Collaborating to Spotlight Health Care Cost Drivers and Solutions

Focus Area:
Sustainable Health Care Costs
Peterson-Milbank Program for Sustainable Health Care Costs
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Copublished with the National Alliance of Healthcare Purchaser Coalitions

For more and more US employers, improving the affordability of health care is competing with the core concerns that affect their business. As of last year, self-insured employers have a fiduciary responsibility to make sure they are paying fair prices for health care services. To meet this legal requirement, employers need a more complete view of provider prices and price trends in the broader health care cost ecosystem.

More broadly, slower systemwide health care spending growth could allow employers to put more dollars into wages or invest it elsewhere. Piecemeal regulatory and purchasing solutions have not constrained overall health care cost growth, and accelerated health care market consolidation has led to further increases in health care prices. Ensuring future access to high-quality health care in the United States requires a new approach focused on: (1) establishing a common understanding of what is driving systemwide spending, and (2) setting a goal for sustainable growth informed by broad economic trends.

A growing number of states have cost growth target (or benchmark) programs that reflect this new approach. The programs are designed to provide transparency on systemwide health care spending trends and build momentum to reduce the cost growth curve. Since 2014, eight states have formally committed to a cost growth target model and two more are advancing similar initiatives. The Peterson-Milbank Program for Sustainable Health Care Costs provides technical assistance and communications support to help these states advance their programs. Three of the central building blocks for this model include:

  • Operating a transparent governing structure with external input that establishes and oversees the state’s annual cost growth target
  • Collecting, analyzing, and publishing data from payers on aggregate spending trends and specific cost growth drivers
  • Convening policymakers and stakeholders to identify and build support for policy solutions to address the cost drivers that these data analyses identify

Health care purchasing coalitions have adopted a number of complementary efforts to bend the health care cost curve. These initiatives have advanced innovative payment reforms and benefits designs in many regions and states. However, the larger systemic forces driving health care spending growth have eclipsed the ability of these important initiatives to make health care more affordable on their own.

Given these developments, it’s a particularly good time to consider how states and purchasing coalitions can join forces to strengthen their complementary approaches. We suggest four opportunities for collaboration.

Common goals: A state’s health care cost growth target creates a shared health spending growth goal for all stakeholders that is tied to a combination of state economic growth and household income growth. Purchasers can participate in advisory boards that set these targets as well as public meetings where they can express the value that they place on achieving more affordable health care. For example, the Oregon Health Authority Advisory Committee invites public comments at its monthly meetings.

Data infrastructure: Rising health care prices are the major factor driving spending growth and the cost-growth-target states have documented how these price trends have led health plans and providers to exceed the cost growth target. The data analytics infrastructure developed by these states can help purchasers (including self-insured employers) determine whether their payments are in line with or exceed the state’s benchmark. This can be an efficient tool to evaluate specific prices paid through health plans or third-party administrators. For example, the Massachusetts Health Policy Commission regularly publishes information on price variation, and several states now publish cost trend information.

Policy action: More than ever before, purchasers have identified the need for systemwide public policies to make health care spending growth more sustainable. As the state cost growth target programs develop and advance specific policy proposals with legislators, support from purchasers could make a big difference in getting positive changes enacted. In Connecticut, Governor Lamont recently introduced legislation to reduce excessive health care spending growth identified by the state’s cost growth benchmark program.

Scaling the approach: Most states have yet to adopt a cost growth target approach to help advance more affordable health care. If purchasers support this concept, they can help move it forward in more states. Making Health Care Affordable: A Playbook for Implementing a Cost Growth Target offers step-by-step implementation guidance; a companion slide deck for legislators is also available.

Achieving meaningful reductions in health care spending growth is essential to preserving access to high-quality health care. The current path of resource consumption is not sustainable for governments, purchasers, or consumers, nor do higher costs mean higher quality care. That’s why we need to align health care spending with broader economic indicators. State cost growth target initiatives provide a transparent view of systemwide health care spending trends and factors driving cost growth, and a platform to develop and advance policies that will broadly benefit purchasers and residents struggling with high health care costs.