inpatient prices or hospital outpatient prices. It's the same leverage story that we've talked about.
FRIEDMAN - Okay. I would start to question how well that PBM relationship is working for the insurer. But we'll save that for the insurers. Thank you.
SELTZ - I was just gonna also add on that particular side. The largest providers of oncology care are on6311 the left hand side of this slide.
FRIEDMAN - Which would argue that they would have more volume6319 and could do better at pricing?
SELTZ - Or they have more leverage with the commercial plan.
FRIEDMAN - Exactly. That's
MARKEY - As you go down the list from the Farber to MGH, their margin seems pretty good. And you go down towards the more local hospitals, those margins are much smaller. And I assume that these are done6363 in either the inpatient facilities, well, they wouldn't be inpatient, but they'd be outpatient facilities6367 on the campus or in some type of quasi hospital setting. Is there a way to have it incentivized through some policy to push some of these things more into an office setting instead of having that middle ground that we talk about, which we've done, I mean, I think over the last 25 years, we've pushed everything out of the hospital and into a outpatient setting, and then you go into an office setting. Can we get it so that we wanna have personnel to do the infusions? Do we have that ability? And do the offices have the capabilities where they would get the office reimbursement and not the hospital reimbursement?
SELTZ - Do you know the do you know the percentage of how much is in outpatient versus, HOPD versus physician office for some of the categories? I think we've done that.
AUERBACH - We have shown that before. Again, Massachusetts is higher, tends to have a higher use of the outpatient but it varies by service. Sometimes it's 50 50, sometimes it's 75 25 both ways. But do you wanna talk about signature payment? I mean, there are policy pushes to pay the same regardless of setting.
MARKEY - So I understand.
AUERBACH - Okay. Why don't you talk about it.
6453 SELTZ6453 -6453 You6453 know, one of our recommendations that we've made in the past is to look at these differentials specifically for common care that could be provided in a hospital outpatient department or in a physician office, like a regular doctor's visits or a lab test, where we see that there is, in some cases, double the payment going. And, again, patients are often bearing some of that additional cost in their co pays and deductibles. And so there have been policy proposals to say, let's try to equalize that out and pay, you know, the same amount if it's done in a physician office or if it's done in a hospital outpatient department for those types of services that really make sense that could be done in either way.
1, you know, that both helps kind of equalize some of these distortions, but it also helps, you know, blunt an incentive for hospital systems to continue to acquire physician practices and convert them6511 into hospital outpatient departments. And that's what we've seen a lot, is that, you know, there has been this incentive because you can get6519 paid more with that license and with that setting, that more and more, you know, physicians have gone into those settings. The money's there. So you take away some of that financial incentive and you create a more level playing field in terms of competition between, you know, your typical doctor and this hospital outpatient department. So, you know, there have been ideas about how to do that, to do that, you know, appropriately for the right types of care. But that is one way you could start to address some of these differentials.
SPEAKER1 - Thank you. Yes.
TYLER - Thank you. So HBC recently sent us information on the analysis that you're doing about the potential Dana Farber, Beth Israel merger. And I'm just looking at the chart about pharmaceutical spending and I'm seeing how you, following up on Senator Friedman comment, rightly noted that Dana Farber is charging a lot more for the same drug as Beth Israel. And I just wonder if you have a merger, are we expecting even higher prices? Has that historically been what's happened or has there been some leverage to bring the cost down?
SELTZ - Thank you for that question. And we at the Health Policy Commission just did release our preliminary report, analyzing the potential impacts of the new relationship, proposed relationship between Dana Farber and Beth Israel. And, you know, I won't try to sum up all of it because it's a complicated story in terms of our analysis. But this was one of the areas that we did highlight where we saw potential for spending increasing, particularly as we would see some Beth Israel patients and physicians move to Dana Farber and be able to charge higher outpatient rates. Dana Farber has some of the highest outpatient rates in the state for oncology care. And so if we were shifting some care to that higher price point with these new relationships, we estimated that that dynamic alone could increase spending by close to $39 million a year. And so that is one of the areas where we have highlighted in our report and hope to hear from the parties to the transaction in this next phase where6655 they can respond to our report, and then we issue a final report.
AUERBACH - Okay. Great. Let's move on to the pharmaceutical section.
YUE HUANG - HPC - Okay. Good afternoon. Can you hear me okay? Great. So6673 as David already highlighted, pharmacy spending was one of the major drivers of spending growth in 2023 and has been for the last couple of years, so in this section we wanted to take a deep dive on trends in the prescription drug market. So, first, we wanted to show spending by drug class because some classes contribute to spending growth much more than others. So what we show here on this slide is per member per year spending for some major drug classes, and these are net of rebate, where the 2023 spending it's in the blue and the, sorry, the 2022 spending is in the blue, and the 2023 spending is in the orange. And you can see here that while spending growth was high for all these drug classes, some drug classes contribute disproportionately to both spending and spending growth more than other drug classes.
So let's take immunosuppressants as an example, which are shown in the first set of the bars. Immunosuppressants are drugs that tamp down the body's immune responses. And it's used for conditions like rheumatoid arthritis and other autoimmune conditions. These are drugs like Humira, Stelara, Cosentyx, etcetera. Not only did this class of drugs have the highest spending, we also saw very high spending growth, 25% from 2022 to 2023. It's also worth noting that a relatively small number of patients take these drugs. If you look at that gray bar on the bottom of this graph, immunosuppressants only represent 1.3% of overall prescription drug volume, but they have an outsized impact on spending and spending growth because these drugs are so expensive. So 25% growth there.
And then we have hormones and synthetic substances, kind of a mouthful. These are things like steroids, birth control, diabetes products like insulin and GLP1, which we'll talk in more detail momentarily. Also, big spending increase there, 34%. And then we also have chemotherapy. Just a quick note, this is a little bit different from the chemotherapy that we've been talking about, which are typically infusions done at a hospital. These are cancer drugs that patients take on their own. Again, relatively small number of patients take them. High priced drugs, so big spending impact. 21.4% there. So next we'll highlight GLP1 drugs, which is6846 a subset of the hormones and synthetic substances. So GLP1 drugs,6852 these are the drugs dominating the headlines6854 and our commercials. These are the Ozempic, Wegovy, Monjaro. Everyone's heard about them. They're used to treat both type 2 diabetes as well as weight loss. And the utilization of these drugs has just grown exponentially here in Massachusetts.
We found that the percentage of residents using these drugs has grown five fold since just 2020 from 0.8% to 4.1% in 2024. You'll see the 2024 bar there is hash because we only have a half year of data. It's possible if we had a full year of data, that percentage might be a little bit higher. Again, these are relatively high cost drugs. And when you combine high prices with increased utilization, you get big spending impact. So in 2023, 5.5% of all commercial prescription drug spending was attributed to these drugs, and that's net of rebates. And we know rebates are pretty substantial for these drugs. And the increase in spending for these drugs alone added about 3 percentage points to commercial prescription drug spending growth and roughly 0.6 percentage points to overall commercial spending growth. It's hard to emphasize enough just how big an impact these drugs have on spending and spending growth. And a lot of patients are potentially eligible for these drugs, and we do expect to see that utilization will continue to go up over time.
So we've highlighted some specific trends by drug class, but we wanna take a step back here and just say that it's not just the immunosuppressants, it's not just the GLP1. In general, prices on branded drugs has been increasing and that's a trend that's been going on in the prescription drug market for a long time. Brand name drugs account for a relatively small percentage of the prescription volume but they're high priced and they account for the vast majority of spending, about 80%. And in this graph, we're showing the gross price distribution per prescription for branded drugs. So the vertical lines there are the various percentiles and the orange dot shows the average gross price. And you can see here that the average commercial gross price per prescription for branded drugs has gone up 69% just since 2019 from under $1,100 to over $1,800 in 2023. And you'll see the 95th percentile there for 2023. That means that in 2023, 5% of prescriptions exceeded $8,500.
This is in contrast to generic drugs. Generic drugs are the vast majority of drugs that we take but they have small spending impact because they're low cost. The price of generic drugs has remained pretty flat, at around $30 or so per prescription, since 2019. Importantly, this graph shows gross prices, so we do not account for rebates here. Rebates are crucial when we are calculating total pharmacy spending. But when it comes, but rebates are sort of reconciled on the back end between the manufacturers and the payers and through the PBMs. And it does not, for the most part, directly affect out of spending on a per prescription basis, especially if you have a deductible7079 or coinsurance, that's based off the list price of the drugs. So next, let's look7085 at the impact of high prices on cost sharing. So here we have cost sharing for drugs that are used to treat very common chronic conditions. And the lines show the average cost sharing for a month's supply of one drug in each one of these categories.
So if you look at the 287 in the anti arthritic drugs line, for example, that means a patient taking one month of antiarthritic drug in 2023 paid an average of $287. And you can just see these cost sharing over time has gone up a lot for antiarthritic drugs. It's doubled just since 2021. It's nearly tripled since 2019. For MS7135 drugs, it's gone up a 34%. And these are chronic drugs, so patients are paying this amount month after month after month.7145 I think one bright spot on this graph, it's the insulin line that's shown in the yellow. Insulin cost sharing has gone down somewhat over time, and that reflects a combination of market factors as well as sustained public and policy attention. We would be remiss here not to mention the PACT Act, which was passed by the Legislature and signed into law in January, which included a provision that will cap out of pocket spending for certain drugs used for a number of chronic conditions, including insulin. And certainly, that will bring relief to a lot of patients moving forward. So with that, I'll answer any questions and also turn it back to David.
SPEAKER1 - I just wanted to, we have 1 more section. To present around notable trends. Yeah. So I just wanna do a chime check to make sure that we get to the public testimony at 02:30. And I'm thinking if we, maybe hold questions till the end of your presentation, that will, you know, give folks a time to understand all of it and, then do the questions then. Thanks.
SPEAKER3 - Absolutely.
AUERBACH - Okay. I have two more sections, and I'll try to go as quickly as I can but not too fast. Okay. This section is a handful of important trends and dynamics in the commercial market that just are worth mentioning. This one is about primary care and we talked about this in our primary care report recently, but this trend continues in 2023 of lower growth in spending on primary care compared to the growth in spending on everything else. And you can see that in that long run, about 13% growth in primary care spending, that's the orange, the very small orange bars, and growth in non primary care spending in the blue, a faster rate. And again, that means primary care as a share of our healthcare dollar has been shrinking year after year.
Let's move to another component of premiums and affordability, which I'll talk about next, which is administrative costs. These are included in the premium. And you see in the orange, those administrative costs have been growing year after year, about 6, 7% per year. So even though these are regulated by MLR types of regulations and standards, that growth does add about 0.3 percentage points to premiums in 2023. Finally, well, two more. I want to talk about the small group market, which we mentioned earlier. This is this drastically declining enrollment of people getting insurance through small businesses. It's been dropping year after year and it's about half the size it was in 2010. The small group market also, as Lauren mentioned, it has the highest premiums and the highest deductibles. And enrollment is declining year after year.
And finally, I just want to note that, though I showed that our premiums were second highest in the country early on, that was the employer market. An exception to that is the connector, where we tend to have the lowest premiums in the country. And how could that be at the same time? This graph illustrates that phenomenon where on the left I'm showing enrollment by plan in the connector and on the right enrollment by plan in the small group market. And their premiums are arrayed left to right. What you see in the connector is people overwhelmingly choose the lowest cost plans, by far. That's shown by those bubble sizes. And in the rest of the group market, people are choosing the higher cost plans. The connector has a very effective competitive structure where people choose the plans that best work for them, and those plans with low premiums are rewarded with higher enrollment. That dynamic doesn't work as well in the group market. So it's an important note that this is again a bright spot in our spending trends and then our overall spending in Massachusetts.
Okay. And I'll just note that the connector is about 8% of total private enrollment. The employer market is the vast majority, 90, 92%. So that is really dominating the commercial trends and that's dominating what we find in affordability. So let's move to the implication of all of these trends we've shown so far for affordability of healthcare. And Lauren showed some windows into this as well. I wanna7412 start with really the very big picture long run7416 view of economic trends and health care trends7420 in Massachusetts. What you see is in the yellow, average annual growth in a number of quantities from February to 2012, so before the HPC. Then you see in the blue those same trends, average annual from 2012 up until today, 2023. So for example, those yellow bars showing annual premium growth of 7, 8, 9, 10 percent, that was what we were experiencing in the 2000s. Those have come down. Premium growth in this long period is much lower than it used to be.
And in the middle, I'm showing the consumer price index. Premium's still higher than inflation quite a bit. But income trends on the right, growth in per capita GDP on the right, median household income. So in the first decade of the 2000s premiums were growing twice as fast as income. In the last decade, they're closer, they're closer together. Premium's a little bit above. Okay. So that's some positive news. Then what we'll start to see though is in the last few years, we've been approaching what we were like in the early 2000s. Okay. Here is those same quantities but now I'm just showing year by year 2010 to 2023. The orange are your family premium, the employer contribution, and the employee contribution to those premiums. Those are above GDP, above household income, and far above inflation. And what you see there is especially in the last few years, those orange lines are spiking up.
Now we're going to focus on just those last few years again. 2022 to 3 in the blue. On the left you have our commercial spending growth and our premium growth. And then in the middle, labor costs, input costs, not growing as fast as the premiums and health care costs have been growing. And then on the right, median household income. And, you know, the orange again is the 2019 to '23 average. So think about that. And then on the far right, I'm showing income for not the median family, but a family with income of about 80,000 a year. That puts you at about the 40th percentile of income. Income for those families is growing slower than the median, and it's growing only half as fast as health care costs. In other words, health care costs are growing double income for families below the median.
This is a phenomenon happening in Massachusetts. It's important. It means that if you look at a measure like GDP, you are missing that income growth is faster at the top. And we are, in fact, the third highest in income inequality in the country as a state. We're 48th and we're getting worse on that measure. So in the next few slides, I want to think about this7590 40th percentile family some more. Before going to that, it's also important to show our deductible trend. I've been showing premium growth. The premiums don't include out of pocket spending, cost sharing deductibles. We're now at about almost half of commercial coverage in the state is in a high deductible plan. Those average deductibles have risen from 2,300 to over 3,000 by 2023. And we know people in high deductible plans, they're avoiding care, they're having medical bills. And CHIA has shown that.
So when I include that out of pocket and the premium, an average family health care spending is over $29,000 a year. It's a tremendous amount, especially against a salary or an income of 80,000. And that's what we're looking at in 2023, about 2,400 a month in health care spending. That level of health care spending adds to our high cost of living. This was mentioned earlier. I'm stacking up an average two family, I mean, two parent, two child family in Massachusetts, in Suffolk County and in Worcester County. And you can see when you add in typical costs for transportation, food, childcare, housing and everything else, that is higher than median income for7668 those families in these areas. They're underwater already. And that's for paying for a lot of things that are not included on this list. So the health care7676 in the orange is making that situation worse.
What I want to think about here is, using the CHIA survey, how do these affordability challenges, real deep problems such as I'm avoiding going to the doctor for care that I need because I'm worried about the cost, and B, I have medical bills, how does that vary with how much my healthcare costs are relative to my income? That's what this graph shows. So, on the left is where health care cost over my income is less than 10%. And as you go to the right, I'm looking at families where their health care is a larger and larger portion of their income. And on the far it just goes up. The reports of these medical problems goes up as that health care percentage goes up. And on the far right, you have7726 on the extreme where health care is more7728 than a quarter of my income. About one in three people are avoiding care and incurring medical debt. It seems like a real turning point for affordability at this 25%.
So what we then asked was, how many people are at this 25% level? And we looked here, does it vary by race and ethnicity? It sure does. Hispanic families with employer coverage, 40% of them are at this level or more of health care as a portion of income. And it also varies across the state. These levels are the highest in Western Massachusetts and on Cape Cod. And finally, I wanna illustrate tying some of this together. The implication of health care costs growing faster than income. What this graph is showing is on the top line, this is a scenario where I'm taking your average income for an average family, subtract your taxes and your health care costs, and this is what you have left per month to pay for housing and transportation and food and everything else. That line traces that disposable income, if you will, through 2030. That's the blue line, in which case we are able to keep premiums at the benchmark level for the next six years.
Now look at the orange line. That's what we're looking at if health care premiums grow not 3.6%, but 7% as they have been. You can see that families' available income eroding year after year to the point where by 2030, they have $614 less per month to pay for everything else that they have to pay for. That's that difference. That's the implication of current premium growth compared to premium growth at the benchmark level and it's a significant impact. Okay. So on that note, I'm happy to take any other questions and I will turn this back to David Seltz.
SELTZ - Well, I'll just finish off there. I just have a few more slides, and I wanted to particularly highlight the work of this legislature in tackling some of these major issues in recent legislation. As you all know, there was two important pieces of legislation passed and signed into law earlier this year. And many of the provisions in these two new pieces of legislation touch on some of the topics that we've discussed today. And so I wanna specifically mention a few of these. 1, as we've noted, you know, pharmacy growth is one of these major drivers that we've seen year over year. The new laws established within the Health Policy Commission, a dedicated new office of pharmaceutical policy and analysis to really act as our expert hub to understand what is going on in this particular market and to help us be able to develop policies to address pharmacy spending growth. And so this is7916 gonna add new tools and focus for the7920 HPC and for CHIA to really be able to dive more into this sector. I'll also note that the law requires the licensure of pharmacy benefit managers.
This too will provide greater transparency and understanding of how they fit into this market and what their structures are for the first time. Third, in the prescription drug space, as you have mentioned, the laws contain important consumer protection provisions around capping out of pocket costs for certain drugs for chronic conditions. And then finally to the point of affordability, that David Auerbach just talked about, the law requires the Division of Insurance for the first time to consider affordability when reviewing health insurance rates that are filed with them and subject to review. So this will provide a new lens and a new tool for the Division of Insurance as they are reviewing insurance rates through this cost of living lens, this affordability lens. How are we thinking about this? So we are excited to move aggressively in implementing the provisions that relate to the Health Policy Commission because we know how important it is for us to make progress on some of these trends. And I wanna thank the legislature and the governor for their bold action in these areas. That is it for us in terms of our presentation. I'm happy to take questions before we turn to public testimony on anything.
REP FROST - Thank you. Representative Paul Frost. Two questions, and the first was the GLP1 medications, and the rising cost on those, or the rising demand for those. When will we see, if we haven't seen it already, because I know it's something that is relatively new in the grand scheme of things and more and more people are using them, that we may see other health benefits and lower costs elsewhere? If you're dealing with the issue of diabetes and obesity, that these individuals will need less medication other types of medication, perhaps avoid medical procedures, be in better health overall? When could we see, and is there a way of tracking that to see that even though this is might be costing a lot in the long run, or the short or long run we're gonna see, you you know, it become cheaper elsewhere in health care?
SELTZ - Yeah. I'll speak to that and ask Yue to chime in as well. You know, these are very effective drugs for these conditions that they've been approved for and that is part of the reason that they've been so widely used is their effectiveness. And8104 the idea that8106 managing diabetes, managing obesity can lead to greater health outcomes, lower unnecessary utilization in other cases, improve the overall health and well-being of patients, I think is absolutely sound. We have not yet seen it in the data. The manufacturers of these drugs are pouring a lot of money into studying this factor because they want to be able to show that there are gonna be these savings in other areas. So I think the hypothesis and the concept is absolutely right on, I don't think that we've seen it yet. And that's not to say that it won't happen. It's just we haven't yet.
And I do think that's an important dynamic for us to track and to look at both in Massachusetts and nationally. But here to see, are we starting to see some of those potential positive other health impacts? With all that said, I would say one confounding factor that we do see in some of the data is that there is some amount of patients who drop off of these drugs at a certain point. This is a monthly drug. It requires adherence to this drug in perpetuity, for the time being, and a not small percentage of patients after six months, eight months are coming off of drugs. And then whatever health benefits may have happened in most cases are reversed. So that's another dynamic to track, is how long are we8202 seeing adherence and can we see those long term benefits.
HUANG - I think I'll just add to that that some of the patients are abandoning the drug because of the high prices. So, you know, in some sense, we're not realizing the full potential, including the cost saving potential because the price of these drugs are so high. As we know, the prices that we pay for GLP1 in this country are magnitudes higher than what other countries pay. So there's that cost sharing piece that could potentially happen in the long term. It does not address the problem we face today, which is that these drugs are very expensive and a lot of people are taking them.
FROST - Thank you. And the second question had to do with the graph on the chemotherapy drugs, and comparing the different hospitals. And like, for example, you know, Dana Farber being the highest and then you get down to Health Alliance in Clinton being the lowest. What do the hospitals pay for the drugs? Do we know that? And if we do, what is it? And if we don't, why?
HUANG - Yeah. We do know. We have a general sense of what they pay. So you also, you see the Medicare bar in that graph as well. So Medicare has a really clear kind of payment rule for these clinician administered drugs, which is acquisition cost plus 6%. So based on that acquisition cost, we have a general sense of how much hospitals are paying for these drugs. Now, we know a lot of these hospitals are 340B entities, which means that they receive additional discounts off of that acquisition cost. So for some of these costs, their acquisition costs are gonna be lower. We don't know the exact discount for this particular drug, but there's gonna be kind of variation based on the 340B, the entity's 340B status.
FROST - So do we or do we not know how much, I hate to8336 use the word, profit, but, you know, over what say Dana Farber is making, what they're paying and what they're charging versus what, you know,8344 the Clinton Hospital is buying it for and then charging it for?
SELTZ - I think it's fair to say we do not have a clear picture of the acquisition costs for each of these hospitals of what they're paying for the drug or how much they're paying to store the drug. But as Yue said, you know, we we look at Medicare as a benchmark there, and, you know, can kind of see it on aggregate. But I think to specifically8369 get that information, we8371 would need to go to the hospitals and to inquire. And as Yue said, there's gonna be some variation there.
FROST - Thank you. And just last thing I would just say8382 is, is there something we need to do in the legislature, in the law? I know we've done more on transparency but is there more we need to do on transparency to see, again, when we see these big variations of what different hospitals are charging for the same exact medication, I just, you know, wondering if there needs to be more. If there isn't enough, should there be more transparency on getting a hey, you're buying it at this, and you're charging it at that, and get a better understanding of the difference and why. Because just some of these seem to be big, big differences.
SELTZ - Having that insight and transparency, I agree, would be important. We have some new tools in this new law to try to get some more information. But I would say, we'll be back and talking with you if we think that there's additional things, tools necessary to get at some of these issues. Thank you.
MARKEY - When we look at what Representative Frost was talking about, the gap,8452 and what Doctor Auerbach talking about with the hospitals and all that, the hospitals make more money off of particular surgeries, particular treatments, and all of that, I would assume, but those benefits to it also pay for the things that don't make money. So when you have a hospital like, whether it be, Brigham and Women or you have a hospital in Lowell, when they, or New Bedford or Brockton, those8489 procedures subsidize the other process that or the other treatments that the hospital does. When you have a hospital like Dana Farber who they do cancer and they don't take on that responsibility of the other things, yet they make more money off of the treatments that they provide, what is it that we can do to say, hey, listen, there's a social responsibility to add on to something you do? As opposed to, you know, you get stuck in a disproportionate hospital again. You get8527 stuck in a psych ward. They're making no money. But8531 somewhere else where they specialize in it, they're making more money and they're not necessarily providing any more8540 social benefit to us. So I'm curious as to, I don't mind paying the extra money if it's gonna go be spread out. But if you're utilizing the same formula and you're making more money but you're not taking on that responsibility, it seems unfair to everybody.
SELTZ - I'll try to, thank you for the question or comment. And I'll try to answer briefly, it's hard for me sometimes. You know, I think there is always a delicate balance, you know, within some of these institutions about, you know, the different types of services that they provide, some of which help, you know, subsidize providing behavioral health in their community. And if they, you know, part of that is, you know, what other types of services am I providing that maybe help overall balance the book, so to speak. I think there's a couple of things we can do. You know, 1, I think helpfully in this new law, there's a new office of health resource planning, which is really an office, an idea to let us have a state health plan to really understand who is providing all of these services, do we need more of some of these particular types of services that we know are the most highly reimbursed?
There's an incentive to expand those. Is there that same incentive to expand in other areas? And so I think having that information through this planning process will help guide us in terms of what are the decisions that we as a Commonwealth wanna make about are we expanding, are we investing, are we putting, you know, our policies behind the right types of resources that are actually addressing community need? And I think to date, you know, many of8648 those conversations, when we have a review of, you know, we wanna expand this hospital or we wanna expand services, you know, they're always kind of on a case by case basis. I think having that larger picture will help guide all of our policy discussions so that we are incentivizing the things that we need.
AUERBACH - Can I add to that?
SELTZ - Yep.
AUERBACH - You know, to put it in a different way, you're right about the existence of these well, that some kinds of care tend to be more profitable to provide than others. And it's not a great situation because you'll8690 then tend to get more of the more profitable thing and less of the less profitable thing. That might not be aligned with8696 what we think about value in society. And so, ideally,8700 we would equalize that8702 somewhat. It's not easy to do. But it's just not a great situation overall to have these vast differences in profitability.
MARKEY - I guess my point is, at the end of the day when you take the totality of the circumstance, if everyone's carrying their weight, then it works. If they're not willing to carry their weight, then it doesn't work. It's the same thing with the pharmacies. It's the same thing with, you know, a specialized hospital who just does orthopedics or just does cancer where they're making money. But if we look at the totality of it, and that's one of the things, I guess, is we're looking at a benchmark of 3.6% or whatever it is. That's the big pot. The question is, are we dividing that pot the right way to incentivize better social like, you go to a place down in New Bedford, there's no real I mean, now we have a place down there, but finding a psychiatrist for mental health stuff, finding certain, certain things are never gonna be there because they just don't make the money that they could. So I'm just curious as to what we can do to more get at the end of the day, divide that pot to more be more equal, to satisfy some of those social needs that we have.
SELTZ - The last thing I'll say is that there have been states who have been very intentional about increasing the slice of pie for certain areas. So many states have set targets for increasing the amount of the pie, slice of the pie, for8803 primary care, and saying over8805 time, we think that more money8807 is going should be going into primary care because this is so high value, but the system as it is is not incentivized to invest in it. And so government, you know, can come in and say, let us set a collective goal and work with the healthcare industry, work with the providers and health plans to say, we wanna grow this slice of pie. I would put behavioral health also in that category. So there are policy mechanisms that can be added to the benchmark. It's not either or. It can be a compliment to say, we have this big overall goal for the big pie but we also wanna have goals for specific sectors where we maybe want to invest more. Thank you.
DEVAUX - I think that report has raised very important questions about what else can we do to address the drivers of health care cost. I appreciate the8859 legislator's questions and illuminating that more. I think it brings us back to the opening comments from Senator Friedman, which is that, the legislative advancements that, you know, that happened in December are a start. And I think holding some of the thoughts that you've raised, you're posing a question to HPC and others, what comes next? And I think that's a very important question. What can we do based on the legislation that has just passed to address some of these issues, and what else would be helpful.
FRIEDMAN - I would just like to add that it would probably be useful for folks, new members, and members that have been around to go back over the past several years and actually look at the recommendations that HPC has put forward. There's8913 been8913 quite a number of them that address a lot of8917 what folks have talked about here today.8919 And I also go back to8921 what I said, this is an administration and legislature task to take up some of those very important recommendations and put them into statute because they do address the things that you've all, a lot of people have raised with some really good questions.
Okay.
SPEAKER1 - Thank you so much. Thank you, doctor Auerbach.
SPEAKER5 - Thank you.8945
SPEAKER1 - Thank you. You wait. I'd now like to turn to the public testimony.
Great. Thank you. And we have 3 individuals who have, registered in advance. Eileen McEnany is the first, the president of the Employer Coalition on Health. Welcome, Eileen.
EILEEN MCANNENY - ECOH - Thank you. Good afternoon. As Chairman Devaux mentioned, I am Eileen McAnneny. I am8971 the President of the Employer Coalition on Health. ECOH is, as the name suggests, a coalition of business organizations and individual businesses who are concerned about the unsustainable cost growth in health care. And have joined forces to amplify their voice in these health policy discussions. And today, I testify on their behalf to ask that you lower the health care cost benchmark. And with all due respect to my, you know, health policy colleagues and friends, I would also suggest that we need to better define the purpose of the cost benchmark. You know, I've represented the employer community for a long time and when all of this was being negotiated, I was the senior VP of health policy at Associated Industries of Massachusetts. And I can tell you, the employer community envisioned the benchmark to be about taking cost out of the system. And they did that, I would say, justifiably because we knew, it was well documented, that there was a lot of inefficiency in the system. 30% of healthcare is either unnecessary, harmful, avoidable.
The other thing is the whole premise of healthcare reform was to reallocate the significant amount of money already in the current system to get better results. So the notion was people would9072 have to buy health insurance. And that way there, they would get preventative care. They wouldn't utilize the emergency room unnecessarily, and we would9082 stave off more acute illness. And so the whole purpose of Chapter 58 was to take cost out of the system. And I would say, even physicians themselves report that 20% of medical care is not needed, including 25% of test, 20% of prescription drugs, and 10% of procedures.9107 So my message is pretty simple. We've had a cost growth benchmark and we've gotten cost growth. If we want to reduce the cost of healthcare, we must first reduce the cost benchmark and impose different penalties for non compliance.
And I think this is important for three reasons. 1, it signals that we are finally serious about getting healthcare costs under control. And I think everyone in this room acknowledges9140 Massachusetts has an affordability and a competitiveness problem. It's been documented. BU professor, excuse me, Mark Williams studied out migration. And healthcare costs are right behind housing costs as the reason people are leaving Massachusetts. So, it's actually no wonder. We9163 heard the statistics. If families are spending almost $30,0009167 a year in9169 healthcare expenses, something's got to give. And when you think about it, healthcare impacts every man, woman, and child in this Commonwealth and every business. So if we're serious about tackling healthcare, well, about affordability more generally, we have to act urgently.
And I will say, as troubling as the numbers we've heard, which are looking backwards are, the trend is even more alarming. And so, some of Eco members have indicated the Retail Association of Massachusetts surveyed their members looking at average price increases 12% and FIB members, looking at 11%. I sit on the group insurance commission. We just voted for active members for a 12.7% increase. I mean, something's got to give. And secondly, lowering the benchmark doesn't mandate how providers and pharmaceutical companies achieve the cost savings, just that they do. And I think that that can take a lot of forms. For MGB, for9247 instance, we've heard about their, you know, integration of their system9251 and elimination of probably legacy management layers. I think The Globe said they had 15 layers of management. There's opportunity there.
Lawrence General's recent CEO talked about the need to better use electronic medical records and you would eliminate duplicative services and tests. Every pharmaceutical company in PBM could probably lower the price point of their GLP1s given the explosive uptake of them. And I think we could all use, and I know it's a goal of this administration to better apply AI to get better care and to reduce low value care. So, you know, and by not dictating how these savings occur, I think we allow each healthcare stakeholder to determine the best course of action for them. And this could spark innovation and provide many creative ways to tackle the system. The third reason is I think it will let Massachusetts reclaim its reputation as a leader on health policy once again. We did lead the nation with our landmark healthcare reform but we're falling behind other states who are taking this affordability issue more seriously and with a little more urgency.
And I know healthcare costs are a national problem. They're certainly not unique to the the Commonwealth, but we're unlikely to get any kind of solutions out of the Trump administration. And so, for Massachusetts, I think9347 finding solutions is more important. Healthcare is a9351 big economic sector in this state and its long term viability is crucial. And so that requires systemic change and payment reform. But before we9364 get there, I think a lower benchmark is the initial step. It's the first proactive step to having Massachusetts devise innovative solutions that are less disruptive, certainly than the federal proposals and which can be a model for other states. The bottom line is that making healthcare affordable means tackling the cost components of healthcare.
The HPC has done a great job documenting the primary cost drivers over the past decade, but with little effect because we haven't taken action. We haven't9399 implemented those recommendations. And by reducing the cost benchmark, lawmakers will require healthcare actors to act. If we wanna make health insurance less expensive, we also need to think about eliminating the 50 mandates that Massachusetts imposes on the fully insured. In the last legislative session alone, we mandated seven new benefits. And9426 they9426 are estimated by CHIA to add 750 million in premium9430 cost to the fully insured. And I would just say, I know we all want to help seniors you had suggested, Representative Tyler, but this piecemeal approach isn't going to solve it in the long term. It can't be about more subsidies for seniors, more subsidy for people under 500% of poverty level. It has to be systemic change and that's what I would urge this committee to consider and to do.
The only other thing I would say in closing, I asked you to consider health care cost in the broader context. So businesses, all small businesses, actually all businesses are facing really high energy costs as we've heard. Their potential tariffs on all of their inputs, which will make their goods more expensive, could reduce, any kind of profit margin. We're looking at a $2 billion shortfall in the state's unemployment insurance trust fund, which people have indicated they expect the employer community to fund and take care of. And this is all against the pressures of a worker shortage, rising wages, and general inflation. And so I just ask we can't9504 accept these double digit health care costs year over year and then wring our hands when health9510 care costs go up. We have to actually do something and I would suggest with urgency. And so, sorry, because my voice is going and I'm near the end of my testimony, I'll leave it at that. But, happy to answer any questions.
SPEAKER1 - Any questions for Eileen McEnany?
SPEAKER15 - No. Thank you for the opportunity to testify.
SPEAKER1 - Thank you. Next, I'd like to call Alex Sheff who's the senior director of policy and government relations for healthcare for all. Welcome, Alex. Thank you.
SPEAKER16 - Okay. Can you guys hear me okay?
ALEX SHEFF - HEALTH CARE FOR ALL - Great. So thank9559 you for the opportunity to testify. As you said, I'm Alex Sheff. I'm with Health Care For All. As most of you know, we operate a helpline in Massachusetts. We take more than 20,000 calls a year in five languages, and we advocate for health justice by supporting or promoting health equity and ensuring coverage and access for all. As we've heard, the Massachusetts healthcare system is really being stretched to the brink. People across the state are facing unprecedented challenges both affording and accessing the care they need. CHIA's annual report, as we've talked about, notes that health care spending grew by an extraordinary 8.6% in 2023. That's nearly 2 and a half times the benchmark. And as we've talked about, it comes as other costs for everyday necessities, including food and housing are growing even faster, leaving residents to make impossible choices between paying their rent and getting the medical care9615 that they need.
High costs are why 40% of residents report challenges affording care, and these costs ultimately need lead, too many, 1 in 8 residents in the state, to take on medical debt despite most having health insurance coverage. This is both unsustainable and unacceptable. There are many factors contributing to the growth, but prescription drug costs do jump out in the CHIA report as a leading driver yet again. So I wanna talk about it for a second. Pharmacy spending was the largest share of total health care expenditure growth by double digits, 10% this year even after accounting for rebates. At the same time, we know from Chia's health insurance survey that 40% of residents also report challenges accessing care. So we have this dual challenge going on. And, we also know from that report that 25% report not being able to get an appointment when they need one. That's up significantly from even just a few years ago.
Primary care is a particular concern. Citing another survey, out of 15 US metro areas that were surveyed in 2022, Boston had the second longest wait times for a new appointment for a physical. Cutting across both of these challenges, it's worth noting are startling inequities. Black and Hispanic or Latino residents are significantly more likely to report challenges affording care than their white counterparts. And similarly when it comes to access to care, and primary care specifically, residents who live in low income ZIP codes or a community with a higher share of people of color are less likely to have a primary care visit in any given year. But statistics only tell part of the story and on HCFA's helpline, you know, we hear from individuals, how they're struggling with both of these challenges, cost and access.
One recent helpline caller from Hull reached out seeking help because they have a rare disease and their insurance through their employer has a high deductible. We've talked a lot about that today. As a result, they said they could not afford a doctor visits, and their prescriptions weren't covered until they met a deductible on their prescription side as well. After rent and taxes and utilities, they felt like they could barely afford food, never mind the $550 they were told their visit to a doctor's appointment would9763 cost them. They talked about how afraid they were that they would need to go get care in an emergency, but they would be hesitant because they couldn't afford it, or that they would, go have to go deep into debt to get the medical care that they need. So what can we do? We've asked that question a little bit today.
First, and the reason we're here, is to keep the benchmark current at its 3.6% level moving forward. CHIA's report once again showed that consumers are bearing the brunt of the pain from cost growth both in terms of premiums and cost sharing, both of which grew 6%, this last year in 2023, and December respectively over the two years. As we've talked about, both exceeded wages and salaries. And that's, I think if I could leave you with one thing, like, that's the problem. People are being asked to pay more with less, and that's leading people to forego care. It threatens the competitiveness of the state as a place to do business. And, you know, the high out of pocket costs force people to forego necessary care and the premiums force them to choose which monthly bills to pay and mounting medical bills force too many into medical debt.
The second thing we should do is think creatively about what is necessary9844 to enable the state to meet the benchmark in the years to come. That has to start with reining in prescription drug costs. The recent passage of the PACT Act took very important steps to address the challenge of prescription drug costs. However, there is broad agreement that there is more to do and the legislature should consider additional proposals that would give the9866 state new accountability tools to9868 push back on rising drug prices and better contain their costs. More flexibility and9874 accountability in the benchmark process will also be critical to this effort, especially when it comes to, closing the price disparities between the most and least expensive hospital systems in the state.
And third, the work to increase access to care should invest resources where they are needed most, the front door of the healthcare system, and that's primary care. Massachusetts, patients reported worsening access to primary care each year9903 from 2019 to 2023, and it's partly the result of this insufficient investment that's been talked about in primary care. It accounts for just 6.7% of commercial health care spending and it grew at half the rate, as was pointed out of other medical spending between 2017 and 2022. Tackling the problem will require setting a spending target to invest more in9928 primary care, changing the way we pay for primary care, and training more primary care doctors through additional residency slots. And finally, reforming the prior authorization process is also necessary in this moment to both help patients access the care they need and to reduce the administrative burden on health care providers that leads to burnout. It's more important than ever, that we keep up our efforts to contain costs, while also making these strategic investments in expanding access to care. So thank you again for the opportunity to testify and I'm happy to take questions.
DEVAUX - Thank you. I understand your testimony around what we could do to9972 better control costs and improve access. I wanna make sure I understood your testimony around the benchmark itself. Were you saying, keep the benchmark at 3.6?
SHEFF - That's correct. Yes. We recommend keeping the benchmark at 3.6%. I think this is one where we just can't take our eye off the ball. As David spent some time pointing out, this is a target. It's a goal. If we keep moving goalposts, we're only gonna go in the direction that we move them. So we wanna make sure10001 to maintain this effort to keep costs under control.
SPEAKER1 - Thank you. Other questions or comments for Alex Schiff?10011
Thank you for your testimony.
SPEAKER16 - Thank you.
SPEAKER1 - And I'd now like to call10019 Laura Pellegrini who's the president and CEO of the Massachusetts Association of Health Plans. Welcome, Laura. Thank you.
LORA PELLEGRINI - MAHP - Thank you, Chair Devaux, Director Seltz, Secretary Walsh, Commissioners, Chairwoman Friedman,10036 Chairman Lawn, and members of the Healthcare Financing Committee. My name10040 is Lora Pellegrini, President and CEO10042 of the Massachusetts Association of Health Plans. MAHP represents 13 health plans and one behavioral health organization that provide coverage to nearly 3 million Massachusetts residents across all lines of business. This includes the commercial market, our state's health connector, the MassHealth ACO program. And we serve some of our state's most vulnerable residents with complex health care and social needs through the10066 one care and senior care options programs.10068 First, let me take a moment to applaud the legislature and chairs Lawn and Friedman in particular for passing two important health care bills this last session.
Among many important provisions is the requirement that we will now hold the pharmaceutical industry accountable to the HPC through the cost trends hearings. Thank you for getting these bills and these important provisions to the finish line. I'm here to testify in support of a strong cost growth benchmark set at 3.66% or below. And I'm here to ask you for your help. Today CHIA reported that we missed the benchmark by more than 5%. This was driven in the commercial market by billions of dollars in new prescription drug and hospital outpatient department spending. These results are not new and they shouldn't be surprising given some of the dynamics that are going on today. First, hospitals and providers have been emboldened to simply ignore the cost growth benchmark. Today, my members regularly see providers asking for rate increases of 30% to 40% and really refusing even to negotiate. They are willing to walk away from longstanding relationships with health plans, leaving consumers in the middle.
Second, the median price of10142 prescription drug launch prices grew to $300,000 in 2023, a 35% increase from 2022, and prices have grown by almost 40% for prescription drugs over the last decade. In 2025 we have seen close to 1000 drugs receive price increases for no apparent reason and pharma continues to generate average profits in excess of 20% annually. Spending on GLP-1 weight loss drugs have grown substantially. This was a key driver of the nearly $1 billion in losses that our state's two largest health plans reported recently in the Boston Globe. The cost of health insurance and cost sharing are a direct reflection of our failure to control health care prices. When providers and pharma raise the prices, premiums and cost sharing for employees and consumers go up. There is no magic. That is how it works.
But for too long, due to legislative and regulatory requirements, the sole responsibility for controlling health care costs has rested on the health plans and that is no longer working. We need new tools to control cost. Let me give you some examples. Health plans have a cap on their surplus or their profit. If a health plan makes more than 1.9% surplus or profit annually, they can have their rates rejected by the Division of Insurance. Neither pharma nor the providers have similar requirements. Health plans have the most stringent requirements of any state in the country as how they spend their dollars, with 90% going to medical care, excuse me, 88% going to medical care and the rest going to administration. If they spend too much on administration, they are required to issue rebates to their consumers. Neither pharma or providers have similar requirements.
Health plan rates are aggressively10255 reviewed by the Division of Insurance and health plans are required to10259 present their rates publicly before they are10261 approved. Neither pharma nor providers have any oversight relative to the prices they charge. The new law passed by the legislature now requires that the Commissioner of Insurance consider affordability of health insurance premiums when reviewing rates, but the law gives the health plans no tools10279 to achieve this goal and there is no accountability for pharma or providers to make healthcare affordable despite the fact that we have over 40 state reports that have consistently identified10290 them as the major drivers of healthcare spending. I want to be very clear and simple. Without cost constraints on providers in the pharmaceutical industry, health plans cannot make health care more affordable for your constituents.
We are currently at a critical juncture and it is essential for the state to take decisive action to ensure all entities within the health care ecosystem are held accountable for escalating costs. This is imperative and we are falling behind other states. Simply look at Rhode Island, Maryland, Colorado, and Oregon who are all doing major amazing work to rein in costs. These states have taken decisive action. Please be mindful that we still have an individual mandate in our state. All residents must have health insurance coverage and they must meet10336 minimum credible coverage standards or10338 they face a tax penalty when they file their taxes. So it's really incumbent upon all of us to address the affordability issue. It's a matter of fairness for the citizens of the Commonwealth.
Along with ensuring a strong cost growth benchmark, the state should consider implementing a moratorium on any new legislation or regulations that would increase health care premiums until such time that we're able to meet the benchmark. I had the pleasure yesterday of going through every healthcare bill that's been filed for the '25, '26 session. Hundreds of bills have been filed that will raise healthcare costs and take away important healthcare tools to improve quality and manage cost. There were very few bills filed that would actually reign in cost. Last session alone, the legislature passed several bills, including several mandates, into law that would put hundreds of millions of new dollars added to health care premiums, particularly for small businesses due to mandated coverage that large companies can avoid. A moratorium should not only apply to the commercial market but should apply to the Group Insurance Commission and MassHealth as well as they too are struggling with high healthcare costs. Today and for several quarters, my carriers have experienced significant losses that threaten their solvency, meaning that theoretically they're not collecting enough premium to10418 cover their costs.
The current course is unsustainable without serious legislative10422 and regulatory intervention. We have come here for many years, but this10426 is the most serious that it is right now. Along with a strong cross growth benchmark and a moratorium on new legislation that will not add to health care premiums, we10435 urgently ask that you provide the health plans with the tools needed to rein in health care10439 costs and meet the affordability challenges faced in our state. I have submitted a letter. Each of you should have a copy of it with some ideas. They're not new ideas. Many of them have been supported or recommended by the Health Policy Commission. And delightfully, the Health Policy Commission now has new authority to actually file legislation. I would ask you to consider doing that after this hearing so that we can save billions of dollars for employers and consumers by way of lower premiums. I wanna thank you for your time today, and I'm happy to answer any questions you have.
SPEAKER1 - Thank you, Laura. Any questions? Yes, please.
MARKEY - I'm sorry. I keep asking questions. I'm new. I'm trying to figure this out. But you said something in there that, you said10487 that providers walk away10489 from negotiations. Why would they walk away from negotiations with commercial insurance?
PELLEGRI - I think it depends who the insurer is, but for some providers, they don't need to do business with certain carriers or they're willing to give up the business.
MARKEY - Okay.

SHOW NON-ESSENTIAL DIALOGUE

PELLEGRI - For Representative Diggs, I would love to10525 meet with you after, but you had a great question earlier10527 about plans and providers being available 24/7 to help with patient flow.10535 That is critical. I will say one of the bills passed10539 by the legislature, the Long10541 Term Care Act, actually has provisions in there that require quick turnarounds and require coverage. I would really like10547 to see a system where both providers and payers are available, right, on weekends, to help move patients through. My experience in hospitals is everything sort of stops on Friday and starts again on Monday. And I think to really move patients through the continuum, we want folks available on weekends to do that work both on the payer and on the hospital side. Thank you.
DEVAUX - Thank you so much for your testimony. Are there any other individuals that wanted to testify today? If not that brings us to the close of our meeting today. I wanna thank those who provided the public testimony this afternoon, as well as the HPC commissioners, Chair Friedman, Chair Lawn, and members of the Joint Committee on Healthcare Financing for participating in today's hearing. As always, it's10606 the dialogue and the discussion and the public testimony that really give us the insights that we need into how to set the benchmark for this year10616 and also implications for the future.10618 The HPC board will meet on Thursday, April 17 to discuss the findings presented at today's hearing and vote to establish the health care cost growth benchmark for 2026. With that, I thank you all for your attendance and we will adjourn.