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October 12, 2023
Sustainable Health Care Costs Peterson-Milbank Program for Sustainable Health Care Costs Health Care Affordability
Mary Louise Gilburg
Aug 14, 2023
Jun 28, 2023
Jun 15, 2023
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For years, health care costs have been rising much faster than overall inflation and wages. This unsustainable trajectory has led to cost burdens for employers and workers, including ballooning insurance premiums, with employer-sponsored family premiums jumping 20% in the last five years and 43% in the past decade.
In response, several states are trying something new: health care cost growth target programs. These programs bring together stakeholders to set reasonable annual goals for statewide health care cost growth and collect spending data from payers. States then track spending in relation to the cost growth target, identify cost drivers, and work collaboratively to advance tailored solutions.
The Peterson-Milbank Program for Sustainable Health Care Costs is supporting five states as they implement their health care cost growth target programs. Securing active participation from employer, consumer, and community groups has been critical to the states’ success. These groups can provide on-the-ground insights and the political capital needed to enable meaningful change. But state officials may need to communicate with them in ways that resonate with their respective perspectives to get their support.
Groups like the Catalyst for Payment Reform (CPR), a nonprofit that aims to encourage employers and other purchasers to push for health system change, and Health Access California, the statewide consumer advocacy coalition, have been effectively partnering with employers and community groups for years. The Peterson-Milbank Program for Sustainable Health Care Costs invited Andréa Caballero, interim co-director of CPR, and Anthony Wright, executive director of Health Access California, to discuss approaches to engaging employers and the broader community of payers and the public in advancing health care affordability through cost growth target programs.
In the conversation below, Andréa and Anthony emphasize the importance of plain language explanations, highlighting inflated and variable prices in the health care market, and the impact of high health care costs on wage growth and other benefits.
Wright: Health care costs are one of the biggest affordability concerns people have. Premiums have been rising at a greater rate of inflation and eating a bigger and bigger part of workers’ paychecks. You don’t need to convince people to care about health costs. Health care is particularly scary because it’s oftentimes unpredictable, and a hospital bill is often the biggest bill anybody gets in their entire life.
Caballero: For private purchasers of health insurance, improving health care affordability is key because the more they spend on health care, the less they have to offer in other compensation. They can’t offer other benefits or increases in wages to their employees due to rising health care costs.
Wright: Highlight that health care costs are not just high, they’re inflated. Consumers are paying more and not getting improved quality of care. We spotlight the profit-taking in the system, whether it’s pharmaceutical pricing or certain hospitals charging four times what others charge for the same service. It’s about injustice.
Caballero: For the employer audience, some health insurance decisions are about which providers or facilities to include in a network. Employers understand that higher cost does not equal better quality, but it doesn’t always affect their decisions about their provider networks because their employees have a different perception.
More and more, we highlight that the price of services, specifically hospital services — not utilization — is driving up the cost of health care and impacting affordability. The commercial market is paying 200%, 300%, 500% of Medicare. Employers are starting to ask, “Why is that?” In areas where there are multiple options for services, employers can take bold action and carve out high-priced providers from their network and still ensure that employees have access to high-quality services.
Wright: Andréa is the expert on employers, but in my limited experience, business leaders would never purchase anything the way they purchase health care. They would never stand for the kinds of market failures and the lack of value in their core business that they allow for in health care. The biggest problem with employers is getting their attention on this issue, because they’re so focused on their core business. If they engage public policy, it’s on the taxes, regulations, and policy issues relating to their core business.
Caballero: I completely agree. A car manufacturer would never purchase steel the way that they’re purchasing health care. They wouldn’t buy the parts without knowing the price of those products or the quality of the raw materials. And as Anthony said, employers lack the bandwidth to focus their attention on health care because they typically have to prioritize the issues that impact their industry and business.
Wright: The biggest struggle with consumers is how to connect these broad health system issues and market failures with what people experience in their day-to-day lives in terms of health care costs. Because our system is so fragmented, it’s very hard to point to system-level reforms that universally have a direct impact on what consumers pay for a premium or a deductible. At the same time, a cost growth target is one of the few policy solutions that has the potential to have a broad impact, not just for a specific program or population.
Consumer, community, and constituency organizations can be important allies to advance these policy solutions because their members — whether patients, seniors, low-income families, women, children, communities of color, faith-based groups, LGBTQ communities, or others — desperately need relief on health costs. The only question is their commitment and capacity to engage on health policy issues alongside other issues to focus on and services to provide. Labor unions understand the urgency: they see firsthand at the bargaining table how higher health care costs eat away at potential wage increases and other worker benefits.
In our polling and focus groups, the public supports regulation and oversight of essential services provided by utilities or other companies in monopoly or monopoly-type markets. Most people would consider health care an essential service, and in many cases, health care is a monopoly or at least a consolidated market, so using an antitrust frame is effective. People support preventing price gouging, bad practices, and other market failures.
Caballero: In general, employers are not going to be overly inclined to look to policy solutions to fix their problems. There’s a feeling that it could be slippery slope. If government intervenes with segments of the health care industry, their industry could be next. Building support with employers requires educating them about the market interventions that the private sector has already tried and haven’t adequately bent the cost curve. Marketplace interventions like changing network and benefit designs, value-based payment, transparency, and consumerism — making consumers “good shoppers” for health care — are levers that have some peripheral impact, but these strategies have failed to adequately constrain commercial health care prices.
Building support is about softening the ground for employers to be open and willing to pursue policy options as a solution. It’s about creating awareness around the fact that employers need use their leverage if they want to regain a functioning, competitive health care market.
Cabellero: CPR believes that states have at least four levers to rebalance health care markets to address affordability. They can 1) prohibit anti-competitive behavior, 2) support market competition where it hasn’t eroded to the point of failure, 3) regulate costs and prices, and 4) build infrastructure and oversight. Building infrastructure and oversight could cut across all of those. CPR’s state policy intervention menus are designed to address the biggest pain point any given state might face or want to address.
Wright: Having a cost growth target, and a government agency that sets and enforces those targets is a comprehensive and good strategy, but not sufficient. The cost growth target program needs to be implemented in conjunction with other efforts to address market failures and address prices. States can and should advance policies to intervene to fix markets where possible and introduce more direct price relief or regulation.
When we were working on prescription drug price transparency, surprise medical bills, and other specific strategies, it didn’t seem like the changes were filtering down to an actual consumer experience of greater affordability. Our hope is that having a broad and more comprehensive view of the system through our new California Office of Health Care Affordability will allow us to have a better mechanism to ensure savings get down to the payer, the purchaser, and the patient when changes and reforms occur.
Caballero: The advice I would give to a policymaker related to employers is to really try to engage their business coalitions. Chambers of commerce are tricky because they typically have conflicts with hospitals, physicians, and health plans sitting on their committees and their boards. There are exceptions, but they often have to sit on the sidelines of these debates. Business coalitions can be powerful advocates for health care affordability efforts, and they typically do not have the conflicts chambers have.
Wright: In California, even the Chamber of Commerce was supportive of the concept of the Office of Health Care Affordability because we had done the work to lower the temperature of opposition from the health industry by having this broader, more flexible approach to oversight — oversight without rate regulation. Policymakers have an opportunity to provide leadership and to provide space to invite and bring employers along in this policy conversation. Inviting business and community leaders to be part of a roundtable or committee is a way to engage employers and other payers in a way that will get their attention.
For the public, I think the question should be flipped. Consumers are very engaged in this question — health care costs are a top voter concern. So, what are policymakers doing to respond to that concern?
Wright: Improving the affordability of health care is incredibly important work that touches so many other issues. Controlling health care costs could have a positive impact on bankruptcies, financial instability, and homelessness. Reducing the cost growth of medical services would create more ability to fund core services like education and social services that affect the general day-to-day lives of low and moderate-income people. Health care costs are a big issue by itself, but also because of its outsize impact on the cost of living and quality of life for virtually everyone.
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