The rapidly increasing cost of health care is burdening families, businesses, and government. In recent years, state policymakers have undertaken a range of activities to address health care costs, from establishing per capita growth targets to increasing transparency around pharmacy costs and addressing market consolidation.
With a focus on the private insurance market — the source of health coverage for the majority of Americans — we’ve developed a series of implementation guides to help state policymakers design effective solutions for containing health care costs. Topics for the five guides were selected for their potential impact on commercial health care costs and their potential to complement existing initiatives targeting health care spending growth, such as those related to pharmaceutical prices.
Each guide lays out key design decisions that policymakers will need to make, as well as the strategic and operational considerations for success. The guides draw on the relevant experiences of pioneering states and include evaluation results where possible. They also discuss ways to address health equity concerns that may arise during the implementation process. While each state needs to tailor its approach to its specific circumstances and goals, these guides present a framework to support thoughtful planning and effective action.
Select an implementation guide:
- Limiting the Rate of Growth in Provider Prices
Rapidly growing prices are the major driver of rising health care costs in the commercial market — rising average prices were wholly responsible for health care spending increases between 2016 and 2020. Drawing on lessons from Rhode Island and Delaware, which have established caps on how much provider prices can grow each year, this implementation guide offers a set of iterative and dynamic steps for states to limit health care costs through price growth caps.
- Capping High Provider Prices
Provider prices for the same services vary tremendously between hospitals and, in some cases, even within the same institutions. Provider price caps seek to establish some modicum of pricing discipline and they can take a variety of forms. Looking at Montana and Oregon’s hospital price caps in their public employee health benefit programs, as well as other price cap models championed nationally, this guide offers a roadmap for implementation that has the potential to generate significant savings by limiting spending and spending growth.
- Adopting Multipayer Value-Based Payment Models
Unlike the prevalent fee-for-service models, value-based payment is a health care purchasing strategy that can hold health care providers accountable for the quality and cost of care they deliver to patients. There are many possible models, including hospital global budgeting, episode-based payment, and total-cost-of-care contracting. This guide lays out concrete steps for states to plan and implement multipayer value-based payment models to promote higher-quality, more equitable, more cost-effective, and better-coordinated care.
- Adopting Multipayer Hospital Global Budgets
Hospital global budgets are fixed payments made to hospitals for a set of defined services. Because they are not paid based on the number of services they deliver, this alternative payment model can incentivize hospitals to better serve their communities rather than increase service volume. Using examples from New York, Maryland, Vermont, and Pennsylvania, this implementation guide offers a sequence of important decisions for states looking to adopt this model. The guide includes a sample calculation spreadsheet.
- Using Rate Review to Make Health Insurance More Affordable
Health insurers are typically required to file their proposed rates for individual and small-group health plans with state regulators every year. Rate review is an essential component of states’ comprehensive oversight of health care costs — it gives regulators the chance to review and even disapprove or modify proposed increases. Some states, like Rhode Island, have used their regulatory authority to advance rate review policies to achieve more affordable health coverage for consumers and businesses. This implementation guide offers a roadmap for states to exercise stronger rate review authority, which is associated with lower premiums in the individual market.