On Oct. 31, a team of four healthcare policy researchers published an analysis in the “Forefront” section of Health Affairs online, in which they analyze state governments’ attempts to rein in spending on healthcare, particularly the highly evolved program in Massachusetts; they find that, over time, such initiatives, even when well-conceived, produce diminishing returns in terms of cost savings.
“How States Are Holding Payers and Providers Accountable For Health Growth” is signatured by four researchers: Debra J. Lipson, Sarah Berk, Keanan Lane, and Rachel Block. Lipson is a senior fellow at Mathematica, where she leads evaluations of federal and state health policies and programs; Berk is the associate director of monitoring, evaluation, and research at the Peterson Center on Healthcare; Lane is a senior manager at the Peterson Center on Healthcare, where he manages a portfolio of grants that build analytic capacity to improve affordability, value, and performance of the US health care system; and Block is a program officer at the Milbank Memorial Fund, where she focuses on a variety of state health policy issues.
The authors note that, “In 2012, Massachusetts became the first state to enact a health care cost-growth benchmark, which set a target for annual rates of increase for all health spending, including by private insurers, tied to growth in the state’s economy. It also established several mechanisms to hold payers and providers accountable for keeping health spending growth below the benchmark. Some evidence suggests the initiative has reduced health care cost-growth rates in Massachusetts.”
Among the pieces of evidence the researchers put forward are the following:
Ø The average ate of cost growth during the first five years of the initiative (2012-2107) fell below the statewide benchmark of 3.6 percent, to 3.44 percent, and was at or below national growth rates—though the growth rate exceeded the benchmark in 2018 and 2019.
Ø Massachusetts had the second-lowest rate of growth in standardized per-person spending from 2013 to 2019 among all states.
Ø Although the state’s health spending is still high relative to the national average, its rank in health spending per capita fell from third-highest in 2014 to seventh-highest in 2019.
And, as the authors note, “Encouraged by Massachusetts’ progress, eight other states, most recently California, have adopted similar initiatives intended to reduce the rate of cost growth. The Golden State joins Delaware, Rhode Island, and Connecticut, which all adopted new statutory and funding support for their existing cost-growth target programs during their 2022 legislative sessions, and four other states—New Jersey, Nevada, Oregon, and Washington—that are implementing health care cost-growth targets. Many of these states participate in the Peterson-Milbank Program for Sustainable Health Care Costs, which provides technical assistance for cost-growth target-setting.”
Importantly, the researchers note, “State healthcare cost-growth targets establish a shared goal among state policy makers and healthcare stakeholders by which to judge collective performance”; that said, “[T]he effectiveness of such targets depends on the policy for holding payers and providers accountable for meeting them.” The complication is that even though all the states implementing these initiatives “leverage the power of public reporting on healthcare spending to persuade voluntary compliance with the cost-growth targets to avoid ‘naming and shaming,’” at the same time, “Some states have also enacted stronger enforcement tools, such as the imposition of performance improvement plans (a feature of the Massachusetts initiative) and financial penalties for failing to meet the target.”
Per all of that background, “The Peterson Center on Healthcare and Gates Ventures commissioned Mathematica to conduct a study of stakeholders’ experiences with, and views of, the Massachusetts Health Policy Commission’s (HPC) accountability mechanisms, and to draw lessons for other states. Mathematica conducted a comprehensive review of public documents and interviewed nearly 50 key stakeholders involved in, or affected by, the Massachusetts cost-growth benchmark initiative.”
In fact, “The study found that the HPC deployed its accountability tools effectively during its initial years of operation. Respondents said that the benchmark influenced contract negotiations between payers and providers and increased providers’ willingness to participate in accountable care organizations, both of which helped to constrain spending growth.”
But what happens when the stick is added to the carrot? “Last year, Oregon was the first state to add authority to levy financial penalties on plans or provider organizations whose cost growth exceeds the target ‘with statistical certainty and without good reason’ in three out of five years. This represents the strongest enforcement mechanism to date among states now implementing these programs.” And “California’s model also provides authority for financial penalties and corrective action plans. Beginning in 2025, the state’s new Health Care Affordability Board will set an overall statewide cost-growth target and specific targets tailored to geographic regions and different types of health care entities.”
The article’s authors believe Massachusetts’ experience offers clues as to what to do going forward, in this area. Their key recommendations to policymakers: “Ensure there is a transparent, trusted source of data on healthcare cost trends”; “decide which entities to hold accountable for keeping spending growth below the target, based on their contribution to cost growth; “establish clear criteria for applying sanctions”; and “devise incentives to motivate compliance. The researchers conclude that “Decades of federal and state policies designed to restrain cost growth have been stymied by payer and provider strategies designed to circumvent them. While continuing to rely on transparency and voluntary compliance, states implementing cost-growth target initiatives may need to strengthen their accountability tools if payers and providers fail to keep spending in line.”
