Seeking Affordability and Transparency, Five States Join the Peterson-Milbank Program for Sustainable Health Care Costs

Today we are pleased to announce that Connecticut, Oregon, Nevada, New Jersey, and Washington have been selected for participation in the Peterson-Milbank Program for Sustainable Health Care Costs. With the Peterson Center on Healthcare’s support, the Milbank Memorial Fund and Bailit Health will provide technical assistance to these five states as they set and implement health care cost growth targets as a first step toward making health care more affordable and transparent.

In the United States, health care costs have grown faster than the economy for decades. These rising costs are burdening states, employers, and families, as well as crowding out other critical priorities like education or housing. Moreover, the pandemic has stressed the budgets of many states and families through an abrupt decrease in revenue. Unfortunately, many states do not have a holistic understanding of health care spending and what is driving unsustainable increases. As a result, initiatives to address health care spending can be ineffective or have unintended side effects, such as simply shifting, rather than truly decreasing, costs across heath providers, payers, employers, and patients.

We believe that an important first step toward addressing health care cost growth is measuring it and analyzing its drivers. To work with states on such efforts, the Milbank Memorial Fund and the Peterson Center on Healthcare launched the Peterson-Milbank Program for Sustainable Health Care Costs. The program supports state-led activities that engage cross-sector stakeholders in designing, adopting, and implementing policies to measure health care costs and set a statewide health care cost growth rate target. A foremost activity is developing the necessary data infrastructure and collectively selecting an annual rate of growth for the whole health care system that is aligned with economic growth. The end-goal is systemwide, collaborative action to address cost growth drivers and improve health care performance.

The approach is modeled on Massachusetts’s cost growth benchmark set in 2012. Since 2013, state spending growth has been, on average, lower than the benchmark and lower than the national rate of growth. In the commercial insurance sector, employers and individuals in Massachusetts spent about $7.2 billion less from 2013 to 2018 than they would have if the state’s spending growth had risen as fast as the national average.

After seeing the success of such initiatives in Massachusetts and other states, Connecticut Governor Ned Lamont and fellow policymakers decided to establish a cost growth target via executive order. Vicki Veltri, executive director of the Connecticut Office of Health Strategy, expressed the value in having all stakeholders, including health providers, health insurance, employers, and consumers, participating in the process: “It’s hard but it does the obvious, which is give everyone a voice. Alignment around the strategy is important to ensure people are champions of the work and are looking at the same data and understanding it in the same way. We want to be swimming in the same direction. What we’re seeing in terms of costs and patient experience will help us provide a platform for better policymaking.”

Jeremy Vandehey, health policy and analytics division director at the Oregon Health Authority, says that he’s looking forward to having program support to help customize the implementation of Oregon’s health care cost growth target, which was established by legislation.

“The concept of targets isn’t going to solve all things health care but it’s a pillar of our state health care plans in terms of where to expand coverage, contain costs, and drive value,” Vandehey says. “This program will provide a lot of the data infrastructure to have an informed process about how to move forward on our goal of high-quality, affordable health care.”

In Oregon, health care prices are high, utilization is low, and there is considerable competition among health insurers. According to Jack Friedman, chair of Oregon’s stakeholder group and a former health insurance company CEO, Oregon is home to a lot of high-deductible and high-premium plans, meaning Oregonians spend a disproportionate amount of their income on health care.

That’s why targets are so important, says Friedman, adding that during the target development process, it’s also important to develop “a safe environment for stakeholders where there’s no pointing fingers at who is responsible for high health care costs.” Stakeholders also need to establish accountability so that payers and providers meet their targets, he says.

Nearby Washington is just starting its target-setting process. “I’m very excited about the relief we can provide businesses and families, and the room we can make for other social investments in the state,” says Sue Birch, Health Care Authority Director, Washington State. “It wouldn’t be possible without the support of Peterson, Milbank, and other innovative state leaders.”

Nevada and New Jersey are also launching the work of setting a growth target with their state payers, advocates, employers, and others. “As we have seen across the nation and especially in our state’s ongoing battle with the pandemic, COVID-19 has not only devastated our economy, but it has turned gaps in coverage into chasms, especially for those who need it the most,” says Sara Cholhagian, executive director of Nevada’s Patient Protection Commission. “My hope is that this program will help our state address growth in health care spending across all populations by facilitating a greater depth of experts working alongside our state with collective action from payers and stakeholders.”

Shabham Salih, director of the New Jersey Office of Health Care Affordability and Transparency, agrees that the pandemic has underscored the need for states to take action on rising health care costs. “Now more than ever, the COVID-19 pandemic has highlighted the importance of equitable access to more affordable health care and the critical need to advance New Jersey’s efforts to build a more accessible, affordable and transparent health care system for our residents, families, and employers,” Salih says. “We thank the Peterson Center on Healthcare and the Milbank Memorial Fund for this opportunity and look forward to working with Bailit Health for their expertise and guidance as we develop and implement health care cost growth targets in our state, to help stem the tide of rising health care costs. I believe this work will help New Jersey lay a strong foundation for years to come of more robust and focused health care affordability work.”

For more on the program, watch the slide show below on the steps involved in setting and implementing health care cost growth targets and identifying cost drivers.