New Program to Support States in Establishing Statewide Health Care Cost Growth Targets

Total Costs of Care

With funding support from the Peterson Center on Healthcare, the Milbank Memorial Fund has launched the Peterson-Milbank Program for Sustainable Health Care Costs, which will advance state efforts to address health care cost growth. The program will provide technical assistance to up to five states that commit to developing targets for per-capita trends in total health care spending statewide—and to examining which factors lead to cost growth in particular sectors.

While COVID-19 has led to temporary reductions in health care spending, it will be important to have the capacity to monitor health care cost growth trends as the delivery of routine health care services ramps up again.

The two-and-a-half-year program will follow a model created by Massachusetts and adapted by Delaware and Rhode Island in which state policy leaders convene health care stakeholders and lead a public process to set a cost growth target. Health care spending will be measured by insurer, region, and provider. States will then analyze health care spending performance relative to that target to identify the top drivers of spending growth.

“Health care spending growth affects all states and their constituents,” said Milbank Memorial Fund President Christopher F. Koller. “This program will build on the work of pioneering states, so that more states can look at health spending in a comprehensive, collaborative fashion—and more effectively allocate their health care dollars. Strong leadership, stakeholder engagement, and public awareness of the sources of health care spending growth will be essential to the program’s success.”

Massachusetts has made significant progress in reducing health care spending and achieving its vision of a more transparent and accountable health care system since establishing the first-in-the-nation health care cost growth benchmark in 2012. “We are thrilled that the call to action for innovative strategies to address health care costs will be taken up by more states,” said Massachusetts Health Policy Commission Executive Director David Seltz. “We look forward to engaging with them and with the Milbank Memorial Fund in efforts to achieve better health and better care at a lower cost for all people across the country.”

Along with receiving assistance with the measurement and target development process, states will also receive support to enable them to regularly inform the public about performance relative to the total health care spending target; design public policies that support target achievement; foster sustainability plans; and participate in learning opportunities with other state participants.

To participate, states will submit a letter of intent that documents their readiness to proceed with a health care cost target development process. This will include an assessment of the state’s policy, health care purchasing, and data analytics environment. Once accepted, states will receive technical assistance through Bailit Health, a firm that has worked with other states on building capacity for health care cost growth target development. States will also receive communications support, and an implementation guide for other interested states will be developed.

“The many effects of the COVID-19 pandemic will significantly increase pressure on state budgets throughout the country,” said Jay Want,  executive director of the Peterson Center on Healthcare. “And even before the pandemic, patients weren’t getting the full value out of American health care that we should. The Peterson Center on Healthcare is excited to continue its work within the states, bringing a broad cross-section of health care stakeholders to the table to address our nation’s rapidly growing health care costs. Health care spending growth crowds out states’ other priorities, leaving fewer resources available for other important priorities and services, including those that may support better general health.”