Prices biggest cause for rising health costs

IT’S THE PRICE, stupid.

That was the message delivered at the first day of annual state hearings on health care cost trends with experts and officials pointing the finger at pharmaceutical costs coupled with federal red tape in approving new drugs as key factors keeping Massachusetts from meeting spending goals

Health care spending in Massachusetts went up 4.1 percent in 2015, above the state benchmark of 3.6 percent set by the Health Policy Commission, but still below the 4.8 percent increase in 2014. Much of that hike was on drug expenditures, from higher cost-sharing to increased use of more expensive medications.

Gov. Charlie Baker, a former CEO of Harvard Pilgrim Health Care, said one way to slow those cost increases is faster approval of generic drugs. He pointed a finger at the federal Food and Drug Administration, saying there is a nearly four-year backlog on applications for manufacturing generic alternatives to drugs that have been in use for 17 years.

“There’s a 47-month median on approval, which means it’s a failure on both ends,” said Baker, the keynote speaker for the commission’s hearing at Suffolk University Law School. “How could it possibly take four years to decide whether or not somebody’s generic application for a drug is the same chemical composition as something that’s been in the market for more than a decade?” He said generic drugs account for 70 percent of all prescriptions and 50 percent of prescription spending.

Baker said cost transparency is hindered by the lack of consistent data, requiring a Herculean effort by consumers trying to determine costs before rather than after the fact. He said even he can be overwhelmed by the jargon of insiders on the issue.

“Usually, I come away more confused than when I started, and I pretend I know something about this stuff,” he said.

Meeting with reporters afterward, Baker said everyone – industry and public officials – has to do a better job of making information more accessible if there’s any hope of creating informed consumers, which in turn will tamp down costs.

“I wouldn’t have brought it up as an issue if thought anyone was doing it well,” Baker said when asked for an example of someone in the state who is making information accessible. “I think much of the data is serving the policy and research community and not so much the person using the health care system themselves. There are a lot of other states that are a lot further down the road than ourselves.”

State Rep. Jeffrey Sanchez, House chair of the Legislature’s Joint Committee on Health Care Financing, said the increased costs hit low-income and minorities disproportionately because it’s a bigger bite out of their paycheck.

“We need to make sure that we work on solutions that make a difference to people,” Sanchez said. “Pharmacy expenditures continue to grow at a substantial rate, accounting for one-third of growth of overall medical spending.”

The annual report by the Center for Health Information and Analysis presented at the hearing showed overall health care spending in Massachusetts hit $57.4 billion in 2015, an average of $8,441 per person in the state. Drug spending totaled $8.1 billion, accounting for 15 percent of the total, and represented 36 percent of the $2.1 billion in spending growth.

The report showed premiums continued to rise faster than inflation, while cost-sharing also rose 4.4 percent, with one in five private insurance members enrolled in high deductible plans. The report said overall trends were kept somewhat in check by an influx of newly insured residents, most of whom enrolled in lower-premium plans.

While the gap has closed, the Health Policy Commission report said Massachusetts residents continued to use emergency services at a higher rate than anywhere else in the nation. And the commission found that the state’s readmission rate for Medicare patients remains near the bottom nationally, ranked 43^rd, meaning lots of patients return to hospitals within weeks of being discharged.

The commission’s report showed little difference in costs between income groups, with those earning $25 an hour or less paying an average of $489 a month in premium for single coverage, while people in higher earners paid $539 a month. Out-of-pocket costs were about even but the impact was greater on those earning less.

“Costs are more affordable to those at the top,” said Dr. David Auerbach, director of research and cost trends for the Health Policy Commission. “Employer premiums are not taxed and that tends to help the guys in higher wages.”

Dr. Robert Berenson, of the Urban Institute in Washington, DC, citing numerous studies, said prices are the reason the United States has the highest health care spending in the world, whether measured by per capita spending or by percent of Gross Domestic Product. He said while many spotlight hospital consolidation as a major reason for provider price increases, that is just a minor issue. He said other factors such as reputation, geography, and leveraging “monopoly” services have a greater impact on the increase in prices.

A panel of health plan executives said one way to rein in costs was to embrace technology, such as greater use of telemedicine and telepsychiatry to cut down on costly office visits. According to the health trends report, 91 percent of the state’s health plans pay for telemedicine consultations but only 82 percent pay for telepsychiatric services such as drug and alcohol, mental, and behavioral counseling.

But the biggest bogeyman cited by those who testified was pharmaceutical companies and their pursuit of profits. The health plan executives all pointed to the toll higher drug prices is taking on their ability to contain costs. While acknowledging the role federal officials and lawmakers would have to take to tamp down costs while encouraging innovation, commission chairman Stuart Altman said he was “tired” of watching drug prices spiral, and he wondered what could be done at the state level to make changes.

“We want to put the spotlight on gougers, we need to hold them accountable,” said Eric Schultz, CEO of Harvard Pilgrim. “Don’t let them hide under rebates or trends. We need to negotiate payment for value.”