Three Federal Actions to Support State Efforts to Make Health Care More Affordable

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

Addressing health care cost growth requires a systemic view of our health system and its performance. However, gaps in health care spending data and limited capacity for measurement and analysis make it difficult to understand and act on what’s driving a growing affordability crisis in US health care.

States leading health care cost growth initiatives, including California and the six states supported by Peterson-Milbank Program for Sustainable Health Care Costs (as well as Massachusetts and Delaware) seek to address this challenge by better understanding health care cost growth. Their initiatives are designed to establish statewide health care cost growth targets, require payers to submit their health care spending data and meet the target, and then identify and implement solutions for addressing rising health care costs. However, US health policy operates through a federal, state, and private partnership, and further federal support is critical for states to build a sustained, holistic, and effective approach. In this blog post, we recommend three specific federal actions that can advance state-led initiatives to bend the health care cost curve.

1. Data policy: Require ERISA plans to submit standardized health spending data

States can collect aggregate data from health plans, including self-insured plans covered under the federal Employee Retirement Income Security Act (ERISA), to monitor their health care cost target performance. However, as a result of the U.S. Supreme Court’s 2015 Gobeille vs. Liberty Mutual decision, states may not require submission of individual claim data by self-insured plans to state claims databases. In many states, these plans cover more than 60% of the state’s commercial/employer-covered populations, and this segment is growing. Without this information, states do not have a complete picture of health care spending drivers. It is also important to engage these self-funded plans in the state’s policy process around containing cost growth, and contributing data is an important step in that engagement.

Recent federal legislation focused on standardizing state claims data collection to encourage more ERISA plan participation, but it stopped short of requiring that these plans do so. The U.S. Department of Labor (DOL) should require ERISA plans to submit de-identified claims and non-claims-based payment data. Using the common standard recently recommended to DOL, the plans should submit data to state all-payer claims databases (APCDs) or, for states that do not have them, alternative federal and state data collection systems.

2. Policy and data analysis support: Provide a permanent source of funding for health care data infrastructure

The Peterson-Milbank program provides technical assistance to states that complements often significant state-funded investments in cost-containment data infrastructure. Cost growth target programs provide market-wide insight into spending and new tools for holding accountable payers and providers, including providers that serve Medicare and Medicaid enrollees. A dedicated federal source of funding could help ensure the sustainability of these programs.

State cost growth programs have used Medicaid-enhanced administrative matching funds as one source of support for data systems development and implementation. To facilitate requests, the Centers for Medicare and Medicaid Services (CMS) should issue guidance on designing and using statewide health data infrastructure that supports cost growth target programs and APCDs. (This type of guidance was provided previously in support of statewide health information exchange programs.) While investment of these funds must be proportionate to the extent of Medicaid data participation, these databases have clear benefits to Medicaid in gauging cost growth over time, identifying high-cost areas that are susceptible to intervention, and examining Medicaid performance as compared to that of private payers. Philanthropy can support these efforts, but the federal government should promote the use of matching funds in any state that commits to a systemwide health care cost growth target process.

3. Payment policy: Increase federal participation in all-payer value-based payment models

Cost growth targets and their associated data analytics and reporting are important means of providing insight and transparency around health care spending. Value-based payment (VBP) programs can build on these efforts by creating a consistent set of measures and incentives across payers to get traction on controlling cost growth and making investments in cost-effective services like primary care. Many states and regions have implemented multipayer programs involving commercial and Medicaid plans, but there are few ways to bring in Medicare to create all-payer models. Greater federal participation in VBP programs would support health system transformation and attract more interest from other market segments.

CMS and state experience with multipayer VBP models illustrates both the galvanizing impact of federal participation and having more dollars go toward improved population health. The Comprehensive Primary Care Initiative and the Comprehensive Primary Care Plus models generated interest from large and diverse groups of payers (including states) and practices. Broad payer participation, including Medicare-supported shared technical assistance and upfront care management fees, incentivized practices to meet quality metrics to receive enhanced payments. While these models have had mixed success in achieving cost savings, there have been demonstrable improvements in several participating regions. One well-established state-led program — the hospital all-payer rate-setting system in Maryland — has proven to be successful in controlling cost growth. These models show how federal participation can increase the participation of other payers and providers for greater scale and allow states to pursue broad payment strategies such as hospital global budgets.

Health care cost growth targets provide key insights into systemwide health care spending trends. These state-led programs are essential to provide the public and policymakers with a common foundation of data that can be used to explain cost trends and motivate actions to address them. But state efforts need federal support to realize their full potential and, as described here, there are practical steps that can be taken to forge a strong federal-state partnership to pursue coordinated health care cost containment strategies.