States are increasingly focused on addressing healthcare costs as affordability issues have led coverage gains to level off or even decline, according to a new report from legal and consulting firm Manatt Health on Thursday.
Although the Affordable Care Act's implementation helped many states expand healthcare coverage early on, out-of-control healthcare inflation is dampening results in recent years.
"We have to figure out a way to contain costs in the commercial market to make healthcare affordable for families," said Jeremy Vandehey, director of health policy and analytics for the Oregon Health Authority.
That has led some states to pursue new strategies for containing healthcare costs rather than waiting for the federal government to take care of the problem.
"States are realizing that if they don't address the affordability question, they're going to have trouble expanding coverage," said Joel Ario, a managing director for Manatt Health.
Delaware, Massachusetts, Oregon and Rhode Island have each adopted statewide healthcare cost benchmarks to control growing healthcare expenses. Massachusetts is the furthest along, and its benchmark helped the state save $4.7 billion in healthcare spending during a five-year period, according to Manatt.
Each state's approach to benchmarking is different, but they have some common features. All the states set a benchmark or target for statewide healthcare cost growth. They also collect data to compare healthcare spending to the benchmark. The states publish reports to identify cost drivers and try to contain spending growth through increased transparency among providers, payers and other healthcare companies.
States that have adopted benchmarking, or that are considering it, tout the approach as more comprehensive than other state-initiated measures like all-payer rate setting because it engages more stakeholders in the cost containment efforts.
"We know that prices are the biggest driver of healthcare costs, but we felt strongly that we needed to take a total cost of care approach," Vandehey said. "We needed to create a system where insurers and providers are collectively held accountable."
Massachusetts and Oregon have taken the most comprehensive approach thanks to a robust commitment from state officials and ample resources, while Delaware and Rhode Island have more "streamlined" benchmarking systems that could expand over time. States who want to pursue benchmarking will have a leg up on their counterparts if they have already taken measures to control healthcare costs and collected data.
"Oregon has two attributes that will allow it to build on the Massachusetts model," Ario said. "Oregon has always been a leader in transparency (and) they're not starting from scratch because they're already using benchmarking with their public programs.
States that want to adopt a healthcare cost benchmark will need to consider their circumstances when designing their policies. The report recommends that states evaluate their market landscape, resources, governance structures and data collection capabilities. States should also think about how they can identify and implement corrective actions through the public data disclosure and enforcement actions.
Policymakers have had particular troubles addressing enforcement actions. But there are "a number of options available" to hold the healthcare system accountable for costs, Vandehey said.
The federal government could help states leverage benchmarking by continuing to promote transparency and acting on drug costs, which states have little control over. It could also assist states with data collection and ensure payer alignment, especially as Medicare, Medicaid and commercial payers move toward value-based care.
"Ultimately, what's going to help (benchmarking) be successful is moving from a fee-for-service system to value-based payments," Vandehey said. "And giving states the ability to align our payment reform efforts across markets.
