Total Health Care Expenditures, Total Medical Expenses and Alternative Payment Methods

Key Annual Report THCE Metric

Key Annual Report TME Data

Key Annual Report APM Data

CHIA monitors health care spending by public and private payers in Massachusetts using three key metrics: Total Health Care Expenditures (THCE), Total Medical Expenses (TME), and alternative payment methods (APMs). These measures are all reported in CHIA's Annual Report on the Performance of the Massachusetts Health Care System.

Total Health Care Expenditures (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, co-payments, and co-insurance

• The net cost of private health insurance.

Total Medical Expenses (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 and 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) are methods of payment used by health care payers to reimburse health care providers not solely based on a fee-for-service (FFS) basis. APMs function so that the financial risk associated with both the occurrence of medical conditions as well as the management of those conditions is shifted from payers to providers to incentivize efficiency and quality of health care delivery. APMs include payment mechanisms such as global payments, limited budgets, and bundled payments.

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 THCE, TME, and APM Findings from CHIA's 2019 Annual Report on the Performance of the Massachusetts Health Care System

• Total health care expenditures grew 3.1% to $8,827 per capita from 2017 to 2018.

• Total commercial and Medicare spending grew from 2017 to 2018, while MassHealth spending was flat.

• Hospital services, physician, and pharmacy expenditures continued to be the largest service categories of THCE spending.

• Commercial APM adoption declined in 2018.