Emergence and Potential of State Healthcare Cost Growth Benchmark Programs

Abstract

Healthcare cost benchmark programs have emerged as states seek to curb healthcare cost growth. States feel the adverse effects of rising healthcare expenditures acutely through Medicaid, employee health benefit programs, and the growing burden of benefit costs on private sector employers. Beginning with Massachusetts in 2013, eight states have established benchmarks through executive action or legislation. These programs set cost-growth benchmarks and collect data to compare spending trends to the benchmarks at multiple levels, from statewide performance to individual providers and insurers. Many states employ a graduated strategy to promote compliance with benchmarks, ranging from public reporting of provider and insurer performance to imposing sanctions for persistent growth above targets. The effectiveness of these initiatives is not yet clear, in part because most programs are relatively new and early trends were obscured by the pandemic. Several factors suggest that benchmark programs may ultimately achieve meaningful, sustainable impact, including mounting cost pressures, broad support for transparency, and phased enforcement approaches. However, entrenched interests, the need for ongoing investment in program infrastructure, and the inherent complexity of healthcare cost containment present significant challenges.