Hospitals and insurers are grappling with rising health care costs

Leaders of the state’s largest hospital systems and insurers wrestled Wednesday over how to manage rising health care costs at a time when historic staffing shortages threaten people’s access to care.

Dr. Ann Klibanski, CEO of Mass General Brigham, told the Massachusetts Health Policy Commission that hospitals are inundated with sick patients and there is a severe shortage of staff to care for them.

“We are actually at a tipping point and there is a risk that patient care will be compromised,” she said. “And I never thought I’d say this, but this is actually where we are.”

Klibanski said the current crisis is worse than the early days of the COVID pandemic because it has lasted so long and is not getting better.

She was among several health care leaders called to testify before the Health Policy Committee on Wednesday, in a discussion that exposed the tension between health care providers under multiple pressures and policymakers seeking to make health care more affordable for patients .

The commission set a statewide goal of holding health care spending growth to 3.6 percent annually. Hospitals or insurers that exceed this target may be forced to adopt a cost-cutting plan.

“In fact, we are at a critical point and there is a risk that patient care will be compromised. And I never thought I’d say this, but this is actually where we are.”

Mass General Brigham, the state’s largest and most expensive hospital system, is the only organization so far that has been required to follow such a plan because of its high costs. He promised to cut costs by $127.8 million a year, in part by lowering prices.

Health Policy Commission leaders say they need more power to hold the health care industry accountable for spending.

But Klibanski said hospitals are struggling with higher costs driven by inflation — and many are losing money. She said they should not be penalized for costs they cannot control.

“I’m really worried about what the benchmark means at this particularly fragile time. We’ve done a lot to make health care more affordable,” Klibanski said. “But this is a very dangerous time for patient care.”

Andrew Dreyfuss, CEO of the state’s largest health insurer, Blue Cross Blue Shield of Massachusetts, pushed back. He said he understands hospitals are facing pressures, but worries about building more costs into insurance premiums that are already rising.

“We also have to think about what are we going to do about accessibility?” he said. “Because I see some crisis looming in Massachusetts.

“On the one hand, we have hospitals that are under tremendous stress and pressure,” he said. “On the other hand, we have an inflationary environment and a potentially looming recession. We have businesses, especially small employers, that cannot afford rising health care costs.

The commission’s data shows that the prices of hospital services and prescription drugs have been rising for years, and the health care industry is consolidating.

These trends affect the costs that consumers and businesses pay. Annual family health insurance premiums, not including out-of-pocket costs, averaged $22,163 in Massachusetts last year, the commission said. And many people skip medical care because of the cost.

(Courtesy of Massachusetts Health Policy Commission)

Dr. Eric Dixon, CEO of UMass Memorial Health, said three factors drive up costs: administrative waste, drug prices and labor costs.

“If we don’t address these root causes, we’re not going to do anything about health care costs in this country or in the state,” Dixon told the committee.

Dr. Kevin Churchwell, CEO of Boston Children’s Hospital, said his institution is struggling to accommodate the growing number of young patients with mental illness and the increase in children with RSV and other respiratory illnesses.

“The system was not prepared for this,” he said. “The system was not staffed for this.”

Churchwell said the state needs to work with health care providers to manage the crisis.

“How do we walk, chew gum, throw a football, all at the same time? And how can the state help us with this? These are really complex questions,” he said.

Gov. Charlie Baker also addressed the committee and said the fundamentals of the health care payment system must change. Baker called for more investment in primary care and behavioral health to help people stay healthy and avoid costly procedures and hospital stays.

Baker twice proposed sweeping legislation to reallocate health care dollars by spending 30% more on primary care and behavioral health — but his plan failed in the legislature.

“Most of the money we spend is after people get sick,” Baker told reporters. “And we’re not doing, in my opinion, anywhere near enough to keep them healthy in the first place.”

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