Comparing and Monitoring State Health Care Spending Trends

October 31, 2017

Program:  Total Costs of Care

We have heard a lot about health care costs lately—and state health leaders and the public have many questions about them. Does my state spend more on health care than others? How much does spending vary based on who is paying? How has that spending changed over time and why?

Measurement activities continue at both the national and state level. Here are two recent updates:

Comparing Trends in Health Care Spending at the State Level

The CMS Office of the Actuary recently published updated comprehensive estimates of state health spending through 2014. These estimates are based on total health spending, not just state direct expenditures. It comes as no surprise that there is wide variation among states in their per capita health care expenditures, and overall health care spending increases have tempered in recent years. As Christopher Koller, president of the Milbank Memorial Fund, noted in a recent blog post, one of the interesting observations from the new data is that states that expanded coverage had slightly lower rates of total health care spending growth.

Following this national publication, two state-level organizations have published documents based on the new CMS data: the California Health Care Foundation offers several publications on the state-level data and the New York State Health Foundation’s report presents the data in simplified, easy-to-use formats.

Monitoring Health Spending Trends in Massachusetts

The Massachusetts Center for Health Information Analysis has published its 2017 annual report on Performance of the Massachusetts Health Care System. The report includes estimates of total health care expenditures for 2016; a breakdown of factors driving increases in health care spending by provider and payer, and from the consumers’ perspective; and alternative payment method adoption rates by payer and health care quality indicators.

According to this report:

  • Total health care expenditures in Massachusetts in 2016 grew by 2.8% compared to the prior year; this spending growth rate is below the state’s health care cost growth benchmark of 3.6% and represents slower growth compared to 2015.
  • Pharmacy and hospital outpatient spending were the biggest cost growth factors in 2016.
  • Adoption of alternative payment methods—that are expected to help curb health care cost growth—continues to increase across all payers.
  • Out-of-pocket costs for consumers continued to grow at a faster rate (4.4%) than average income and premiums.

At a recent public hearing focused on Massachusetts’ cost trends, research staff from the Health Policy Commission (HPC) presented a report using the CMS data updates, compared to state data, to show that the state’s rate of growth was fourth lowest in the nation between 2009 and 2014; the rate of spending increase has been consistently lower than the national average, particularly for commercial health insurance.

“Since the establishment of the HPC five years ago, the state, on average, has been below the cost growth benchmark as set forth in law,” noted the chair of the HPC in the report. “However, even with these positive trends, there continue to be areas of concern—and challenges ahead. Overall affordability remains an issue for our residents, businesses, and the state… and the HPC will continue to push the industry to find solutions to create a more transparent, accountable, and affordable health care system on behalf of consumers and businesses in Massachusetts.”

Said Rachel Block, program officer at the Fund, “States need good data to develop and monitor policy effects on health care costs, and they need to develop their own data analysis capacity to make this job easier. The national data are also very important because they provide context and a reliable way to compare spending trends.”