Business & Tech

Mass. makes progress in containing health care spending

The growth of health care spending moderated in Massachusetts last year, the state reported Wednesday, a sign that its ground-breaking experiment to rein in medical costs is making tentative progress.

Outlays rose 3.9 percent, a figure that is down from a 4.2 percent increase in 2014 and that matches the state’s economic growth, according to the new data. Spending most likely rose at a slower pace here than nationally, a change from years past — and an accomplishment given that Massachusetts has some of the most expensive hospitals and doctors in the country.

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While the numbers from the state’s Center for Health Information and Analysis show some success on the spending front, cost control remains a significant challenge at a time when more people are gaining insurance coverage and prescription drug prices are rising. Growth in expenditures in 2015 exceeded the state’s goal of 3.6 percent for the second straight year. Moreover, health care spending rose much faster than the state’s 0.6 inflation rate.

Massachusetts, which mandated health insurance coverage for all residents in a landmark 2006 law, is also considered a leader for monitoring medical costs and encouraging insurers and hospitals to adopt new business models designed to provide more cost-effective care.

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“We’re really the only state that is trying to do something about total health care spending,” said Stuart Altman, chairman of the Health Policy Commission, a state watchdog agency that tracks health costs.

All together, Massachusetts spent $57 billion on health care in 2015, or $8,424 per resident, according to the report. That includes spending through private health insurance as well as the big government programs Medicare and Medicaid.

Nationwide, the report says, health spending was projected to increase 4.6 percent last year.

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A good sign, industry experts said, is that the spending growth in Massachusetts kept pace with the state’s economic growth. That means health care expenditures didn’t account for a larger proportion of total output of goods and services.

Altman, a health economist, said he was “pleased but cautious” about the report’s findings. “I still believe there’s a real potential for [medical] inflation to rear its head again,” he said, “but right now I give credit to the people who are running our delivery systems and the people running our insurance companies that they are sticking to the letter of the law.”

Higher prescription drug prices contributed to the growth in spending again last year. Spending on medicines jumped 10.1 percent in 2015 after rising 13.5 percent the previous year. Many pharmaceutical companies have implemented substantial price hikes in recent years for both brand-name and generic drugs. Most recently, the drug company Mylan faced an outcry after it raised the price on its popular EpiPen, which treats allergic reactions.

“It’s unsustainable,” Lora Pellegrini, president of the Massachusetts Association of Health Plans, said about rising drug prices. “The health plans, providers, and pharmaceutical community all need to be held accountable.”

Robert K. Coughlin, president of the Massachusetts Biotechnology Council, a trade group, said it’s important to remember that drug companies often offer discounts and rebates to reduce the cost of medicines.

“As the report clearly points out, there is certainly more work to be done to get a truly accurate picture of the costs and value of innovative medicines, and we look forward to continuing the conversation,” Coughlin said in a statement.

The state’s largest insurers — Blue Cross Blue Shield of Massachusetts, Harvard Pilgrim Health Care, and Tufts Health Plan — all kept spending increases below the state benchmark. But large health care providers had mixed results, meeting the goal for some insurers but not for others.

The state Health Policy Commission can require organizations that exceed the benchmark to submit plans to curb spending and fine organizations that don’t comply with those plans. So far, it has not taken those steps.

Timothy F. Gens, executive vice president of the Massachusetts Hospital Association, said doctors and hospitals are working to become more efficient and control costs by, for example, monitoring patient care through technology and trying to prevent unnecessary hospital visits. New types of insurance contracts, which encourage doctors and hospitals to focus on quality of care over the amount of services they provide, are pushing such changes. But these so-called alternative payment models account for only 35 percent of the commercial health insurance market, the report found.

“When looking at costs, whether you’re looking at Massachusetts or the country, it’s a challenge, but I think we continue to make progress,” Gens said.

Meanwhile, spending on the state’s Medicaid program, called MassHealth, moderated last year after thousands of people who had received temporary coverage from the program moved over to commercial insurers. Spending on the program rose 4.6 percent, after a 17.9 percent spike the previous year. MassHealth covers more than one in four poor and low-income residents.

The report released Wednesday is the third to measure overall health spending, after a 2012 state law set a benchmark for containing spending. The same law established the Center for Health Information and Analysis and the Health Policy Commission, sister agencies that monitor the health care industry.

The figures are preliminary and could change as more data become available. The estimate for spending growth in 2014, for example, was revised from 4.8 percent to 4.2 percent.

Priyanka Dayal McCluskey can be reached at priyanka.mccluskey@
globe.com
. Follow her on Twitter @priyanka_dayal.
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