Washington State Officials Examine Options to Address Affordability

Dec. 4, 2023
Among options being explored are healthcare cost growth benchmarks, public option health plans, exchange subsidies, and an all-payer model

In a preliminary report to the Washington Legislature, state Insurance Commissioner Mike Kreidler and Attorney General Bob Ferguson examine several policy options that other states have pursued to address healthcare affordability, including the possible creation of an all-payer model, as in Maryland.

The Legislature provided Kreidler and Ferguson with funding last year to review key factors impacting the affordability of healthcare coverage for individuals, businesses and government in the Evergreen State. Their two offices were tasked with compiling policy options for improving the affordability of healthcare in Washington. The final report is due to the Legislature in August 2024.

Healthcare expenditures now account for over 20 percent of Washington’s general fund budget. 

The report notes that challenges with healthcare affordability are not limited to individuals with lower incomes or those without health insurance. A survey of 1,300 Washingtonians in November 2022 found that 62 percent of respondents had experienced at least one healthcare affordability burden in the past year – including rationing medication, delaying or going without care, and depleting savings – and that 81 percent worried about affording healthcare in the future.

“Washington state has made tremendous progress in helping people access health coverage,” said Kreidler, in a statement. “Our uninsured rate is one of the lowest in the country, and I’m so proud we were early adopters of Medicaid expansion. But too many people have health insurance they cannot afford to use. We need to get at the underlying costs of healthcare and I'm grateful the Legislature is helping us do this critical work.”  

The preliminary report includes details on: 
• The structure of Washington’s current healthcare system, including information about vertical and horizontal consolidation of health insurers, hospitals and healthcare providers. 
• Private equity investment trends in Washington.
• An overview of current enforcement of federal and state antitrust laws aimed at securing strong market competition. 
• A review of how other states monitor and challenge healthcare consolidation. 
• A review of non-compete agreements in healthcare and anti-competitive provisions in insurer/provider contracts.

The interim report looks at policy options that other states have pursued to address healthcare affordability and, where applicable, compares the Washington experience with that of other states. These policies include:
• Set healthcare cost growth benchmarks
• Establish prescription drug pricing regulation
• Enhance health insurance rate review
• Increase health insurer medical loss ratio requirements
• Implement a reinsurance program
• Use reference-based pricing
• Implement facility fee reform (e.g., site-neutral payment requirements)
• Offer public option health plans
• Implement exchange subsidies
• Enact a state individual mandate
• Create an all-payer model, as in Maryland

Under a total-cost-of-care model, Maryland accepts accountability for growth in Medicare spending per enrollee, and each hospital is subject to a Medicare performance adjustment (MPA) based on total per capita spending increases in its service area relative to a target growth level. Through TCOC, Maryland aims to save on Medicare per capita total cost of care during each model year (2019−2023). The state’s goal is to achieve more than $1 billion in Medicare total cost of care savings by the fifth model year, 2023.

The final report to the Washington Legislature will include actuarial analysis and economic modeling to project the likely impact of adopting policies to address healthcare affordability. This preliminary report describes the analytic framework of the economic model, which will be used to estimate the impact of the policy options selected for further analysis.

The model will examine both direct benefits, such as the effect on healthcare spending by major purchasers of health insurance and indirect benefits, including increases in wages and reduced spending on means-tested programs. The model also will estimate the multiplier effect, which will reflect the positive ripple effect on Washington’s economy as various parties experience savings from lower healthcare costs, which can be spent on wages, new business investments, etc. The model also will examine the costs that probably would be incurred to develop, implement, and manage the new policies.

The final outputs of the model will be a calculation of the ratio of total benefits to total costs, and the return on investment from adopting the policies examined.


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