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States interested in establishing targets need to engage in planning well in advance of program authorization to facilitate support among a wide array of stakeholders and pave the way for statutory codification to ensure continued success of the program.
This section describes considerations for obtaining the necessary authority to establish the program, identifying a governance structure, and ensuring program sustainability. For all these activities, states should have program champions to help secure support for the target initiative. Executive branch buy-in is especially important since agency staff will need to develop the policies and infrastructure to implement and manage the program on an ongoing basis.2 Legislative support is also critical for long-term sustainability, and to ensure that the program endures changes in executive branch and agency leadership.
States can take incremental approaches to establishing authority (Exhibit 2) as they build support. For example, Rhode Island developed its target program in 2018 through a voluntary compact signed by public and private stakeholders that included payers, providers, and business and community leaders, which was quickly followed by an executive order. In 2022, the state included budget language to fund the program and is now pursuing legislation to establish it on a permanent basis. Similarly, Connecticut began with an executive order and subsequently adopted legislation that made the program permanent and further strengthened it by establishing public hearings to focus attention on health care cost growth target performance.
Ultimately, the process for setting targets should ideally be established in law so that they endure through election cycles and are appropriately resourced. Executive orders can be halted with changes in administration. This was exemplified in Nevada. After setting cost growth target values, analyzing cost growth drivers, and collecting data to measure performance against the target, Nevada’s program implementation was halted in January 2023 when a new governor took office. This experience underscores that codifying the program in statute is important for sustainability as it affirms and institutionalizes specific activities by making them part of a state agency’s core mission and responsibilities. (See Sustainability section below.)
Exhibit 2. Approaches to Authorizing a Cost Growth Target Program
A program governance model defines the structure and processes that guide program administration, decision-making, and accountability. There is no “one-size- fits-all” approach to governance, and states’ approaches vary based on available resources and the local cultural and political norms.
Massachusetts, Washington, and California have set up by law a formal governing board comprising external stakeholders and ex-officio or state agency staff to direct the agency implementing the target. Program staff present options and recommendations to these boards that in turn make binding decisions on critical policies, such as the target methodology and value and the use of available tools to compel entities to meet the target. Board discussions and deliberations are subject to open public meeting laws, which ensure transparency in policy development and decision-making and help build trust among stakeholders.
Instead of having a formal governing board, other states have stakeholder committees that advise the implementing state agency. The agency retains formal decision-making authority but uses the stakeholder committee to obtain critical subject-matter expertise, stakeholder input, and buy-in.
Regardless of the governance structure, a critical consideration for states is how to ensure representation of key stakeholder groups and obtain the needed technical expertise, while protecting against undue influence of groups that might have a financial interest in maintaining the status quo. To protect policy decisions against the influence of special interests, states could fill their board or advisory committee with appointees who have expertise in health care purchasing, delivery, financing, and/or administration but who do not represent organizations such as insurers, pharmaceutical manufacturers, or providers that could be held accountable to the target or contribute to cost growth. States could also include employer purchasers, consumers, and consumer advocates to ensure a focus on affordability.
The board or stakeholder committee could then appoint technical subcommittees to advise on specific issues. These committees offer a way for providers and insurers that may be held accountable to the target to provide input and an important perspective on how the target might impact their operations and ultimately patient care. For example, in Washington, the Health Care Authority administers its program under the oversight of the Health Care Cost Transparency Board (HCCTB), which has formal decision-making authority. Members of the HCCTB include state agency officials, large and small employer representatives, health care economics and financing experts, and consumer representatives. Two committees — one including a diverse group of health care providers and payers, and another including experts in data collection, analysis, and reporting — advise the HCCTB on issues related to the HCCTB’s work.
Another important consideration for states is which entity or entities should be responsible for developing and implementing the program, collecting spending data, reporting performance against the target, and analyzing drivers of cost growth. Massachusetts and California established new agencies focused solely on implementing the target. In a dedicated agency, all staff have the same priorities and can concentrate exclusively on the target. However, this approach requires significant resources and is not always feasible, particularly in smaller states where it is difficult to achieve economies of scale.
Other states rely on existing agencies with broader responsibilities. For example, Rhode Island’s target program is housed in the Office of the Health Insurance Commissioner, which is the state’s commercial health insurance policy reform and regulatory enforcement agency. In New Jersey, the Department of Health implements the program in coordination with an interagency working group comprising other executive branch departments and agencies, including the Department of Banking and Insurance, the Department of Human Services, and the Division of Consumer Affairs. While the scope of these agencies is much broader than the target program itself, health care affordability is a critical part of their mission.
Evolving Governing and Advisory Bodies
As cost growth target programs mature, states need to evaluate and potentially modify the purpose and/or composition of their governing and advisory bodies to reflect changing needs and priorities. The expertise and perspectives needed when building a program are different from those needed when considering actions a state should take to slow cost growth. For example, states in the early phases of building the data collection and analysis infrastructure to support cost growth target programs may seek more input from individuals and organizations with data expertise, while states with more mature programs might benefit more from guidance on the appropriate cost containment strategies to pursue.
In addition, some states have found that as their focus shifted from measurement and reporting to cost containment policy, industry representatives on advisory bodies became oppositional to efforts aimed at curbing spending growth. As a result, these states are exploring options to restructure their primary advisory body by either: a) excluding industry representatives and establishing a separate platform for industry stakeholders to provide input, or b) increasing the presence of purchaser, labor, and consumer representatives to achieve a more balanced perspective.
For example, as Oregon pivoted to exploring cost containment strategies, in December 2024 it decided to sunset its Cost Growth Target Advisory Committee, which helped shape the state’s annual reporting and public hearing processes, provided insights into spending trends and factors driving cost growth, and created principles for holding entities accountable to cost growth. Instead, Oregon is creating a new Affordability Committee that elevates consumers’ and purchasers’ voices to inform identification of new cost containment approaches. In Washington, to provide more balanced input to the HCCTB, that state changed its “advisory committee of providers and carriers” to a “health care stakeholder advisory committee” that includes representation of consumers, labor, and employer purchasers. These additions ensure that the voices of individuals and businesses that bear the burden of high and escalating health care costs are considered in the HCCTB’s discussions and recommendations.
States establishing new advisory bodies or restructuring existing ones should consider the following key insights from the experience of other states:
Regardless of where administration of the program resides, having strong leadership and management is essential for the program’s successful launch and long-term sustainability. A strong team can sustain momentum and program activities during political and other transitions. Leadership and expertise on cost growth targets cannot depend solely on one individual. Instead, states need to “build the bench” and develop capacity among career agency staff.
Staffing needs and structure may change over time as the program matures, but at a minimum, states need a team to perform the following core functions:
Larger states with more resources may dedicate one or more staff members to each of these functions. However, smaller states may consolidate these responsibilities among a smaller staff and leverage expertise in other parts of the agency or other agencies for some functions, such as communications and analytics. States that take this approach will need to monitor for shifting priorities and competing demands and ensure that a core team is available to sustain, and potentially expand, the cost growth target program.
Many factors and conditions influence state decisions on staffing, and states will vary in how they define and fill the staff structure to implement the program. Some states may not be able to hire full-time staff to run a cost growth target program and must procure expertise from outside vendors. While procuring the required expertise is a more costly option, a vendor can fill gaps in knowledge and skill sets that occur in the event of state staff vacancies or turnover. Still, contracting will require a core state team to effectively manage the vendor and ensure knowledge transfer over time to avoid long-term dependence on vendors.
How States Have Passed Legislation to Strengthen their Cost Growth Target Programs
States have used incremental approaches to strengthen their programs over time. Rhode Island passed a budget bill to specifically fund the Healthcare Affordability and Transparency Program. This allows for dedicated funding to support data analysis around drivers of health care spending and spending growth in the state, as well as development of policies to address affordability. In Washington, the legislature passed SB1508, which added consumers, labor purchasers, and employer purchasers to the HCTTB’s stakeholder advisory committee. It also added a requirement to conduct a public hearing to publicize benchmark performance, and gave the HCA flexibility to streamline analysis of cost drivers through sharing of information with other agencies.
At every point in the planning, development, and implementation of a cost growth target, states should consider how to navigate the program through changes in leadership, personnel, and political and health system contexts. Sustained focus from state executive leadership is critical to advancing the program and ensuring its long-term sustainability.
States that establish targets through a voluntary compact or executive order should begin planning for future legislation to codify the cost growth target program in statute. Even those states that already have legislation authorizing the program should consider potential improvements based on lessons learned from the first few years of implementation. For example, states could amend legislation to strengthen data collection requirements to improve compliance or direct additional funding and resources to program implementation. Or, if stakeholders neglect to take action to address persistent and excessive cost growth, states could consider new or additional enforcement mechanisms, such as performance improvement plans and penalties.
In addition, after a few years, states that rely on vendor support to establish processes and perform key program activities should think about whether and how to develop expertise within the implementing state agency to assume these critical functions.
Protecting Cost Growth Target Programs Against Proposals to Weaken It
Cost growth target programs and related cost containment initiatives have been met with strong industry opposition. Thus, the legislative work that states need to engage is not just about making program improvements; it also often involves protecting against attempts to weaken their programs through legislation, including efforts to limit data collection authority or accountability mechanisms.
For example, in Oregon, legislation was proposed to weaken the state’s cost growth target program. House Bill 2742, which ultimately did not pass, would have excluded cost increases related to the workforce, pharmaceutical drugs, and many basic services that are currently included in measuring performance against the state’s cost growth target. Removing them from the measurement of health care spending growth would have essentially rendered the target useless and significantly weakened the state’s cost containment efforts.
To protect against such efforts, states need to cultivate relationships with legislators and educate them of the importance of cost growth target programs in promoting health care affordability. Having legislators who understand the program and will champion health care spending transparency and affordability is critical to preserving the program. When considering program improvements, states also need to evaluate whether further legislative debate about the program could instead make the program more vulnerable to legislative amendments to dismantle or weaken it.
Executive Orders on Health Care Cost Growth Targets
Legislation on Health Care Cost Growth Targets
Voluntary Compacts on Health Care Cost Growth Targets
Reports and Publications
2. Boxwell AM. What Does the State Innovation Model Experiment Tell Us About States’ Capacity to Implement Complex Health Reforms? Millbank Quarterly, March 29, 2020. https://doi.org/10.1111/1468-0009.12559
