Contact: January Angeles
Email: TBD
Health care costs have been rising faster than inflation for decades, meaning health care is taking up larger and larger proportions of government, employer, and household budgets and crowding out other critical priorities.
Policymakers across the political spectrum have long recognized the widespread and growing burdens posed by high and rising health care costs, 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, more and more states are taking action through 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. Once a target is established, the state measures and publishes how all health care payers and large provider organizations perform against this expectation and may 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 partnering stakeholders to identify specific opportunities to take individual or collective steps to lower cost growth.
Massachusetts was the first state to implement a statewide target in 2012. At that time, Massachusetts’ commercial cost growth (spending among private payers) was above the national average. But from 2013 to 2019, commercial cost growth fell below the national average. Stakeholders reported that the target, and the potential for scrutiny of payers or providers that exceeded it, had a sentinel effect that helped restrain cost growth.2 A recent assessment of Massachusetts’ efforts indicates that the program influenced contract negotiations and fostered commitment among health care stakeholders to reduce cost growth, at least in the early years.3
Seven more states — Connecticut, Delaware, Nevada, New Jersey, Oregon, Rhode Island, and Washington — have since implemented targets. In addition, California recently passed legislation to establish an Office of Health Care Affordability that is responsible for setting targets as part of a suite of measures to enhance transparency and accountability around health care cost growth.
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.