MMA forum explores health cost drivers, possible remedies

The MMA brought together a panel of experts in Wrentham on Sept. 30 to examine the aggressive growth in health care costs in Massachusetts and to explore strategies for slowing the escalation.

The consensus: there’s no silver bullet, given the complexity of the system, but a range of actions by all stakeholders — health care providers, insurers, employers, consumers, and state policy makers — could make a significant impact.

Lauren Peters, executive director of the Center for Health Information and Analysis, an independent state agency, set the stage by presenting data about the use and cost of health care in Massachusetts.

Key takeaways:
• Health care spending continues to outpace inflation in other sectors of the economy.
• Increases are driven by provider charges and drug prices, as well as changes in health care utilization.
• Cost increases are being borne by premium payers and members of health plans (via plan design changes and higher cost-sharing).

Total health care expenditures in Massachusetts increased by 8.6% from 2022 to 2023 — the second highest rate since CHIA was established in 2012 — to a total of $78.1 billion, or $11,153 per resident.

The CHIA data show a trend toward higher-deductible health insurance plans and higher-cost prescription drugs. Health insurance premiums and cost-sharing have been increasing faster than wages in recent years, putting pressure on consumers and employers.

Regarding utilization data from acute hospitals, Peters said individuals are tending to be sicker when they arrive, staying for longer, and needing higher-cost services and care.

Panelists weigh in
The trends found in CHIA’s data have significantly worsened since 2023 (the most recent year with complete data), according to a panel representing the Employer Coalition on Health, Blue Cross Blue Shield of Massachusetts, the Group Insurance Commission, and the MMA’s MIIA program.

“Unfortunately, we don’t see any significant cost abatement coming in the near future,” said Chris Bailey, director of MIIA’s Health Benefits Trust, which provides health insurance services to 160 cities and towns. “We expect challenges to go into 2026, 2027 and beyond.”

Paul Sweeney, a senior vice president at BCBS, said health insurance premiums rose by about 4% per year in the couple of years before the 2020 COVID pandemic, about 5.5% per year during the pandemic, about 6% per year in the post-COVID years of 2022 to 2024, and then shot up by about 12% for this year. Even so, the insurer had a “terrible, unprecedented financial year” last year, he said.

GIC Executive Director Matt Veno said costs increased by 11.7% this year for his quasi-independent state agency, which has more than 280,000 subscribers (state and local government employees) and 460,000 members.

“Yes, it’s a crisis,” he said. “Certainly a crisis for the GIC.”

Veno added that the GIC needed a $300 million subsidy from the state last year to balance its books — just to sustain the same level of service — which drew funds away from other shared priorities. This precarious balance, he said, underscores the collective interest in bending the health care cost curve.

Recent surveys show that health care ranks alongside housing and food as top affordability changes for residents. Massachusetts is renowned for the quality of its health care, and life sciences are a cornerstone of the state’s economy. But panel moderator Eileen McAnneny, executive director of the Employer Coalition on Health, said Massachusetts’ ranking as the third worst state for health care costs is contributing to outmigration to more affordable states. Another irony is that the cost of providing health insurance for employees is contributing to the fiscal instability of some hospitals and care providers.

The crisis is particularly challenging for municipalities due to tight budgets and strict revenue-raising limitations.

Panelists said there’s plenty of blame to go around, among drug makers, health care providers, insurers, consumers and policy makers.

GLP-1s, a class of medications primarily used to treat type 2 diabetes and obesity, came up frequently in the health cost conversation, due to their skyrocketing popularity and exorbitant cost.

Veno cited pharmaceuticals as a cost driver overall, but noted that GLP-1s accounted for 4% of total GIC expenditures last year, which translates to roughly one-third of the premium increase for the current year.

Some insurers are ceasing or reducing coverage for GLP-1s, while others are considering placing lifestyle change requirements on consumers in order to ensure a long-term health benefit from the costly prescription. Veno pointed out, however, that GLP-1s are a proven treatment for a chronic condition, and it’s “a slippery slope” to deny coverage for an effective drug simply due to its cost.

“Where are we going to look next?” he asked.

Panelists lamented the lack of price restraints for drug manufacturers. Veno said pharmaceutical costs have been steadily increasing “10% a year for many years, and now it’s accelerating even further, so that is definitely a concern.”

Possible solutions
Panelists said strategies employed in recent years to manage health insurance costs — network design, copay design, tiered access levels, and prescription drug coverage restrictions — have been largely tapped out.

“You can’t plan-design your way out of this,” Veno said, “even if you wanted to.”

Some strategies with promise include:
• Increasing market oversight and accountability for excessive spending
• Constraining provider prices, particularly highest-cost providers
• Establishing price controls on pharmaceuticals
• Dissuading consumers from seeking care from high-end providers, particularly for routine treatments
• Effectively incentivizing lifestyle changes that improve overall health, enhance the success of drug treatments when they’re needed, and reduce demand for health care
• Pressuring the state and federal governments, as major health system funders, to demand efficiencies and cost controls
• Pressuring providers to improve efficiency
• Persuading state leaders to pursue impactful policy solutions

McAnneny said the threat to the heart of the state’s economic health should unite stakeholders in pursuit of real solutions.

“These are systemic problems,” Veno said. “They need systemic solutions. In a lot of cases, those are policy solutions.”

“This isn’t going to be easy to solve,” Sweeney said. “We need to get uncomfortable. … We have to be considering things that we haven’t considered historically.”

Legal landscape
Attorney Timothy Zessin of KP Law discussed the legal landscape relative to municipal health insurance, particularly a 2012 law (Ch. 32B, secs. 21-23) that gave municipalities two options to manage costs: changing health plan design (e.g., copayments, deductibles and other cost-sharing features); or transferring employees to the GIC.

Zessin detailed the steps for adopting the local option and who needs to be involved. He said the law remains “an incredibly valuable tool for cities and towns.”

Closing thoughts
The forum generated strong engagement from nearly 250 local leaders who filled the room.

MMA Executive Director Adam Chapdelaine, who kicked off the day’s discussion, closed the forum with the following message: “Our commitment to you is that finding a pathway toward sustainable health care costs remains a top organizational priority for the MMA and MIIA. As we heard today, there are no easy fixes, but we will continue to engage with members and the range of stakeholders in the health care ecosystem to work toward meaningful solutions.”