The HPC Board may modify the statutory annual health care cost growth benchmark pursuant to a public hearing process and engagement with the Legislature.
Chapter 58 of the Acts of 2006 was passed by the Massachusetts state legislature to provide near universal health insurance coverage for state residents. Today, Massachusetts has the highest rate of insurance coverage in the nation.
Following the passage of Chapter 58, health care policy efforts in Massachusetts focused on enhancing the transparency of the state’s health care system and identifying health care cost drivers. While Massachusetts is a national leader in innovative and high-quality health care, it is also among the states with the highest health care spending. The rapid rate of growth in health care spending has contributed to a crowding-out effect for households, businesses, and government, reducing resources available to spend on other priorities.
Given these trends, the state enacted Chapter 224 of the Acts of 2012 with the ambitious goal of bringing health care spending growth in line with growth in the state’s overall economy by establishing the health care cost growth benchmark, a statewide target for the rate of growth of total health care expenditures.
The HPC Board of Commissioners sets the benchmark for the following calendar year annually between January 15 (when the potential gross state product is established) and April 15. The Center for Health Information and Analysis (CHIA) reports annually on the Commonwealth’s performance against the benchmark.
What is the Measure of Total Health Care Expenditures?
Total health care expenditures (THCE) is a per-capita measure of total state health care spending growth. THCE includes three components:
- All medical expenses paid to providers by private and public payers, including Medicare and Medicaid (MassHealth);
- All patient cost-sharing amounts (for example, deductibles and co-payments); and
- The net cost of private insurance (for example, administrative expenses and operating margins for commercial payers).
THCE is calculated on a per capita basis to control for increases in health care spending due to population growth. The inclusion of public and private payers in the measure is intended to reduce the likelihood of “cost-shifting” among different payer types and ensure that gains are shared with both public and private purchasers.
The Commonwealth’s THCE is measured annually by the Center for Health Information and Analysis (CHIA). This data is then used to measure the state’s health care expenditures against growth of the Commonwealth’s economy.
Measuring Performance Against the Health Care Cost Growth Benchmark
The health care cost growth benchmark is set prospectively for the upcoming calendar year, while actual performance is measured retrospectively.
Chapter 224 defines three multi-year targets for THCE growth:
- From 2013 through 2017, the benchmark had to be set equal to the growth rate of potential gross state product (PGSP), or 3.6%.
- From 2018 through 2022, the HPC had to set the benchmark equal to PGSP (3.6%) minus 0.5% (or 3.1% in 2018). During this time period, the HPC had limited authority to modify the benchmark back up to PGSP if it determined, after consideration of data, information, and testimony, that an adjustment was reasonably warranted. Learn more on the process of establishing the 2018 benchmark.
- For 2023 and beyond, the benchmark will be established by law at a default rate of PGSP, though the HPC Board can modify to any amount deemed reasonable, subject to legislative review.
Health Care Cost Growth Benchmark FAQs