Editor’s Note: Welcome to the Manatt State Cost Containment Update, a digital publication produced with generous support from the Robert Wood Johnson Foundation and developed in coordination with the Peterson-Milbank Program for Sustainable Health Care Costs. This Manatt series, released quarterly, shares the latest updates on state cost growth benchmarking programs and other data-driven initiatives states are undertaking to contain health care cost growth. In each edition, we also feature a spotlight issue that speaks to how state benchmarking programs are evolving to meet new policy and program priorities. In the May edition, summarized below, we examine how benchmarking programs may be used to assess and redirect health care spending toward high-value service areas, such as primary care and behavioral health. Click here to read our full May update.
In April, Manatt hosted a webinar titled “Leveraging State Cost Benchmarking Models to Address Health Care Cost Growth,” with guest speakers Victoria Veltri, Executive Director, Office of Health Strategy (OHS), state of Connecticut, and Sarah Bartlemann, Cost Growth Target Program Manager, Oregon Health Authority. To view the program free on demand and download a free copy of the presentation, click here.
Leveraging State Benchmarking Programs to Drive Investments in Primary Care
The takeaway. State cost growth benchmarking programs support market transparency and accountability and may be used to assess and redirect health care spending to higher-value, preventive services, such as primary and behavioral health care, through “priority service” targets.
What it is. States are increasingly seeking both to constrain health care cost growth and to influence where health care dollars are being invested, with the goal of redirecting spending to high-value services and activities that support long-term population health, such as primary care.
While the United States far exceeds peer countries in health care spending—at $4.1 trillion or $12,530 per person in 20201—it continues to lag in terms of care access, administrative efficiency, equity and health care outcomes. There is a disconnect between how much the United States is investing in health care and how much it is getting in return.2 Studies indicate that the disconnect may be attributable, in part, to where health care dollars are being invested.
Studies of other Organization for Economic Cooperation and Development (OECD) countries indicate that stronger primary care systems, for example, are correlated with better population health outcomes, such as lower overall mortality rates, lower rates of premature death and lower hospitalizations for ambulatory care-sensitive conditions,3 and higher infant birth weight, life expectancy and overall satisfaction with the health care system.4 Even within the United States, communities with greater primary care availability have reported better patient outcomes as well as decreased use of more costly health service categories, such as inpatient hospitalizations and emergency department visits.5
States like Rhode Island and Delaware have long recognized the value of investments in primary care and successfully directed attention and spending through existing insurance regulatory authorities. For example, Rhode Island’s Affordability Standards required regulated commercial insurers to spend at least 10.7% of their total health care spending on primary care services under the health insurance commissioner’s rate review authority. Insurer primary care spending achieved the state-set target of 10.7% in 2014, and actually exceeded the target in 2018, reaching 12.3%. Delaware is seeking to pursue a similar strategy through the implementation of its own state Affordability Standards. Other states, such as Connecticut and Massachusetts, are testing how they may leverage their benchmarking programs as a mechanism for advancing broader primary care investment agendas across all markets.
What it means. State cost growth benchmarking programs are data-driven, transparency-focused, cost-containment initiatives that measure resident health care spending growth in relation to established targets, and payers and providers that exceed targets may be subject to public inquiry or penalty. Health care cost growth benchmarking programs can provide states with a mechanism to advance cost containment and priority service objectives, allowing stakeholders to measure and monitor primary care spending against total system spend and use this information to influence investments in preventive services. For example, Connecticut is the first state with a cost growth benchmarking program that has established primary care spending targets as part of its statewide program. The OHS has adopted primary care spending targets of 5.3% for 2022, 6.9% for 2023, 8.5% for 2024 and 10% for 2025, and the OHS will collect primary care spending data from payers within their cost growth benchmark data submissions in late 2022. In Massachusetts, the governor has proposed the creation of a statewide aggregate primary and behavioral health care spending target and set a goal of increasing spending on these services by 30% over three years while maintaining the state’s health care cost growth benchmark. Progress toward meeting these spending targets will be assessed by the state’s regular cost growth benchmark reporting process, and accountability measures for entities that fail to achieve the established primary care spending target may mirror the accountability measures in place for entities that fail to achieve the state’s cost growth target.
What happens next. As state cost growth benchmarking programs continue to proliferate and mature, more states will explore ways to leverage their data collection and reporting to advance local priorities, including increasing investments in preventive services like primary care and behavioral health.
1 “NHE Fact Sheet,” Centers for Medicare & Medicaid Services. Available here: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet.
2 “Mirror, Mirror 2021: Reflecting Poorly—Health Care in the U.S. Compared to Other High-Income Countries,” The Commonwealth Fund. August 4, 2021. Available here: https://www.commonwealthfund.org/publications/fund-reports/2021/aug/mirror-mirror-2021-reflecting-poorly.
3 M. Niti, T. Ng. “Avoidable hospitalisation rates in Singapore, 1991–1998: assessing trends and inequities of quality in primary care,” Journal of Epidemiology and Community Health. January 2003. Available here: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1732279/.
4 J. Macinko, B. Starfield, L. Shi. “The Contribution of Primary Care Systems to Health Outcomes within Organization for Economic Cooperation and Development (OECD) Countries, 1970–1998,” Health Services Research. June 2003. Available here: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1360919/.
5 C. Chang, T. A. Stukel, A. B. Flood, D. C. Goodman. “Primary Care Physician Workforce and Medicare Beneficiaries’ Health Outcomes,” JAMA. May 25, 2012. Available here: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3108147/.