Ensuring Health Care Cost Growth Targets Promote Health Equity

Focus Area:
Sustainable Health Care Costs
Health Equity Peterson-Milbank Program for Sustainable Health Care Costs

States are increasingly turning to cost growth targets as a strategy for monitoring and slowing unsustainable health care cost growth. These states work with health insurers, providers, consumers, and other stakeholders to set annual targets for statewide health care cost growth to help ensure costs don’t rise faster than the economy, state revenues or wages. As they engage in this work, however, states must ensure that their efforts to slow cost growth do not exacerbate but instead address the deep and well-documented inequities in the health care system.

These inequities are reflected in persistent health disparities and elevated disease burden for certain populations. Inequities can occur across a broad range of dimensions, including age, disability status, gender identity, geography, income, insurance status, language, race and ethnicity, sexual orientation, and other social risk factors. Inequities often result in distorted health care spending (e.g., lower health care spending could be attributed to certain populations skipping needed care for a chronic condition due to cost or access challenges), and an imbalanced distribution of resources. They can also lead to unequal access to health care and disparities in quality of care.

There are various points in the cost growth target implementation process when states can consider or incorporate health equity so they can measure and address inequities. Approaches to considering equity during the design, analysis and reporting process are discussed below.


  • Population being measured: Cost growth targets traditionally measure total medical expenses for state residents for the commercial fully and self-insured, Medicare, and Medicaid populations, but states can consider including additional populations to make their cost growth target analysis more comprehensive. Examples of additional populations states could consider include those in the Correctional Health System, the Veterans Health Administration, TRICARE, and the Indian Health Service. States can include these additional populations to help them better understand the costs associated with the inequitable health care the populations have historically received. The disadvantages of including these additional populations are that they represent a small percentage of spending, data are often not fully comparable to data collected from traditional payers, it is not feasible to perform cost driver analyses to understand the reasons for spending growth because the data are not sufficiently detailed, and there are limited state-specific levers to impact spending.
  • Representation in governing and/or advisory bodies: Minoritized populations are not always represented in stakeholder groups that inform policymaking. States should ensure the governing and/or advisory bodies that develop recommendations on the cost growth target, review findings, and advise on public reports and policy initiatives are representative of the state’s demographics. Creating representative governing bodies ensures that all perspectives are considered during decision-making and can foster trust with the community. Creating inclusive groups may require reaching out to and building relationships with communities that have historically been excluded from policymaking. When facilitating advisory bodies, states should be sure to engage all members equally.


  • Cost driver analyses: When states are performing drill down analyses to identify drivers of high cost and cost growth, likely using all-payer claims databases, there are two types of analyses that can identify inequities. First, states should prioritize analyses that focus on variation in utilization and cost by population. Such analyses may help identify whether lower spending for a certain population is tied to that population not receiving necessary care, the locations at which they obtain care, and/or other considerations. Second, states should analyze price disparities among providers by geography (e.g., urban, rural), population (e.g., safety net provider), and affiliation (e.g., system-owned, independent).
  • Monitoring for negative impacts: While there is no evidence of negative consequences of cost growth targets, states should nonetheless monitor to ensure lower spending growth doesn’t lead to a harmful impact on minoritized populations. For example, Connecticut’s Cost Growth Benchmark Program includes a Cost Growth Benchmark Unintended Consequences Measurement Plan. Potential negative impacts include deterioration in access to and/or quality of health care services, underutilization of health care services, and shifting of cost burdens to consumers through higher out-of-pocket spending and premiums. States can watch out for these negative impacts by monitoring preventive and chronic care performance measures; monitoring anti-stinting measures (i.e., measures that assess whether payers and providers limit or deny care for populations with greater health needs); fielding member experience surveys to assess patient perception of underutilization; and monitoring out-of-pocket spending using all-payer claims databases and the Census Bureau’s Current Population Survey. Whenever possible, states should stratify the results of these monitoring strategies using health equity data, which can include disability status, gender identity, geography (e.g., rurality, zip code), income, insurance status, language, race and ethnicity, sexual orientation, and other social risk factors.
  • Defining and measuring affordability: Given that high and rising health care costs are felt most acutely by people of lower socioeconomic status, states can consider incorporating household level affordability into their cost growth target programs. States can include growth in median household income and wages into the formula for setting the cost growth target. States can also establish household-level affordability targets, including out-of-pocket and premium growth targets, that are complementary to the cost growth target to limit cost growth more actively for consumers.


  • Using appropriate language: States should strive to give context to findings and use language that does not put the onus of addressing a problem on a specific subpopulation. One way to do this is to highlight the structural barriers faced by subpopulations that may lead to higher or lower costs. When presenting on structural barriers and health inequities, states should use the appropriate language. Two resources states can reference are the Massachusetts Health Policy Commission’s “Style Guide: Practices and Resources for Bringing an Equity Focus to HPC Work Products” and State Health & Value Strategies’ “Health Equity Language Guide for State Officials.”
  • Contextualizing performance: When reporting on cost growth target performance, states should contextualize spending when there are equity considerations. Cost growth at the payer and provider level may be driven by efforts to improve service coverage or access. For example, a provider may exceed the cost growth target if they are making a concerted effort to decrease underutilization among a historically marginalized population. Likewise, cost growth at the market level could potentially be driven by increases in reimbursement for safety net providers. Furthermore, states should highlight when cost growth is dependent on the unique characteristics of the market’s population. For example, Medicaid per capita spending is not always comparable with other markets because it covers unique services (e.g., long-term care) and populations (e.g., persons with developmental disabilities).

In addition to cost growth target programs, states can consider complementary policies to promote health equity, such as quality and health equity targets. States can use quality targets to motivate maintenance of or improvement in health care processes and outcomes alongside a cost growth target. To incorporate an equity lens into this policy, states can stratify performance using health equity data. They can then implement health equity targets that aim to reduce disparities in performance between two populations and/or improve performance for a specific subpopulation with known disparities.

Cost growth targets provide a more complete, system-wide perspective on health care costs. States, however, face a moral imperative to ensure that cost growth targets do not perpetuate or exacerbate the persistent known inequities in the health care system. These strategies present several ways for states to adopt a health equity lens in the development, assessment, and reporting of cost growth targets with the aim of making the health care system both more affordable and more equitable.