A major driver of spending growth is pharmaceutical spending, which, net of rebates, increased by $1 billion or 10% from 2022 to 2023
BOSTON — The Massachusetts Health Policy Commission (HPC), in conjunction with the Legislature’s Joint Committee on Health Care Financing, held the Health Care Cost Growth Benchmark Hearing today, an annual hearing to assess performance against last year’s benchmark and consider the target for the next year (calendar year 2026).
The health care cost growth benchmark is the centerpiece of the state’s cost containment efforts. The benchmark provides a statewide target for the rate of growth of total health care expenditures (THCE), the annual sum of all health care expenditures in the Commonwealth from both private and public sources, calculated on a per person basis.
Ahead of the hearing, the Center for Health Information and Analysis (CHIA) issued its 2025 Annual Report on the Performance of the Massachusetts Health Care System, which focused on data through 2023 and examined trends in costs, coverage, and quality indicators to inform policymaking. CHIA found that THCE per capita exceeded the 2025 benchmark of 3.6%, increasing 8.6% from 2022 to 2023 and totaling $11,153 in average annual health care spending per Massachusetts resident.
These concerning health care cost growth trends were largely driven by rising pharmaceutical costs and higher spending in hospital outpatient departments. Pharmacy spending net of rebates increased by $1 billion (10%), partially driven by increased use of GLP-1 medications and growth in prices of prescription drugs. Other noteworthy drivers of spending growth include hospital stays, expanded utilization, and hospital price markups for infused drugs.
Additionally, while growth in each sector (commercial, MassHealth and Medicare) exceeded the benchmark in 2023, commercial spending has grown the fastest since 2019 and is responsible for more than three-fourths of spending over the benchmark since that year. Commercial spending grew 7.2% per person in 2023 after accounting for prescription drug rebates – more than three times the rate from 2012 to 2019.
“The Commonwealth’s world-class health care system is grappling with significant challenges. The wait for a new primary care visit is among the longest in the country, emergency department boarding is at an all-time high, and the cost of health care for a family is almost $30,000 a year,” said David Seltz, HPC Executive Director. “In the most recent year of data, the growth in health care spending exceeded the rate of growth in inflation, labor costs, and household income – exacerbating affordability concerns, particularly for working class households and small businesses.”
HPC Executive Director David Seltz continued, “Seen through this cost of living lens, it is clear that a renewed focus on affordability is needed. The state’s recent health care legislation provides new tools to address some of these alarming trends, including an increased focus on pharmacy costs, the consideration of affordability in the review of insurance premiums, and a new working group focused on improving access to primary care. Even so, a renewed, collective commitment to action to keep cost growth under the benchmark is needed to ensure a future where our high-quality health care system in Massachusetts is affordable, equitable, and accessible for all residents.”
Massachusetts Cost Trends: Key Datapoints
- Massachusetts exceeded the 3.6% benchmark in 2023 with per capita growth in total health care expenditures of 8.6%. Health care spending per resident has grown an average of 5.2% annually since 2019.
- Growth in each market segment (commercial, MassHealth and Medicare) exceeded the benchmark in 2023, but commercial spending has grown the fastest since 2019 and is responsible for 78% of spending over the benchmark since that year.
- Commercial spending per person increased 7.8% in 2023 and grew an average of 6.1% annually from 2019 to 2023. Hospital outpatient and pharmacy spending have had the biggest impact on spending growth from 2019 to 2023.
- Commercial pharmacy spending growth was partially driven by the increased use of GLP-1 medications. In 2023, 5.5% of all commercial prescription drug spending (net of rebates) was attributable to these medications. The increase in use of GLP-1 medications between 2022 and 2023 added 3 percentage points to commercial prescription drug spending growth (net) and 0.6 percentage points to overall commercial spending growth.
- In hospital outpatient settings, the biggest drivers were major surgeries, chemotherapy, and injections and infusions.
- As in prior years, spending growth largely reflected higher prices for care rather than more care received.
- Health insurer administrative costs have risen 29% since 2019. The increase in general administration from 2022 to 2023 adds 0.3% to premium growth.
Affordability Impacts
- Growth in commercial spending since 2019 has exceeded the rate of growth of inflation, labor costs, and income, and was double the rate of growth of household income for working class households.
- Massachusetts has among the highest costs of living in the U.S., and with the second highest commercial premiums in the country ($26,355 average annual family health insurance premium (including employer and employee contribution in 2023), costs of living exceed income for average families across the state.
- Including out of pocket spending, the average cost of health care for a Massachusetts family exceeded $29,000 in 2023.
- If premium growth continues at the current rate of 7% rather than at the benchmark rate of 3.6%, take home pay for an average Massachusetts family in 2030 would be reduced by $600 per month.
- As health care spending grows as a portion of household income, more and more families incur medical debt and avoid using needed care. These rates become particularly dire when health care premiums and out of pocket spending reach 25% of total income – a reality for 41% of Hispanic families and 26% of black families in Massachusetts faced in 2023 compared to 9% of white families.
- The percentage of commercially-insured Massachusetts residents enrolled in high-deductible plans increased from 19% to 45% from 2014 to 2023, and CHIA survey data shows that those with high-deductible plans are more likely to report having medical debt (19.5% vs. 11.6%).
- Health insurance coverage received through businesses with fewer than 50 employees has declined by half since 2010, suggesting increasingly unaffordable coverage, and small group premiums increased 7% in 2023.
The HPC Board will vote to set the 2026 benchmark at the board meeting on Thursday, April 17th. More information on the benchmark process is included in these FAQs and in this short explainer video. A recording of the hearing, public testimony details, and presentation materials are available on the HPC’s website.
