Making Health Care More Affordable: A Playbook for Implementing a State Health Care Cost Growth Target, 2025 Edition

Introduction 

Policymakers across the political spectrum have long recognized the widespread and growing burdens posed by high and rising health care costs,¹ but state governments have not looked at cost growth patterns across insurance markets using standard metrics. 

As a result, it has been difficult to create a comprehensive and cohesive picture of overall costs or identify where costs are growing fastest. To draw attention to the problem of health care affordability and increase systemwide health care cost transparency and accountability, a number of states have established cost growth target initiatives.

A health care cost growth target, also referred to as a benchmark, is an expectation of how much per capita total health care spending in the state should grow annually. 

These initiatives set a health care cost growth target, also referred to as a benchmark, which is a shared expectation of how much per capita total health care spending in the state should grow annually. These targets, set by a committee of stakeholders, are often tied to other measures of economic well-being, such as growth in the state economy or median income. Once established, the state measures and publishes how spending by health care payers and large provider organizations performs against this expectation. The state may also develop accountability mechanisms to encourage them to meet the target. Establishing a target, in and of itself, is not likely to slow health care cost growth. The process must be supported by additional data analyses to understand the specific drivers of health care costs and cost growth. These reports allow states and their partners to identify specific opportunities to take individual or collective steps to lower cost growth.

Massachusetts was the first state to pass legislation in 2012 authorizing a statewide target out of concern that the health care system would be unsustainable without efforts to control spending growth. Since then, seven more states — Connecticut, California, Delaware, New Jersey, Oregon, Rhode Island and Washington — followed suit and have committed to increasing transparency and accountability around health care cost growth; these states are also pursuing companion initiatives to bend the cost curve and make health care more affordable.

First published in 2023, this playbook provides a program design and implementation roadmap for states that are interested in, or in the process of, establishing a target. It offers concrete steps, practical tools, best practice strategies, and insights to guide states through the work. It is informed by the experience of five states participating in the Peterson-Milbank Program for Sustainable Health Care Costs and that receive technical assistance from Bailit Health and communications assistance from Burness, as well as the experiences in California, Delaware, and Massachusetts. The Peterson-Milbank Program for Sustainable Health Care Costs provide a forum for these states to share their experiences and collaborate on efforts to make health care more affordable. This latest version draws on lessons learned by these states as their programs have matured, and describes new challenges states faced particularly in the areas of governance, data, and accountability. 

This playbook is organized into six types of activities:

1. Program planning, development, and sustainability
2. Public–private stakeholder engagement
3. Establishing the target methodology and value
4. Measuring performance against the target
5. Understanding the drivers of cost growth
6. Accountability and action to slow cost growth

Exhibit 1 presents the key action steps and their timing, which are described in greater detail in this playbook. While these activities and steps are presented linearly and discretely, many of them are interconnected and interrelated.

As states consider a cost growth target initiative, they have several options for how to structure their policies and processes. In some cases, states may choose to take incremental steps — establishing short-term processes while paving the way for long-term commitments. No two states have implemented targets in the same way, but all of them have built on lessons learned from other states’ experiences to fit the pieces together and build a program that recognizes and respects their local context.

Exhibit 1. Activities and Steps to Implement a Health Care Cost Growth Target

Notes

1. Jones DK, Page C. Bipartisan Approaches to Tackling Health Care Costs at the State Level. Milbank Memorial Fund, October 2020. https://www.milbank.org/publications/bipartisan-approaches-to-tackling-health-care-costs-at-the-state-level