Cost report is latest piece of evidence of system under heavy strain
STATE HOUSE, BOSTON, MARCH 13, 2025…..Warning that the state’s health care system is “falling apart,” the Senate’s point person on the topic said Thursday that she wants to rein in for-profit and private equity entities as well as give regulators more muscle to control rising costs.
Policymakers and health care industry leaders gathered for an annual hearing about the so-called benchmark state government sets as a goal for reasonable health care spending growth, where they unpacked new data that showed health care expenses surged at a near-record rate in 2023.
Kicking off the event, Sen. Cindy Friedman did not mince words.
“We hear about a system in crisis. We’re beyond that. It is now falling apart,” said Friedman, who has co-chaired the Legislature’s Health Care Financing Committee since 2019. “It is imperative for us to dig into which services and entities are siphoning the most health care dollars and returning the least value, as well as those that offer more value at a lower cost. It’s time for the state, including the administration and Legislature, to take bold steps to rein in costs and refocus the health care system on the patient and the delivery of quality care to those patients, rather than money and profit.”
The Center for Health Information and Analysis reported Wednesday that health care spending in Massachusetts grew at an 8.6% rate from 2022 to 2023, more than twice the 3.6% benchmark and the second-highest annual increase since state watchdogs began tracking the data a decade ago.
CHIA researchers dubbed the 2023 growth rate “unsustainable,” and said the major drivers were increased pharmacy spending and new MassHealth supplemental payments to hospitals.
After hearing several hours of testimony about the data and calls for change from major industry stakeholders, Friedman said she expects the Senate to “take another pass” at some of the topics, like private equity, that featured in health care debates last term.
“We still have this huge issue of private equity and for-profit in health care, and it’s driving a lot of this, a lot of these costs,” she told the News Service. “We’re going to do that, and then we’re going to attack primary care again and the prior authorization pieces, which is really driving people out of the business because they can’t provide the care that they trained for.”
“We’re going to go back a second time, a third time, and push those because we really believe that they will have a major impact on care and quality,” she added.
The Legislature and Gov. Maura Healey late last year enacted a pair of new laws, one aimed at reining in prescription drug costs and the other designed to boost hospital financial oversight. (CHIA’s latest annual spending report only covers 2023, so the new laws have not yet affected the topline data.)
Beacon Hill created the benchmark process in a 2012 cost containment law. The figure is a target for spending growth, not a cap, and regulators do not automatically impose penalties when costs surpass the benchmark.
Friedman, an Arlington Democrat, said the data produced each year since the process started have “gotten better and better.”
“There’s information in this report that is invaluable,” she said of CHIA’s latest findings. “I think what we haven’t done is give the [Health Policy Commission] — and, to some extent, the Division of Insurance — the tools to start to bring those costs down. I think that’s really the next step that we have to look at very carefully: how can we empower them in the work that they do to help us bring those costs down?”
Leaders of the HPC have long asked Beacon Hill to give the agency more teeth and muscle to enforce spending growth limits.
Friedman’s counterpart in the House, Rep. John Lawn, similarly said Massachusetts is “at a pivotal moment in health care,” especially as fears swirl about the Trump administration cutting federal funding for Medicaid or other programs.
“The health care sector is facing immense uncertainty and frustration, locally and nationally. We are grappling with the Trump administration’s fiscal policy upheaval. We may reasonably expect that Massachusetts will see a reduction in funding for critical health care services, a blow to our residents and our economy,” Lawn, a Watertown Democrat, said at the hearing. “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.”
CHIA found that the statewide average premium increased 6 percent in 2023 to $631 per member per month.
Researchers said pharmaceutical spending, new MassHealth supplemental payments to hospitals, and care provided in hospital outpatient settings — which are generally less expensive than inpatient admissions but pricier than physician offices — were major drivers of the overall growth.
Several hearing attendees urged lawmakers and the HPC to train their focus on the pharmaceutical industry. Alex Sheff, senior policy and government relations director at Health Care for All, said keeping spending growth close to the benchmark “has to start with reining in prescription drug costs.”
“Without cost constraints on providers in the pharmaceutical industry, health plans cannot make health care more affordable for your constituents,” added Lora Pellegrini, president of the Massachusetts Association of Health Plans group that represents insurers.
No one from the pharmaceutical sector spoke at Thursday’s hearing, but Stami Williams, director for public affairs at industry group PhRMA, said in a statement that CHIA’s report “doesn’t paint a complete picture.”
“There are multiple factors that can influence spending on medicines that this report overlooks, including the number of medicines prescribed to patients,” Williams said. “We will continue to offer solutions to lawmakers that lower costs at the pharmacy and protect access to the medicines patients need.”
Friedman noted early in the proceedings that different figures across the health care landscape tend to point fingers at one another.
“I have heard from providers and 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 [pharmacy benefit managers] 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,” Friedman said.
“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 health care dollars are really going if everyone says they do not have a big enough slice of the pie,” she added.
The sharp rise in health care spending came as Bay Staters struggled with rising pocketbook pressure on many other fronts. CHIA analysts crunched data from several sources, and found that the 9.7% growth in wages and salaries in Massachusetts from 2021 to 2023 lagged not only cost changes for health care premiums but also the growth in center-based child care prices (15.8%), New England housing expenses (19%) and New England food expenses (26.8%) in the same span.
Eileen McAnneny, president of the Employer Coalition of Health, urged policymakers to weigh health care costs “in the broader context” of other factors affecting businesses, including energy prices and unemployment benefits.
“I just ask: we can’t accept these double digit health care costs year over year and then wring our hands when health care costs go up,” McAnneny said. We have to actually do something, and I would suggest with urgency.”
