Introduction and summary
For decades, health expenditures in the United States have risen faster than the pace of economic growth,1 tripling from 2000 to 2020.2 In particular, in the past several years, rising prices for physician and clinical services and for hospital care have contributed significantly to growing spending—a pattern projected to continue through 2028.3 While the expenditure growth between 2019 and 2020 was largely driven by a surge in public health spending due to the COVID-19 pandemic, national health expenditures increased every year from 1961 to 2020.4 From 2019 to 2028, health care spending is forecast to grow at an average of 5.4 percent annually—1.1 percentage points faster than gross domestic product.5
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Concerningly, this increase in spending has not come with commensurate improvements in care quality or health outcomes. Compared with other Organization for Economic Cooperation and Development countries, the United States spends twice the average on health care, yet ranks last overall across five quality domains: access to care, care process, administrative efficiency, equity, and health care outcomes.6 Moreover, in the United States, premature deaths, disease burden, rates of reported poor or fair health, obesity rates, and maternal mortality—particularly among Black and Indigenous women—have been on the rise.7
Health care cost commissions are a tool states can use to address rising health care costs—which have partially resulted from consolidation and increasing prices—and advance other health policy priorities related to quality and equity.
Rising health spending affects consumer affordability. Higher spending translates into higher premiums and cost sharing for people with private insurance. Between 2001 and 2021, premiums tripled for employer-sponsored individual and family coverage—rising at a pace three times faster than wage growth. And in 2018, 40 percent of those with employer-sponsored coverage reported difficulty affording health care or insurance costs.8
Rising health care spending also places a fiscal burden on state governments. From 2014 to 2019, state government health expenditures increased by an average of 3.1 percent, peaking at $607 billion in 2019.9 In fiscal year 2019, health and hospital spending was among the top five expenditures in 47 states and the District of Columbia, alongside categories such as public welfare, education, and road and highway infrastructure.10 In fact, hospital spending alone makes up nearly one-third of total health expenditures nationally.11 Unlike the federal government, which can operate with a budget deficit, every state except Vermont has some type of balanced budget requirement that requires proposed and/or enacted budgets to spend no more than what is collected in revenue in a given year.12 The steady rise in state health care spending constricts financial resources for other state priorities, compromises residents’ ability to access care, and contributes to adverse and inequitable health outcomes.
Health care cost commissions are a tool states can use to address rising health care costs—which have partially resulted from consolidation and increasing prices—and advance other health policy priorities related to quality and equity. While the details and goals vary by state, for the purpose of this report, cost commissions refer to groups of experts convened by the state to monitor and try to control rising health care costs. By convening experts, setting benchmarks to reign in increasing health care expenditures, and creating opportunities to facilitate conversations with affected parties, health care cost commissions leverage the state’s authority to take control of a decadeslong problem. Additionally, cost commissions create an opportunity for states to improve health care quality and advance health equity—all while limiting cost growth.
A note on the five state commissions highlighted in this report
While nine states have established health care cost commissions, this report examines the approaches of five states: Massachusetts, Delaware, Rhode Island, Oregon, and Connecticut. Massachusetts has successfully used comprehensive data analysis to establish benchmarks and hold health systems accountable through strong enforcement incentives and has served as a blueprint for more recent initiatives in other states. Meanwhile, Connecticut, Delaware, Rhode Island, and Oregon have implemented more recent initiatives, setting their own methodologies for benchmarks and entering early stages of the analysis process. The remaining four states—Washington, Nevada, New Jersey, and California—are the most recent states to establish health care cost commissions.
This report discusses the design and impact of existing state health care cost commissions, highlights cost commission innovation, and examines the history and structure of cost commissions in Massachusetts, Delaware, Rhode Island, Oregon, and Connecticut in greater detail. It concludes with recommendations on best practices for states considering reforming or implementing cost commissions, including:
- Build stakeholder buy-in from government, payers, providers, hospitals, and community members.
- Use expert-led methodology to set aggressive but feasible benchmarks.
- Create cost commissions with the authority to enforce benchmark goals and hold health care entities accountable.
- Prioritize quality, affordability, and equity.
How state health care cost commissions can improve health equity while tackling high costs
Several factors are driving up the cost of care, leading to poor quality and health inequities. Cost commissions can both lower spending and address rampant market consolidation; many states also target health inequities through prioritizing improved affordability, establishing quality standards and incentives, and collecting and monitoring population health data.
Combating market consolidation
Across the United States, health care provider markets are consolidating as hospitals merge, acquire physician practices, and integrate to control a larger suite of health care services.13 Studies have shown that consolidation leads to higher health care prices, with hospital consolidation triggering 11 percent to 54 percent higher private insurance prices in the following years and hospital ownership of physician practices in California associated with 10 percent to 20 percent higher total expenditures per patient.14 Dominant health systems can leverage their market power to negotiate higher reimbursement rates from payers, driving up premiums and cost sharing for consumers.15
Cost commissions can have the regulatory authority to confront hospital and provider consolidation.16 While some cost commissions simply set standards and goals, other states can monitor hospital and provider consolidation, administratively review mergers, and limit anti-competitive practices to preserve and promote market competition.
Cost commissions can also protect consumers from the harms of health care industry consolidation via market oversight. For example, the Massachusetts Health Policy Commission (HPC) monitors proposed changes to provider affiliations, assessing the cost and market impact of mergers and acquisitions.17 The HPC’s market analysis provides valuable insight and actionable data for the state attorney general’s office, which determines whether mergers and acquisitions can proceed.
Establishing quality benchmarks and incentives
To address concerns that payers and providers may sacrifice quality of care to reduce costs and meet target goals, state health care cost commissions can enact quality benchmarks and incentives alongside cost growth targets.18 For example, in addition to spending benchmarks, Delaware’s Health Care Commission established eight quality benchmarks related to adult obesity, student physical activity, tobacco use, opioid-related overdose deaths, emergency department utilization, and cardiovascular disease.19
Commissions can also employ incentive structures to reward providers for high-quality services. In 2016, the Rhode Island Office of the Health Insurance Commissioner instituted quality incentives in addition to affordability standards to restrict spending growth. Insurers were required to pay incentives to hospitals and providers who achieve or exceed certain performance measures, including those laid out in the U.S. Centers for Medicare and Medicaid Services’ (CMS’) Hospital Value Purchasing Program for Medicare.20 Initial results indicate that the state’s health care spending slowed while quality was maintained.21
Prioritizing population health in data collection
As states collect and track data, they have an opportunity to connect reductions in cost growth to improvements in affordability and investments in quality services that can address health inequities and improve overall population health.
For example, the Oregon Health Policy Board, the Health Plan Quality Metrics Committee (HPQMC), and the Health Equity Committee work closely together to identify quality measures associated with health inequities and monitor potential impacts of the cost growth targets.22 The Oregon Health Policy Board recommended integrating equity into its cost growth target program by focusing “cost analyses on variation in utilization and cost across populations” and sharing this information publicly.23 In particular, the HPQMC noted the importance of monitoring “measures that directly address equity,” in addition to identifying disparities.24
In Connecticut, a key component of the state’s cost growth benchmark design is a recommendation to gather “social risk factor data,” largely measuring social and economic determinants of health, and to explore the relationship between these variables and health care spending.25 In this case, Connecticut would use its all-payer claims database for its analysis and apply its findings to “future social risk adjustment of cost growth relative to the cost growth benchmark.”26
Five state health care cost commissions
State cost commissions vary in their design, oversight and enforcement authority, cost-containment strategy, and overall impact. This section takes a closer look at health care cost commissions in five states: Massachusetts, Delaware, Connecticut, Rhode Island, and Oregon. (see Figure 1)
Figure 1
Massachusetts
In response to rising annual health care costs, Massachusetts was the first state in the nation to set benchmarks to limit the growth of private and public health care spending.27
Development
In 2002, Massachusetts’ actual and projected health care costs outpaced the growth of the state’s economy, including that of wages, consumer prices, and per capita gross domestic product (GDP).28 By 2009, Massachusetts’ personal health spending—or “total amount spent to treat individuals with specific medical conditions”—across payers was $9,278 per capita, more than any other state and substantially higher than the national average of $6,815.29 The Massachusetts Division of Health Care Finance and Policy projected that, if left unrestrained, the state’s per capita health care spending would grow by 6 percent annually, on track to nearly double from 2009 to 2020.30 However, they projected that health expenditure growth could be slowed to an average of 4.2 percent annually if cost-containment efforts successfully limited per capita health spending growth to GDP growth.31 From 2012—when the first health spending benchmark was set—to 2020, actual average per capita total health spending growth was 2.8 percent; however, excluding the atypical decrease in total health care expenditures associated with the COVID-19 pandemic, average spending growth was 3.6 percent from 2012 to 2019.32
In 2012, the state legislature sought to institute cost growth benchmarks and establish an enforcement agency, the Massachusetts Health Policy Commission. Initially, former Gov. Deval Patrick (D) opposed the creation of a separate agency to oversee cost controls, but legislators insisted that an independent agency with stable funding not reliant on budgetary appropriations is necessary for long-term progress.33 After initial opposition, hospital and insurance industry stakeholders focused on how the benchmark would be set, rather than disputing benchmarking itself.34 Some experts suggest that industry leaders ultimately agreed to benchmarking without a fight because the benchmark did not affect existing prices but rather curbed future price growth.35 At the time of the legislation’s enactment in August 2012, some hospital leaders felt they needed more time to understand the impact of the legislation.36 Others were more positive: While Daniel P. Moen, president and CEO of the Sisters of Providence Health System, had reservations about the state’s potential to overregulate, he said he felt the benchmark set important standards for achieving lower costs.37
Implementation and impact
As the 11-member, nonpartisan independent government agency charged with making health care more affordable for consumers, the Massachusetts HPC calculates and enforces the annual statewide benchmark for health care cost growth.38 The benchmark is tied to the potential gross state product, intending to limit the share of the state economy dedicated to health spending.39 The benchmark is a target measure of growth of total health care expenditures, which includes all medical expenses paid to private and public payers; all patient cost-sharing; and the net cost of private insurance.40 Total health care expenditures are calculated on a per capita basis to account for changes in population size.
From 2013 to 2017, the benchmark was set to the growth rate of potential gross state product (PGSP), or 3.6 percent.41 (see Table 1) From 2018 to 2022, the benchmark is equal to the PGSP minus 0.5 percent, which equaled 3.1 percent in 2018.42 For 2023, the HPC determined that the benchmark will revert to the original 3.6 percent PGSP measure, which the HPC can modify for future years.43
Table 1
Under its enforcement authority, the Massachusetts HPC can require entities and providers that exceed the benchmark to submit a performance improvement plan (PIP) identifying the factors that led to cost growth and detailing cost-saving measures they plan to implement in the following 18 months.44 The HPC monitors the entity during the 18-month implementation and can impose a fine of up to $500,000 in the case of willful noncompliance.45 In January 2022, the HPC exercised its enforcement power for the first time, requiring the state’s largest integrated health system and private employer, Mass General Brigham (MGB), to submit a PIP. The HPC noted that MGB’s 2014 to 2019 cumulative commercial spending of $293 million was the highest among all the state’s providers, exceeded the established benchmark, and hampered the state’s ability to meet the benchmark.46 In addition, the HPC asserted that MGB’s proposed expansion of 560 hospital beds and three comprehensive ambulatory care centers would increase commercial costs by $90 million per year.47 In its PIP, MGB committed to reducing health care spending by $70 million per year by reducing utilization, shifting care to lower-cost sites, and expanding value-based care.48
From 2012 to 2019, the state’s annual total health care expenditures met the benchmark for three years and exceeded it for four years.49 Despite not meeting the benchmark every year, health care spending growth in the state has moderated, increasing at an average annual rate of 3.59 percent, remaining at or below national growth rates.50 To sustain and further this progress, the Massachusetts HPC is calling on the state legislature to assist in:51
- Strengthening accountability by increasing the financial penalties for entities that spend above the benchmark
- Addressing provider prices by establishing price caps for highest-priced providers and limiting facility fees
- Setting affordability targets and standards for commercial insurers
Lessons learned
With its innovative approach and early adoption and success, the Massachusetts HPC has served as a blueprint, offering insights and lessons learned for other jurisdictions. For example, the Massachusetts experience demonstrates the importance of creating an independent cost commission that is not beholden to budgetary appropriations to ensure longevity of the commission throughout changes in state leadership. Additionally, it is critical that a commission set a reasonable benchmark growth target. Setting an attainable benchmark helps garner bipartisan support, limits industry opposition, and—with most entities able to achieve spending growth targets—motivates entities to succeed and avoid public scrutiny.
Delaware
Delaware was the second state to implement health care spending benchmarks via cost commission. Delaware’s program design was informed by Massachusetts’ experiences, and the state rounded out its goals by establishing health care quality benchmarks.
Development
In 2014, Delaware had the third-highest per capita total health care expenditures.52 From 1991 to 2020, Delaware’s personal health care spending increased by an average of 6.7 percent per year.53 By 2016, health care costs accounted for 25 percent of the state budget and were growing faster than other spending areas.54 The following year, the legislature authorized and directed the Delaware secretary for health and social services to develop a strategy to slow health care cost growth while also improving health outcomes.55 In February 2018, Gov. John Carney (D) signed Executive Order (EO) 19, which convened an advisory group of stakeholders to discuss the development of health care cost growth benchmarks.56
The Delaware Healthcare Association, expressing the concerns of leaders of every hospital in Delaware, emphatically opposed the benchmark plan.57 The association called for a “fundamental reset” of the process and expressed concern that benchmarking would set a spending cap that impedes access to hospital care.58 In response to the letter, Gov. Carney’s office cited the 20 town halls and round tables with small businesses conducted by the state, emphasizing Delawareans’ concerns about the cost of health care.59 Some hospital representatives later walked back their comments, declaring an “optimistic outlook” about the cost commission program.60
Following advisory group and stakeholder feedback, in November 2018, Gov. Carney signed EO 25, which established Delaware’s heath care cost growth and quality benchmarks.61 The first spending benchmark became effective on January 1, 2019.62
Implementation and impact
The Delaware Health Care Commission (DHCC) and the Delaware Economic and Financial Advisory Council (DEFAC) are the key entities involved in benchmarking.63 Each year, the DEFAC reviews the benchmarking methodology to determine if the group must make changes to the annual benchmark and solicits input from stakeholders. In the case of methodology changes, DEFAC must report these updates to the governor and DHCC by May 31 of the year before a revised benchmark takes effect. The new value must be shared with the public by July 1 of the same year. The DHCC collects data and reports statewide performance relative to the benchmark, as well as performance by insurance market segment, individual large payer and provider, and health care service category.64
The state calculated the benchmark using market adjustments that decrease over time: The benchmark was set at 3.8 percent in 2019, 3.5 percent in 2020, 3.25 percent in 2021, and 3 percent in 2022 and 2023, a value with no additional market adjustment.65 Total health care expenditure is measured as the total medical expenditures across payers, which refers to all health care spending by or on behalf of Delaware residents for health care services, plus insurers’ net cost of private health insurance.66 In addition to cost benchmarks, Delaware adopted eight health status and health care quality measures for 2019–2022 with benchmarks by payer.67 These metrics include emergency department utilization, opioid-related overdose deaths, obesity, tobacco use, and physical activity.68
In 2019, Delaware did not meet its 3.8 percent benchmark. Health care spending grew at a rate of 5.8 percent, and the state met only two quality measure benchmarks: use of opioids at high dosages and statin therapy for patients with cardiovascular disease.69 In 2020, however, while the COVID-19 pandemic altered health care utilization in unprecedented ways, per capita total health care expenditures decreased by 1.2 percent over the prior year.70 Results from the quality measures that year were mixed: The state again met its quality benchmarks for use of opioids at high dosages and statin therapy for patients with cardiovascular disease, plus persistence of beta-blocker treatment after a heart attack for commercial payers but not for Medicaid.71
One challenge for Delaware as it strives to achieve its spending and quality benchmarks is that state officials cannot enforce the benchmarks through incentives, penalties, or other regulatory levers.72 The DHSS describes its “sole levers to achieve our target” as “public dialogue and engagement with consumers, legislators, and employers around health care cost and quality,” as well as increased transparency.73
Lessons learned
Delaware did not meet its first-year cost growth benchmark, and its quality benchmarks results were mixed. Without enforcement authority to hold health care entities accountable, the state has limited options to prompt improvements on these measures. Other states should monitor Delaware’s progress to determine if additional strategies, such as Massachusetts’s PIP and fines approach, could make benchmarking more effective.
Rhode Island
For more than a decade, Rhode Island’s Office of the Health Insurance Commissioner (OHIC) has conducted insurance rate reviews, allowing the state to regulate and control hospital costs.74 Legislation in 2004 created the health insurance commissioner position and charged the office with making health insurance more accessible, of higher quality, and more affordable.75 (see Figure 2) Importantly, the OHIC has the authority to oversee, review, and approve rates in the individual, small-group, and fully insured large-group markets.76 In 2010, the Rhode Island Health Insurance Advisory Council established a set of standards and priorities, which included prioritizing primary care, adopting patient-centered medical home models, supporting the state’s health information exchange, and transitioning toward payment reform.77 Under these standards, the commissioner required insurers to limit the average annual price increases for hospital services to CMS’ hospital price index plus 1 percent, and in 2016, the commissioner updated this methodology to use the consumer price index plus 1 percent.78 From 2010 to 2016, these affordability standards resulted in an average of $55 per enrollee per quarter in reduced expenditures.79
Building on a history of insurance rate review and limitations of hospital price increases, Rhode Island’s spending growth benchmark extends its cost-containment efforts to statewide spending cost growth.80 Rhode Island took a unique approach to benchmarking: In 2019, it entered a public-private partnership to develop a cost-containment strategy and address total health care spending.
Development
Despite having one of the highest coverage rates in the country as well as some of the lowest premiums, Rhode Island’s per capita health care spending was $2,890 in 2018, the eighth-highest in the country.81 In 2018, with funding from the Peterson Center on Healthcare, Rhode Island established the Health Care Cost Trends Project, a public-private partnership among the governor’s office, the OHIC, the Executive Office of Health and Human Services (EOHHS), and Brown University’s School of Public Health.82 The project established the Health Care Cost Trends Steering Committee, leveraging the expertise of state officials, business and community leaders, health care industry players, and provider stakeholders to address total health care spending in the state. After four months of analysis and cost growth strategy development, the committee released a “Compact to Reduce the Growth in Health Care Costs and Health Care Spending in Rhode Island.”83 The compact includes a recommendation for the state to set a cost growth target equal to the projected growth in potential gross state product—a rate of 3.2 percent.84
Additionally, because the steering committee was made up of diverse stakeholders—including payer, provider, and community representatives—it not only set the benchmark but also committed its members and the organizations they represent to “make their best efforts to constrain health care spending to that target.”85 In February 2019, Rhode Island Gov. Gina Raimondo (D) codified the steering committee’s recommendations in Executive Order 19-03, formally setting the 3.2 percent annual benchmark.86 The EO directed OHIC and EOHHS to conduct reports, publish a technical manual with methodology for calculating the target, and implement the cost growth target strategy.87
Figure 2
Implementation and impact
In 2019, Rhode Island’s per capita total health care expenditure grew 4.1 percent, exceeding the 3.2 percent target.88 Although the pandemic may have played a role in expenditure reductions, in 2020, Rhode Island’s health care spending decreased by 2.9 percent, with the largest per capita decrease occurring in Medicaid (6.1 percent) and Medicare (5 percent).89 Analysis by the OHIC found that retail pharmacy spending is the largest cost growth driver across market segments and a threat to the state’s future cost growth target attainment.90 In 2022, to further reduce cost growth and improve quality, the state created the Health Spending Accountability and Transparency Program, and the steering committee released the “Compact to Accelerate Advanced Value-Based Payment Model Adoption.”91
Lessons learned
Engaging an independent committee of stakeholders—including hospitals, insurers, government officials, and providers—throughout the development of benchmarks improves stakeholder buy-in.92 Specifically, these stakeholders both signed off on setting the benchmark rates and committed their organizations to try to achieve the cost growth targets. States interested in cost-containment efforts may want to consider including a diverse range of stakeholders early in the process to create a collaborative and voluntary approach that feels achievable to all major stakeholders.
Oregon
Oregon applied its experience setting growth targets for its Medicaid program to contain growing costs in the private market. In 2012, CMS approved an amendment and extension of Oregon’s Section 1115 Medicaid waiver, which allowed the state to begin transforming its health program toward a collaborative care model.93 The state renewed an updated version of the waiver in 2017, and in anticipation of the waiver’s expiry, submitted a renewal application in February 2022 that would extend through 2027.94 A key element of the state’s health care system transformation was setting a cost growth target for Medicaid and state employee health plans, which is currently set at 3.4 percent.
Development
In Oregon, from 2013 to 2021, employer-sponsored insurance premiums for single coverage grew by 36 percent, and in 2021, Oregonians had the fifth-highest single coverage deductibles in the nation.95 Following a Task Force on Health Care Cost Review, created by Oregon S.B. 419 of 2017, recommendation to establish “an annual health care cost growth benchmark for all payers and provider types,” S.B. 889 of 2018 established the Health Care Cost Growth Benchmark Implementation Committee to design methodology for and set the initial benchmark and make recommendations for implementation.96 According to an interview conducted by Manatt Health, because Oregon has demonstrated benchmarking success for state health programs, stakeholders—including providers, insurers, and state officials—were largely supportive of expanding benchmarking to a broader market.97 Furthermore, providers and insurers expressed enthusiasm for extending value-based purchasing into the commercial market.98
Following task force recommendations, in 2019, the state legislature passed S.B. 889, which established the Sustainable Health Care Cost Growth Target Program and authorized the formation of the Health Care Cost Growth Benchmark Implementation Committee to expand cost growth benchmarking to the broader health care market.99 The Oregon Health Authority (OHA), Oregon Department of Consumer and Business Services (DCBS), and Oregon Health Policy Board (OHPB) oversee the committee and the benchmarking program. Additionally, OHPB is responsible for hosting and convening annual public hearings.100
Implementation and impact
The implementation committee consists of 18 members appointed by the governor representing consumers, providers, payers, health systems, and experts.101 The committee released its recommendations in January 2021 and called for the OHA to convene a technical advisory group open to stakeholders to finalize data-collection methods and conduct further technical analysis.102 The Cost Growth Target Technical Advisory Group first launched in February 2021.103 The implementation committee, which was set to sunset in January 2022, recommended the formation of a new committee of “health care payers and providers, business/employer representatives, as well as consumer representatives” to oversee, monitor, and review the Health Care Cost Growth Target Program on an ongoing basis.104
The Oregon Health Care Cost Growth Benchmark program is modeled after the Massachusetts HPC.105 The Oregon program similarly sets and reviews benchmarks based on economic indicators; requires health care entities to submit data; publishes annual reports describing cost drivers and proposing recommendations; holds public hearings; and may require entities that exceed the benchmark to submit a PIP.106
Rather than create a new agency such as the Massachusetts HPC, the Oregon program relies on existing agencies: the OHA and the DCBS for administration and the OHPB for policy oversight.107 The legislation that authorized the Oregon program leaves many of the details up to the implementation committee.108 The only measure that requires additional legislative review is determining the enforcement mechanisms for entities that exceed the benchmark.109 The Oregon program also encourages value-based payment models through a voluntary compact of payers and providers.110 By September 2021, payers and providers covering 73 percent of Oregonians had signed on to the compact.111
In its 2021 recommendations, the implementation committee recommended a 3.4 percent annual per capita cost growth target for 2021–2025 and a lower 3 percent target for 2026–2030. Like Massachusetts, Connecticut, and Delaware, Oregon set its targets aiming for more ambitious slowdown in later years.112 In 2024, the “successor committee” will review per capita gross state product and median wage trends for the past 20 years to determine if the 2026–2030 target is appropriate.113 The target will be measured at the state, market, payer, and provider organization levels. The implementation committee also recommended that the HPQMC identify quality metrics to include in the Health Care Cost Growth Target Program and work with the OHA, OHPB, and the Health Equity Committee to develop a plan and monitor unintended consequences.114 The implementation committee suggested equity and disparities; prevention and early detection; and acute, episodic, and procedural care as potential focus areas.115
Lessons learned
Oregon reviewed existing cost growth target programs and determined which elements were most appropriate for the state. It also conducted a thorough review of programs in other states and decided that many elements of the Massachusetts program would be applicable, while including unique elements that build on the state’s existing strengths and tweaks to fit the state’s political climate.
Connecticut
As the fifth state to implement a statewide cost growth benchmark, Connecticut seeks to control health care costs and improve quality. Connecticut’s approach, laid out by executive order, sets quality targets to increase primary care spending and meet several quality benchmarks, in addition to its cost growth benchmark.116 Critically, Connecticut’s benchmarking initiative includes transparent reporting, broken down by payer, insurance market, and large provider entity and aims to apply social risk factor data to spending analyses.117
Development
From 2005 to 2020, health care costs in Connecticut rose by 77 percent while the median wage rose by 21 percent.118 In January 2020, in order to address access, affordability, health disparities, and rising costs, Gov. Ned Lamont (D) signed an executive order directing the Office of Health Strategy (OHS) to establish a benchmark rate of cost growth.119 The OHS formed both a technical team of state government employees and other experts, as well as a stakeholder advisory board (SAB) intended to represent “a cross section of the health care landscape, consumers, providers, employers, and health plan carriers.”120 Victoria Veltri, executive director of the OHS, noted that the governor and the legislature worked closely together with bipartisan support to establish a benchmark by EO, a statement echoed by a state senator.121 Leaders of the State Senate Insurance and Real Estate Committee spoke out in support of the EO: Sen. Kevin Kelly (R), ranking member of the Insurance and Real Estate Committee, praised the governor’s work, expressed confidence in the efficacy of benchmarking, and emphasized the importance of controlling health care cost growth.122 Per the EO, the technical team recommends annual cost growth benchmarks and primary care spending targets each year; the SAB weighs in on these decisions and seeks additional input from other entities; and OHS establishes a benchmark rate of cost growth.123
Implementation and impact
The technical team recommended a cost growth benchmark based on “a 20/80 weighting on the growth in CT Potential Gross State Product and growth CT Median Income.”124 For 2020, the benchmark was the base value (2.9 percent) plus 0.5 percent for a total of 3.4 percent.125 In 2022, the benchmark was lowered to the base value plus 0.3 percent, or 3.2 percent. From 2023 to 2025, the state will set the benchmark at the base value—2.9 percent.126
Gov. Lamont’s EO laid out two quality target priorities: first, set targets to achieve increased primary care spending at 10 percent total health care expenditures by 2025, and second, develop health care quality benchmarks for all payers beginning in 2022, “including clinical quality, over/under utilization and patient safety measures.”127 At the time of the executive order, Connecticut was among the states with the lowest primary care spending as a proportion of total health care expenditures, estimated to be 4.8 percent of total health care expenditures.128 The primary care spending target for 2021 is 5 percent, an admittedly conservative goal according to the OHS.129 The OHS calculates statewide primary care spending as a weighted average of each insurance market’s primary care spending, accounting for total market share.130
Lessons learned
In addition to more traditional cost-containment goals, Connecticut’s approach integrates quality metrics and primary care spending targets. By setting targets both for lower total health spending and increased primary care spending, Connecticut incentivizes the use of high-value care with greater primary care use and presumably less dependence on expensive hospital and specialist care.
Figure 3
Cost commission design considerations
The five case studies in Massachusetts, Delaware, Rhode Island, Oregon, and Connecticut provide important examples and lessons in cost commission design, benchmark setting, and quality initiatives. States that are currently exploring cost commissions to address health care costs—including Minnesota131 and Pennsylvania132—have several effective options to consider. As states pursue commissions and cost growth benchmark programs, decision-makers should consider the following design elements to improve effectiveness:
- Stakeholder buy-in. Depending on state statutes and political feasibility, state policymakers must build support among relevant stakeholders to enable the state government to implement benchmarking and cost containment. The formation of an independent body of experts and stakeholders that determine, set, and review targets is key to creating initiatives with achievable benchmarks and buy-in. Ideally, in order to promote long-term sustainability, these bodies should have consistent funding that does not depend on additional legislative action.
- Setting benchmarks. The states highlighted in this report created boards or committees of experts to determine benchmark methodology and create infrastructure for monitoring, review, and implementing changes as needed. Nearly all of the featured states set benchmarks that get more aggressive over time, as the health care entities responsible for slowing cost growth and meeting quality metrics develop the initiatives and infrastructure they need to make progress.
- Enforcement authority. Of the states featured, only Massachusetts and Oregon have enforcement mechanisms for entities that do not meet benchmark goals. Fear of fines, PIPs, and public knowledge about their increased spending helps incentivize health care entities to put in their best effort to meet targets and take these initiatives seriously.
- Quality, affordability, and equity. In addition to setting cost growth targets, many featured states also set metrics for quality, affordability, and equity. Monitoring changes in quality and access measures can help avert cost-saving efforts that reduce quality rather than streamlining efficiency. The complementary nature of the targets further demonstrates that cost containment can be aligned with improvements in quality and access. For example, one of Rhode Island and Connecticut’s quality targets is to increase spending on primary care, which can offer preventive services that improve population health and decrease expensive emergency department visits.133
As states seek to address high health care spending and health inequities, establishing cost commissions can be an effective choice. Interested states will have to adapt these programs to meet their regulatory capacity and programmatic goals. Critically, these states can apply important lessons learned in Massachusetts, Delaware, Rhode Island, Oregon, and Connecticut to developing similar initiatives.
Conclusion
Amid high health care costs that continue to soar, state initiatives to create cost commissions and benchmarking programs that seek to contain costs and improve quality can play an important role. While cost commissions primarily set a target that limits cost growth and promotes quality improvement, the benchmarking process can secure commitments from stakeholders to try to reign in cost growth. For example, experts report that in Massachusetts the cost growth target has become integrated in the health system and helps guide negotiations.134 In addition to containing costs, benchmarking can also be helpful in improving transparency, promoting primary care, and transitioning to value-based payment arrangements.135
While states have taken unique approaches and are at various stages of implementation, these case studies provide examples and lessons that may be useful to states looking to constrain cost growth, improve quality and affordability, and address equity concerns.