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What States Can Do to Get Rising Health-Care Costs Under Control

One effective way is to work with providers, payers and other stakeholders to set statewide cost growth targets. The approach is having an impact.

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With open-enrollment season for health insurance plans approaching or already under way, we are seeing significant premium increases across the country. Between 2010 and 2022, insurance premiums for family coverage rose more than 63 percent — increases exceeding $700 per year, on average. In one survey, employers predicted a 7 percent premium hike for 2024.

Premium increases are part of a larger trend of rapidly rising health-care costs that is making health care increasingly unaffordable for consumers and burdening employers and governments. A 2022 Commonwealth Fund report found that 46 percent of working-age adults in the U.S. had skipped or delayed needed care because of cost, and 42 percent said they had problems paying medical bills or were paying off medical debt. Recent unprecedented declines in life expectancy in the U.S. will only be exacerbated by a lack of access to affordable care. The high cost of health care is a crisis.

Our states, Connecticut and Washington, are among a growing number that are working to get health-care costs under control. Although we are on opposite coasts, we’re seeing the same trends, the same problems and the same consequences.

We’re working on a range of solutions to the health-care cost crisis — including setting an annual cost growth target to hold health-care providers accountable for increases in health-care spending. In each of our states, we have worked with insurers, hospitals and other health providers, employers, unions and consumer groups to set a goal for how much total statewide health-care spending should increase per year. With health-care costs eating into household budgets more and more, this goal is tied to expected growth in our residents’ incomes.

Each year, we collect data from public and private health plans detailing where our health-care dollars are going. We then compare spending across plans and providers to see how they are doing against the benchmark.

The transparency that comes with a cost growth target is having an impact. Massachusetts, the first state to try this approach, has shown that it can influence contract negotiations between payers and providers, leading to better deals for consumers.

But setting a goal and reporting on progress is not enough. As we go about measuring actual performance against our goal, we are creating a foundation of information for strategies to improve health-care affordability.

When we break health-care costs apart, it’s clear what’s driving increases in spending and where our collective efforts need to focus. We’re finding that this process brings everyone to the table and is helping orient our health-care systems toward affordability.

For example, in each of our states, our analyses point to hospital and prescription drug spending as key drivers, so we’re exploring ways we can bring that cost growth down. Both our states have joined ArrayRx, a prescription drug purchasing coalition to get better prices on prescription drugs. Connecticut’s release of its first cost growth benchmark report led to the passage of legislation strengthening oversight of pharmaceutical marketing and improving transparency for high-cost drug price increases to help slow cost growth in that sector.

Cost growth targets are flexible so that states can respond to changing circumstances like public health or economic crises that could affect health-care spending. We review our cost growth targets regularly to ensure that they’re accounting for any significant statewide changes.

More and more states are turning to cost growth targets to guide solutions to the health-care affordability crisis. To date, eight states have set cost growth targets — meaning that 1 in 5 Americans now live in a state with such a mechanism. Other states, including Maine and Utah, are exploring the idea.

We can’t keep paying so much more for health care; we need to slow the pace of cost growth so that health care is more affordable for everyone. It’s time for states to take the lead, and health-care cost growth targets are an option worth exploring.

Susan E. Birch is the director of Washington state’s Health Care Authority. Deidre Gifford is the executive director of Connecticut’s Office of Health Strategy.

Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
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