Minnesota Takes Steps to Open the “Black Box” of Health Care Spending Amid Industry Opposition

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

Minnesota just took an important step toward improving residents’ financial security and health by establishing a center for health care affordability as part of a landmark health care bill. This center will provide valuable health care data, analysis, and recommendations to inform opportunities to enhance affordability and invest in better health for Minnesota residents. However, amid major industry opposition, the bill fell shy of including valuable measures that would increase transparency and accountability, helping the state address years of health care cost increases.

Multiple states are holding key players accountable to stem the rise in unsustainable health care costs affecting their residents. These state actions include organizing public and private stakeholders to set an agreed-upon target for the annual increase in state health care cost growth. By committing to a target, states and their partners are drawing the line on health care cost increases and ensuring that they don’t rise faster than the economy, state revenue, or wages.

Health care costs are a black box and can vary substantially from hospital to hospital and provider to provider. With a cost growth target, stakeholders agree to share spending data, opening that black box so analysts can determine what’s driving rising health care costs. This information is critical in helping identify ways to make health care more affordable. Absent a mutually agreed-upon cost growth target, policymakers are left pursuing potentially fragmented and regulatory-focused approaches to protect the public interest.

As states have begun leveraging cost growth targets and data to identify solutions, some stakeholders have protested this evidence-focused approach. While Minnesota’s policymakers originally proposed a cost growth target, the legislature dropped the target amid opposition from the state’s health care industry. As a result, the state can still collect important data, analyze obstacles to health care affordability, and propose solutions; however, Minnesota is without a target, a regular forum for discussion, and standards for collective accountability. These omissions may limit the state’s ability to drive improvements if cost growth continues unabated.

In opposing a cost growth target in Minnesota, the Mayo Clinic expressed concern that it would jeopardize their financial stability. To date, however, there has been no research that support this claim. Instead, studies have shown the positive impact of cost growth target programs, including the way they convene disparate actors to improve health care affordability for families while upholding stability of doctors and hospitals. Moreover, Minnesota’s health industry is well-positioned to lead rather than oppose efforts to improve affordability — the Mayo Clinic recently reported a net operating income of $595 million.

Massachusetts, a trailblazer in addressing health care spending growth, stands as a testament to the effectiveness of cost growth targets in fostering sustainability. In the first years of the state’s cost growth target (called a benchmark in Massachusetts), purchasers and providers used it as a reference point for price negotiations. Since the target was established in 2012, the state has only once required a health system to implement a performance improvement plan to address a pattern of excessive cost growth. As systemwide health care costs have increased over the last several years, the Massachusetts Health Policy Commission has used data and engagement motivated by the target to identify and propose six policy recommendations to improve state oversight and accountability.

Throughout the United States, escalating health care costs are unsustainable, burdening consumers, businesses, and state and local governments with substantial financial strain. Recognizing this challenge, states such as Minnesota have initiated important programs focused on improving health care affordability and transparency. Nevertheless, there remains considerable room for improvement to promote collective accountability and action on health cost increases that may otherwise impact the long-term sustainability of local health systems.