What States Can Do to Control Rising Health Care Costs

As open enrollment season for health insurance plans approaches or is already underway, we are seeing significant premium increases across the country. Between 2010 and 2022, insurance premiums for family coverage increased by more than 63%, exceeding $700 per year on average. In a survey, employers predicted a 7% increase in bonuses for 2024.

The premium increases are part of a broader trend of rapidly rising health care costs, which is making health care increasingly unaffordable for consumers and a burden on employers and governments. A 2022 Commonwealth Fund report found that 46 percent of working-age adults in the United States had skipped or delayed needed care because of cost, and 42 percent reported having difficulty paying medical bills or to repay their medical debts. The recent unprecedented decline in life expectancy in the United States will only be exacerbated by 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 of states working to control health care costs. Although we are on opposite coasts, we see the same trends, the same problems and the same consequences.

We are working on a series of solutions to the health care cost crisis, including setting an annual cost growth target to hold health care providers accountable for rising health care costs. In each of our states, we worked with insurers, hospitals and other health care providers, employers, unions and consumer groups to set a goal for annual increases in total state health care spending. statewide. As health care costs increasingly eat into household budgets, this goal is tied to the expected growth in income of our residents.

Every year, we collect data from public and private health plans that details where our health care dollars go. We then compare spending across different plans and providers to see how they stack up against the benchmark.

The transparency that comes with a cost growth target has 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 measure actual performance against our goal, we create an information base for strategies to improve health care affordability.

When we decouple health care costs, we clearly understand what’s driving increased spending and where our collective efforts should focus. We see that this process brings everyone to the table and helps move our health systems toward affordability.

For example, in each of our states, our analyzes highlight that hospital spending and prescription drug spending are key factors. We are therefore studying ways to reduce this cost growth. Our two states have joined ArrayRx, a prescription drug purchasing coalition to get better prices on prescription drugs. Connecticut’s release of its first benchmark report on cost growth led to legislation strengthening oversight of pharmaceutical marketing and improving transparency of price increases for high-cost drugs to help slow the cost growth in this sector.

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

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 one in five Americans now lives in a state with such a mechanism. Other states, including Maine and Utah, are exploring the idea.

We cannot continue to pay so much more for health care; we need to slow the rate 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 director of the Washington State Health Care Authority. Deidre Gifford is the executive director of the Connecticut Office of Health Strategy.

GoverningOpinion columns reflect the opinions of their authors and not necessarily those of Governings editors or management.