MASSACHUSETTS HAS LONG prided itself on having one of the nation’s premier health care systems. Our hospitals are renowned, our physicians are among the best in the world, and our commitment to expanding coverage has served as a model for the country. Yet for many residents and employers, care is increasingly unaffordable and out of reach.
The numbers tell a troubling story. According to the Massachusetts Health Policy Commission, health care costs in the Commonwealth have risen significantly faster than inflation and have outpaced growth in median household income since 2019. Hospital spending alone accounts for 43 percent of total health care spending, and Massachusetts hospitals charge some of the highest prices in the nation.
There is also unreasonable variation in Massachusetts hospital prices; prices for inpatient stays at the most expensive facilities are more than double prices for the same services at the least expensive facilities, and prices for lab tests and other routine outpatient services vary as much as 5:1 across hospitals.
To address the growing affordability crisis, Massachusetts must look at how to control hospital costs while maintaining the high-quality care that has long defined our state’s health care system.
While we like to think of our health care system as being the vanguard, we are failing badly when it comes to health care affordability. Other states have shown that solutions exist.
Several states, including Rhode Island, Vermont, Indiana, California, and Delaware have successfully adopted policy reforms designed to slow the growth of hospital spending through hospital price caps, also called reference-based pricing, or through hospital price growth caps.
Rhode Island offers a particularly compelling example.
Its affordability standards, established in 2010, cap annual hospital price increases at one percentage point above inflation. The results have been significant. Between 2011 and 2019, following implementation of the policy, underlying health care costs increased by just $457 per capita, roughly half the $931 increase experienced in Massachusetts during the same period.
Hospital revenue growth remained substantially lower, while care remained high-quality and accessible. Recent evaluations of the standards have further shown substantial reductions in fully insured premiums relative to comparison states. Rhode Island hospitals responded by slowing growth of their costs, while Massachusetts hospital costs continued to grow in parallel to high price growth.
The lesson is straightforward: When hospital prices rise unchecked, health care spending growth follows. When policymakers establish reasonable guardrails, hospital administrators are incented to rein in costs while maintaining access to care.
Massachusetts should move quickly to develop similar approaches. Policymakers should prioritize hospital pricing reforms, transparency requirements, and the adoption of innovative payment models that reward value rather than volume.
We are proud that Massachusetts is home to many of the best hospitals in the world. The goal is not to diminish them, but to ensure residents can continue to access the world-class care they provide – in addition to managing other driving forces behind the affordability crisis, like rising prescription drug prices.
The challenge before us is not a lack of ideas; it is whether we have the political will to turn those ideas into responsive action.
Massachusetts is recognized for leading the nation in health care reform. But leadership requires more than acknowledging the problem. It requires implementing practical, measurable solutions that ensure patients receive high-quality care at a price families, employers, and taxpayers can afford.
The Commonwealth’s health care system is too important, and the affordability crisis too severe, to continue to accept the status quo.
Eileen McAnneny is president and CEO of the Employer Coalition on Health. Michael Bailit is president of Bailit Health.
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