How Connecticut Is Moving to Control Health Care Costs

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In January, Connecticut Governor Ned Lamont issued an executive order that requires the state to develop an annual health care cost growth benchmark, which will hold insurers, hospitals, and other health care providers to a fixed rate of cost growth. The order also calls for increasing the state’s investment in primary care services. These actions aim to reduce costs for individuals, employers, and the state—and help ensure every resident can secure affordable, high-quality health care.

Unsustainable Cost Growth

Data show that health care costs in our state are rising much faster than wages. Over the past 15 years, families in Connecticut saw the cost of health care rise by 77% while median wages only went up by 21%. The cost of employer-sponsored coverage grew 17% in five years, translating into higher out-of-pocket costs. The average family could buy a compact car for what they spend on their health insurance coverage in one year.

The Office of Health Strategy and the Office of the State Comptroller recently released a self-sufficiency report that underscores these affordability challenges for employers and individuals.  That report indicates that the amount needed to meet basic needs such as health care, housing, transportation, and food increased faster than median earnings between 2005 and 2019 in all Connecticut cities and towns.

Market Dysfunction

In Connecticut, the rate at which people use health care services has been relatively flat or dropped while costs have continued to rise, which suggests health care prices are responsible for rising costs. The Health Care Cost Institute’s Health Care Cost and Utilization Report shows that between 2014 and 2018, prices increased by 14.9% while utilization increased by only 2.5%. And while outpatient, prescription drug, and professional (clinician) services grew at about the same rate as the national average, inpatient costs rose by 14.3%, higher than the national average in that same time frame.

The Health Care Cost and Utilization Report also found that prices are the primary driver of increased spending in employer-sponsored health plans in the state. The growth in these prices and overall costs are leading employers to abandon the small-group insurance market in Connecticut for stop-loss coverage options, or self-funded options with predictable costs and protections against high cost claims.

The state budget is also affected by high-cost claims in the state employee plan, which has triggered ambitious cost-savings efforts. These include contracting with health providers to pay based on episodes of care rather than paying for single health services, covering care provided by high-quality/lower-cost providers, and tiering generic drugs to encourage the use of lower-cost generics, among other strategies.

Where Do the Health Care Dollars Go?

Over the past five years, Connecticut has been working toward improving its primary care delivery system and developing new provider payment approaches as part of an effort to lower total health care spending and improve the quality of clinical care and care experience while addressing provider burden. For example, as part of the Center for Medicare and Medicaid Innovation’s State Innovation Models (SIM) Initiative, Connecticut supported the design of the state’s first Medicaid shared savings model and developed approaches to embedding pharmacists in primary care practices.

Still, results from multiple studies, including those undertaken as part of SIM, show that Connecticut spends just 5% of its total health care expenditures on primary care services. While the state’s Medicaid program spends a higher proportion on primary care, the realization that such a small fraction of our health care dollars goes to primary care for the 80% of our population covered by individual or group coverage is a wake-up call. Increasing spending on primary care will help us increase access to services, cut into unnecessary price growth, and support a solid primary care workforce.

A Step Toward Health Care Cost Control

To learn about other states’ approaches to containing health care costs, we in Connecticut worked with colleagues in Massachusetts, Delaware, Rhode Island, and Oregon, as well as national experts. A bipartisan work group made up of staff from Governor Lamont’s office, the Office of Health Strategy, and legislative leaders then collaborated on our state’s approach for nearly a year, holding a public forum in November.

Gov. Lamont’s Executive Order No. 5 reflects the lessons gathered from other states, stakeholders, and the public. Announced with bipartisan support, the order requires the Executive Director of the Office of Health Strategy to:

  • develop an annual health care cost growth benchmark by December 2020 for calendar years 2021–2025
  • set targets for increased primary care spending as a percentage of total health care spending to reach 10% by 2025
  • develop quality benchmarks across all public and private payers beginning CY2022, including clinical quality measures, over/under utilization measures, and patient safety measures
  • monitor and report annually on healthcare spending growth across public and private payers
  • convene a Cost Benchmark Technical Advisory Team within 30 days
  • monitor accountable care organizations and the adoption of alternative payment models.

Governor Lamont also introduced legislation to codify the order, ensure data collection, public hearings, and public reporting, and to provide levers such as performance improvement plans to ensure cost growth remains within a reasonable rate of growth.

The executive order and the legislation are the first major efforts to rein in cost growth across a broad swath of an industry that also provides an economic base to the state. Developing a meaningful benchmark while engaging a multi-stakeholder advisory board with varied priorities will require a solid and trusted governance process.

As a result, we cannot solve the rate of cost growth challenges we face with a snap of our fingers. But the unprecedented level of transparency and oversight, along with the support of employer groups and other stakeholders, holds long-term promise for controlling the rate of cost growth in a sustainable way. The benchmark and primary care targets also give us the incentive to design care delivery and payment models or other initiatives that might otherwise be delayed or avoided.

Connecticut residents and employers routinely rank our state high for our quality of life, but to keep our quality of life high, we must tackle the growth of health care costs while ensuring high-value, high-quality care. With Executive Order Number 5, we are on our way.

Victoria Veltri is the executive director of the State of Connecticut Office of Health Strategy