THCE, TME, and APM

Total Health Care Expenditures (THCE)

THCE compares actual health care cost growth with the growth benchmark set by the Health Policy Commission. This measure of total health care spending in the Commonwealth includes:

• All categories of medical expenses paid to providers
• All non-claims-related payments to providers, such as performance payments
• Member cost-sharing payments to providers, such as deductibles, copayments, and coinsurance
• The net cost of private health insurance

Total Medical Expenses (TME)

TME represents the full amount paid to providers for health care services delivered to a payer’s member population, expressed on a per member per month (PMPM) basis. TME includes the amounts paid by the payer as well as patient cost-sharing and covers all categories of medical expenses and all non-claims-related payments to providers, including provider performance payments.

Alternative Payment Methods (APMs)

APMs are payment arrangements in which some of the financial risk associated with delivering medical care and managing health conditions is shifted from payers to providers. Generally, APMs are intended to give providers new incentives to control overall costs (e.g., reduce unnecessary services and provide services in the most appropriate setting) while maintaining or improving quality. The most common APMs in Massachusetts are global budgets, which establish spending targets for a comprehensive set of health care services to be delivered to a specified population.

While fee-for-service remains the dominant type of payment method utilized in the Commonwealth, APMs have been implemented in recent years among a cross-section of the commercial, Medicaid, and Medicare populations.

Key Findings

• THCE per capita was $11,663, an increase of 5.7%—above the health care cost growth benchmark but a deceleration from the prior year’s growth of 8.6%. Overall THCE increased $5.2 billion from 2023.
• Pharmacy spending continued to drive THCE spending growth in 2024, increasing by $1.5 billion (9.8%) over 2023. After adjusting for rebates, pharmacy spending increased by $1.1 billion, accounting for 23.2% of overall net THCE growth.
• Hospital outpatient services was the second-largest source of THCE spending growth (21.8% of overall net THCE growth) in 2024, increasing $1.1 billion. An estimated one-fifth of hospital outpatient spending was for provider-administered drugs.
• From 2023 to 2024, commercial spending grew 10.8% (8.5% PMPM), Medicare 5.1% (3.4% PMPM), and MassHealth 5.6% (20.4% PMPM). Enrollment in the commercial market increased for the first time since the pandemic, growing by 2.2%. Medicare enrollment increased at 1.7%. MassHealth enrollment decreased 12.3% due to redeterminations.
• HSA TME per member per month spending continued to increase in 2024 for most commercial payers, with 7 of 11 payers reporting trends above the 3.6% health care cost growth benchmark.
• In 2024, APM adoption declined slightly across commercial and Medicare Advantage markets while continuing to increase for MassHealth ACPP/MCO contracts.