The Rising Profile of Health Care Cost Growth Target Programs

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

Health care cost growth targets, benchmarks for per capita total health care spending, are gaining national attention as one of many tools that can address high health care spending in the US. A recent Health Affairs report and Tradeoffs podcast discuss the unsustainable health care costs and the potential of cost growth target programs to manage them.

In 2019, Health Affairs formed a Council on Health Care Spending and Value, chaired by William H. Frist and Margaret Hamburg, to find solutions to moderate health care spending and maximize value. Their Health Affairs report, “A Road Map for Action,” released in February 2023 after four years of research on maximizing investment in health care, summarizes the literature on US health spending and the potential value of approaches to lower spending. The report authors recommend four policy interventions to decrease spending growth: administrative streamlining, price regulation and support for competition, spending growth targets, and value-based payment. While highlighting the success of spending growth target programs in Maryland and Massachusetts, they also comment on the need for target-setting infrastructure at the state-level and supportive political environments.

In the Tradeoffs podcast, Dan Gorenstein covers the history of cost growth targets, and how states are beginning to directly address rising health care prices that are driving cost growth. The episode considers the balance involved in using public policy to make health care more affordable while not harming the health care industry.

Gorenstein focuses on Massachusetts, the first state to set a target, interviewing David Seltz of the Massachusetts Health Policy Commission, which recently required Massachusetts General Brigham to submit a “performance improvement plan” following “excessive spending.” He also talks with Michael Bailit of Bailit Health and the Peterson-Milbank Program for Sustainable Health Care Costs, which is supporting six other states that are implementing cost growth targets.

Bailit discusses how cost growth strategies are an important first step in slowing growth. “I view a cost growth target as a catalyst,” Bailit says. “It creates high level visibility, really transparency on health care spending, but it is not an end in and of itself.”