BE CAREFUL what you wish for.
After years of ever-increasing spending on health care that left policymakers struggling to contain costs, Massachusetts finally found the key to lowering spending on health care: a global pandemic.
Ironically, spending on health care declined by 2.4 percent in Massachusetts in 2020, an unprecedented drop that can be attributed to fewer people seeking care during the COVID-19 pandemic, according to a report released Monday by the Center for Health Information and Analysis.
Of course, a pandemic is not what policymakers had in mind when they searched for ways to contain health care costs, and the delays in seeking care have had myriad unwanted consequences for individuals and the health care system, including people getting sicker from untreated ailments.
“This is not how people planned to reduce spending,” said Ray Campbell, executive director of the Center for Health Information and Analysis. “If you could choose to reduce spending it wouldn’t be in this indiscriminate way.”
The 133-page annual report from CHIA provides the most comprehensive look yet at how the pandemic affected health care spending in the state.
Yet Campbell cautioned that because of the disruptions to the health care system in 2020, it is hard to draw conclusions about health care trends moving forward without looking at multiple years of data. “We think that more than any other year you really have to look past the four corners of our report to think about what it means and the implications of it,” he said. “You don’t want to draw a lot of conclusions from just the 2020 data because it was such an extraordinary year.”
Massachusetts historically has had some of the country’s highest health care spending. Before the pandemic, spending was steadily increasing each year, despite efforts by lawmakers and administration officials to limit the growth. Cost-cutting efforts over the last decade led state health policy officials to set a growth target of either 3.1 percent or 3.6 percent each year between 2013 and 2020, a measure the state has regularly exceeded.
Yet in 2020, the year when COVID-19 hit in March, total spending on health care in Massachusetts was $62.6 billion, or $8,912 per resident – which represents a drop of $0.4 billion or 2.4 percent compared to 2019. Spending dropped despite Massachusetts’ population growing by 2 percent during that time. It is the first time since CHIA started measuring eight years ago that health care spending decreased.
Spending on physician services dropped by 12 percent, spending on hospital outpatient services dropped by 11.1 percent, and hospital inpatient spending dropped by 1.8 percent.
A major reason was that between March 15 and May 18, 2020, Gov. Charlie Baker ordered hospitals to postpone nonessential, elective procedures in order to conserve personnel and resources for what was expected to be a surge of COVID patients. Even after procedures were allowed to resume, many patients feared going into a medical office because they did not want to catch COVID. For example, data in the report show that preventative screenings for a variety of diseases that required in-person visits were down in 2020. (Behavioral health follow-up visits actually increased, presumably because they could be done via telehealth.)
There was also a 14 percent reduction in days spent in nursing homes. The report attributes this to several factors, including COVID-related freezes on admissions, fewer people being discharged to nursing homes from hospital care, and many nursing home residents dying of COVID.
One area that did see an increase in spending was on prescription drugs, consistent with trends in prior years. This may also have been affected by COVID-related policies, which let people get a 90-day supply of drugs at once rather than the typical 30-day supply, and let patients renew prescriptions via telehealth.
The report also documented a significant shift in who paid for care. Between 2019 and 2020, the portion of health care spending paid by individuals with commercial insurance plans – through deductibles, co-pays, and the like – dropped by an unprecedented 17.2 percent. This is a break from past years, during which the amount individuals had been paying out of pocket for medical care had been steadily increasing. According to the report, the decline was driven by people using less health care and by mandates that required insurers to cover services like COVID tests and COVID treatment without copays.
There was also some migration of people off commercial plans and onto public plans like MassHealth, probably as people lost jobs and income. The number of people with private insurance coverage dropped by 2.6 percent between March 2019 and December 2020, to around 6.5 million, while the number of people with public insurance grew by 8 percent during that time, to 2.5 million.
Obviously, these shifts have financial implications not only for individuals but also for hospitals and insurers. The CHIA report found that hospitals finished the year earning a median profit of 2.6 percent, but only because of federal relief funding. Without that extra money, hospitals would have lost money in 2020.
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Insurers benefited from the lower use of medical care, ending the year with $85 million in money that was surplus or used for administrative expenses. Under federal and state law, some of the extra money must be returned to members over a three-year period. Health care premiums grew by 2.6 percent in 2020, but those premiums were set before COVID hit.
Amy Rosenthal, executive director of Health Care for All, a health care consumer advocacy group, said despite the unusual nature of 2020, there are several points in the report “that remain troubling for consumers.” These include the rise in prescription drug spending; the amount of money retained by insurers; and a continuing trend in enrollment in high-deductible health plans.
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