Healthcare Affordability Series #3
Introduction
As of 2020, New York State’s per capita healthcare expenditure was the highest in the nation at $14,007—179% higher than it was in 2000 and 37% higher than the national average as of 2020.[1] Healthcare costs represent part of the “crisis of affordability” in New York, which is becoming as dominant a political issue today as “inequality” was a decade ago. A comprehensive healthcare strategy for New York cannot avoid the issue of affordability, so affordability is one of the major focus areas of the Step Two Policy Project.
Our January 2024 Commentary, The Affordability of Healthcare in New York, began our examination of the issue with the question, in part, of “affordable for whom?” – the answers to which must address the three distinct constituencies of individual consumers, employers, and taxpayers. Our January 2024 Issue Brief, Using Health Data and Information to Better Measure the Affordability of Healthcare, sought to help answer that question by identifying publicly available resources that offer valuable context about healthcare expenditures across service types and geographies.
This third paper in the Affordability Series discusses a strategy that a growing number of states are pursuing to constrain growth in healthcare costs. These states establish an annual health expenditure growth target, typically referred to as a “healthcare cost growth benchmark.” Most states use the terms “cost” and “expenditure” interchangeably to refer to the total amount of spending in the healthcare ecosystem (including the non-medical expenses of insurance plans).[2] Some states, such as California, refer to a “spending target.” This Policy Brief will use “growth target” and “growth benchmark” interchangeably and “spending” and “expenditure” interchangeably.
For a variety of reasons, a healthcare cost growth benchmark has never been proposed in New York, either by the Executive or, so far as we know, as a legislative bill. This Policy Brief examines how healthcare cost growth targets operate in other states and discusses the pros and cons of establishing such a benchmark in New York as part of a broader strategy to improve the affordability of healthcare.
Background: the Relentless Rise of Healthcare Expenditures
U.S. spending on healthcare is higher than in any other wealthy nation, yet our life expectancy, rates of chronic disease, maternal mortality, and other outcomes are not commensurate with that spending. The growth in National Health Expenditures in absolute terms and as a share of gross domestic product is shown in the chart below.
Expenditures are rising due to both utilization increases and price inflation, with price inflation accounting for most of the growth.[3],[4] There are many reasons for price inflation, including providers with significant market power extracting ever-higher prices in certain markets (a phenomenon heightened by growing horizontal and vertical integration), growth in clinical procedures involving expensive technology,[5] and revenue maximization strategies such as up-coding to capture increased reimbursement.[6] If utilization increases were the primary source of expenditure growth, we might expect better outcomes in return. Instead, utilization increases have not been uniform, and many preventive healthcare services are underutilized, eventually requiring more complex interventions to manage advanced disease conditions.
For many years, persistent growth in healthcare expenditures and the resulting strains on healthcare affordability have been top of mind for federal and state elected officials, policymakers, healthcare stakeholders, and the public.[7] At the federal level, the lack of affordable healthcare coverage was a significant motivation for the passage of the Affordable Care Act (ACA) in 2010, which led to a reduction in the uninsured rate between 2010 and 2022 from 15.6% to 8.0% nationally and from 12.0% to 4.9% in New York.[8]
Although the ACA significantly improved the affordability of healthcare coverage for individuals up to 400% of the federal poverty level by providing tax subsidies on a sliding scale based on household income, premiums for employer-sponsored family coverage increased nationally by 22% from 2015 to 2020 and 55% from 2010 to 2020.[9] In New York, premiums for employer-sponsored family coverage increased by 19% from 2015 to 2020 and 59% from 2010 to 2020.[10]
The two charts below show 1) the increase in premiums for employer-sponsored family health insurance in New York compared to average family wage growth in New York and 2) the growth in total premiums and employers’ and workers’ contributions, both nationally and in New York State.[11]
Insurance premiums and individual contributions are useful measures of affordability for individuals and employers. However, in terms of affordability of healthcare for taxpayers, national healthcare expenditures have historically outpaced GDP growth[12] and now dominate state budgets across the country, with comparatively little to show for this increased investment in the way of improved life expectancy, rates of chronic disease, or maternal and infant mortality. The growth of healthcare expenditures as a percentage of total state budgets has the effect of crowding out other spending in other sectors, detracting resources from investments in other areas that ultimately influence health outcomes, such as housing, education, and other social determinants of health.
Much of the work of the Step Two Policy Project seeks to address the underlying drivers of healthcare expenditure growth that is disproportionately funded by State government, such as personal care within managed long-term care and operating subsidies for financially distressed hospitals. An analysis of the drivers of healthcare expenditure growth more generally is beyond the scope of this Policy Brief, but recognition of these underlying drivers is relevant to structuring a healthcare cost growth benchmark. These drivers include spending associated with demographic changes (including higher service utilization by an aging population with more chronic disease burden), the role of payers in the administration of the healthcare system itself, rising prices in areas ranging from prescription drugs to specialty services delivered in an increasingly consolidated market,[13] and disparities in access that eventually increase the total cost of care for vulnerable populations.[14]
When states seek to constrain the growth of healthcare expenditures in the commercial market, they run into a variety of challenges. First, the solutions to problems driving growth in the cost of healthcare are difficult to identify and even harder to implement. With limited exceptions, such as in Maryland, states have not used direct measures such as setting all-payer hospital rates or setting upper payment limits for pharmaceuticals (though prescription drug affordability boards are increasingly common). Indirect cost containment strategies, such as state actions to encourage value-based purchasing of healthcare through alternative payment models, may well be the right strategy but have not fully taken root.
Without a strong health data, information, and analysis infrastructure, states may have limited insight into price trends and utilization patterns that can help accurately diagnose cost drivers. By contrast, states with robust health data infrastructure can at least drill down and develop valuable insights stratified by payer, provider, patient age, and more,[15] to develop targeted initiatives to improve affordability. We view strengthening New York’s health data and information infrastructure as integral to any potential development of a healthcare cost growth benchmark.
Perhaps because states have been unable to establish other mechanisms to slow the growth in healthcare costs, an increasing number have turned to adopting healthcare cost growth targets or benchmarks in the expectation that this will increase accountability and slow spending growth.
Components of Healthcare Cost Growth Benchmarks and their Implementation
Nine states have adopted healthcare cost growth benchmarks as a policy tool for monitoring and controlling spending in the healthcare sector.[16] Maine and Minnesota have also recently engaged in planning around this topic, though they have not yet established benchmarks. The National Academy for State Health Policy issued a useful matrix summarizing the components of benchmark programs in these nine states. The matrix includes columns detailing the relevant Collecting and Reporting Agency, Cost Growth Benchmark Level, Total Cost of Care Measurement, Quality Benchmarks/Measures, and Enforcement (as applicable). The full NASHP matrix is included in the Appendix.
Cost Growth Benchmark Levels
The table below shows states’ cost growth target levels, the year in which the state authorized the creation of a benchmark, the initial benchmark values, and, as available, the performance of actual spending compared to the benchmark.[17]
State | Year of Benchmark Approval | First Benchmark Year | Value of Initial Benchmark | Latest Cost Growth Target | Latest Performance |
2022 | 2025 | See values at right. | 3.5% for 2025-26 | N/A | |
3.2% for 2027-28 | |||||
3.0% for 2029+ | |||||
2020 | 2021 | 3.4% | 4.0% for 2024 | 2022: 3.4% performance against benchmark of 3.2% | |
2.9% for 2025 | |||||
2018 | 2019 | 3.0% | 3.0% for 2024 | 2021: 11.2% performance against benchmark of 2.25% | |
TBD for 2025 | |||||
2012 | 2013 | 3.6% | 3.6% for 2024 | ||
2021 | 2022 | 3.19% | 2.78% for 2024 | N/A | |
2.58% for 2025 | |||||
2.37% for 2026 | |||||
2021 | 2023 | 3.5% | 3.2% for 2024 | N/A | |
3.0% for 2025 | |||||
2.8% for 2026-2027 | |||||
2019/2021 | 2021 | 3.4% | 3.4% for 2021-2025 | ||
3.0% for 2026 | |||||
2019 | 2019 | 3.2% | 5.1% for 2024 | 2022: 1.6% performance against 3.2% benchmark | |
3.6% for 2025 | |||||
2020 | 2022 | 3.2% | 3.0% for 2024-2025 | N/A | |
2.8% for 2026-2039 |
How the Benchmark is Calculated
The mechanics of benchmark-setting and the definition of terms relevant to the benchmark vary by state. The measure itself is typically a variation of total healthcare expenditure (THCE), which is a per-capita composite of total medical expense (the full amount paid to providers for healthcare services delivered to a payer’s members, including all amounts paid by the payer, all member cost-sharing, and any non-claims payments to providers), and the net cost of private health insurance.[18] The net cost of insurance reflects the administrative costs of private health insurance. States take into account broader economic indicators in establishing their benchmark rates, typically including growth in potential gross state product,[19] growth in median household income, or a combination thereof. State-by-state details on THCE definition and economic indicators informing the benchmark are available in the Appendix.
Most states establish a "glide path" to gradually lower their benchmark levels, incrementally reducing their cost growth targets over several years to give the system time to adjust.
Considering the recent estimate from the Center for Medicare and Medicaid Services (CMS) Office of the Actuary of 5.4% annual growth in national health expenditure from 2024 to 2031,[20] the benchmark levels states have established seem low. Performance against benchmarks to date has been mixed. Unpredictability during the peak years of the COVID-19 pandemic destabilized many providers and healthcare institutions and fundamentally changed many aspects of care delivery.[21] In 2021, for example, Rhode Island was the only one of (then) five benchmark states to meet its growth benchmark.[22]
Stakeholders in California, the newest benchmark state, have been grappling with the practical challenges of a low spending target established by the California Health Care Affordability Board. The California Hospital Association (CHA) wrote a letter challenging several aspects of the originally proposed 3.0% spending growth target. CHA argued that the benchmark should accommodate growing pressures on spending associated with increased supply costs, labor costs (including the state’s new healthcare worker minimum wage), and Medicaid rate increases. CHA argued that if these factors were incorporated, the growth target should be between 5.3% and 6.3% (see table at right excerpted from the letter). This range also reflects CHA’s estimated need for a +0.7 or +0.8% demographic adjustment to the proposed benchmark on account of expected growth related to population aging, as well as a “glide path” to gradually reduce the growth target’s value over several years.[23] Shortly after the letter, the California Health Care Affordability Board approved a modestly adjusted growth target of 3.5% for 2025, although it did create a glide path to the originally proposed 3.0% by 2029.[24]
Critics of healthcare cost growth benchmarks express concern for providers’ financial sustainability under the pressures of operating in a cost containment environment. Comprehensively balancing the reality of spending flexibility against the goals of the benchmark presents both conceptual and technical challenges. For example, benchmark states have wrestled with how to account for uncompensated care provided for the uninsured and with charges for bad debt.[25] If New York is going to establish a benchmark, it will be important to examine how to manage these difficult issues.
How Benchmarks Take Quality into Account
Most benchmark states consider quality as part of their cost growth benchmarks. Implicitly, states recognize that it is important to ensure that expenditure constraints do not compromise quality. States with ongoing cost containment activity have also been exploring tools to promote and monitor quality and outcomes—some as part of their enabling legislation, others as a practical effort after the law has taken effect.
Among the quality measures typically included along with benchmark expenditure reporting are measures of patient satisfaction (such as from Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys), utilization measures (e.g., 30-day readmissions, preventable emergency department visits), screening measures (e.g., for breast cancer), and safety measures (e.g., incidence of healthcare-associated infections). While some benchmark states have implemented value-based payment (VBP) arrangements that incentivize meeting quality measure goals (e.g., Oregon’s Coordinated Care Organizations), benchmark states do not apply the same accountability standards to quality measure performance as they do to cost growth.
Enforcement Mechanisms and Authority
If positive recognition for achieving savings is the policy carrot, fines and penalties are the stick, at least in the three benchmark states that have established enforcement authority over their healthcare cost growth benchmarks. Massachusetts, Oregon, and California can require performance improvement plans (PIPs) from and/or impose penalties on organizations and institutions responsible for excessive cost growth.
Oregon has used transparency initiatives to encourage competition and efficiency among providers but has also implemented PIPs as a first-line action against organizations.[26] Specifically, Oregon allows penalties for exceeding growth targets over three out of five years “with statistical certainty and without good reason.”[27] Such “good reasons” may include the entry of new drugs to the market, changes in mandated benefits, relevant legal changes, investments to improve population health, and even some macroeconomic trends.[28] The breadth of these exceptions may have a collectively moderating effect on the potency of benchmark enforcement in Oregon, though time will tell.
California, a newer benchmark state, will first intervene with entities exceeding various benchmarks by providing technical assistance and requesting testimony at public meetings, then issuing corrective action plans and escalating financial penalties for those not in compliance.[29]
Massachusetts, the first state to establish a healthcare cost growth benchmark, did not pursue enforcement for many years and has used its enforcement authority just once in its 12-year benchmark history.[30] In January 2022, the Health Policy Commission (HPC), which oversees the benchmark, voted to require a Performance Improvement Plan (PIP) in response to a provider’s role in the state’s cost growth. That provider was Mass General Brigham (MGB). The rationale for the PIP was that spending by the MGB system had impacted the state’s ability to meet its benchmark and would continue to jeopardize achievement of the benchmark unless addressed. The PIP requires MGB to reduce spending by $176.3 million over the 18 months from October 2022 to March 2024 through ten interventions across a combination of four categories: price reductions, reduced utilization, shifting care to lower-cost sites, and value-based care. MGB has reported an operating loss of $432 million and operating revenue of $16.7 billion for the fiscal year ending September 2022, and an operating loss of $48 million and operating revenue of $18.8 billion (the ninth highest in the country) for the fiscal year ending September 2023.
Whether to establish enforcement authority of a cost benchmark is a complicated policy decision. There is some evidence that the mere existence of a benchmark with its public accountability and perhaps the threat of penalty can influence decisions affecting expenditure growth.[31] A 2022 Mathematica study explored how the cost growth benchmark in Massachusetts and the HPC influenced relevant stakeholders to contain costs. The study observed an early but eventually waning “sentinel effect” of the Health Policy Commission on spending in Massachusetts — effectively, a phenomenon of improvement arising from awareness of being monitored.[32]
The other benchmark states do not have an enforcement mechanism like Massachusetts’s or Oregon’s; instead, they rely on public reporting of expenditure trends as the primary means of accountability. Proponents of a model without enforcement actions believe that although states have had mixed results in achieving their cost growth benchmarks, they still derive value from the existence of a benchmark and the related oversight authority because it establishes an expectation of financial stewardship and transparency for payers and providers.
The Process of Defining, Planning, and Implementing Healthcare Spending Growth Benchmarks
States’ approaches to developing their benchmarks vary, but commonly, a multistakeholder commission convenes to determine the specific benchmark’s level for a given year. Then, healthcare spending is measured retroactively against the benchmark to determine whether spending growth has changed and, specifically, how the rate of expenditure growth compares to overall economic growth in the state, inflation, and other relevant metrics.
States measure the performance of individual health systems against the overall benchmarks by collecting robust, regular data from payers and performing consistent analyses to identify change over time. Through this analysis, a state can identify specific areas—such as hospital inpatient or prescription drug spending—where expenditures surpass the benchmark, or specific payers or provider systems responsible for increased prices, spending, and utilization. The capacity to measure spending within a payer type, age group, etc., enables states to identify inequities, flag outliers, and respond accordingly.
As described earlier, some benchmark states have enforcement authority to require certain providers to take actions that may curb what the State regards as excessive spending. These enforcement powers include the authority to issue financial penalties or require performance improvement plans. States also publicly report on payers’ and providers’ performance relative to the benchmark. These strategies promote transparency and accountability and act as incentives for achieving cost growth benchmarks.
While many states’ healthcare cost growth benchmark initiatives have originated from Governors’ Executive Orders, more sustained planning requires dedicated legislation and ongoing governance for the purpose of benchmark-setting. Typically, governance bodies are composed of stakeholders, including providers, payers, and patients, with the process for setting the benchmark being transparent and publicly accessible. This often includes a public hearing that presents an analysis of the year’s performance and offers an opportunity for stakeholders’ commentary on observed areas of analytic and practical importance for the next year. States may hold separate hearings to discuss adjusting the benchmark itself. Other regular public hearings may complement this process of public discussion of spending trends without an explicit focus on system performance against the benchmark.[33]
The use of benchmarks is not limited to system-wide expenditure growth. Many states with healthcare cost growth benchmarks, and some without, have instituted spending targets for sectors of care that historically have been underfunded, such as primary care or behavioral health. These sector spending targets are intended to grow rather than constrain spending in these areas. The rationale for these sector spending targets is that specifically monitoring spending in these areas will help ensure that spending on primary care and behavioral health is commensurate with policymakers’ view of their importance. Some twenty states (roughly twice as many as have total cost growth benchmarks) have established requirements for measuring spending in primary care.
Ancillary Issues to Healthcare Cost Growth Benchmarks
Analysis of healthcare cost growth benchmarks in other states brings into focus several topics often considered in parallel. These include oversight of market consolidations, provider sustainability, and the role of health data and information infrastructure.
Market Consolidation Oversight
There is a consensus among economists that consolidation in the healthcare market has contributed to price growth and higher spending.[34] For this reason, Massachusetts has linked regulatory oversight of consolidation in the healthcare industry to its healthcare cost growth target. In Massachusetts, the HPC plays a central role in overseeing healthcare market consolidation. One of its key functions is to review proposed “material changes,” including mergers, acquisitions, clinical affiliations, and other contracting and administrative partnerships, for their potential impact on market competition and costs.
At least 60 days before making any material change, Massachusetts providers must file a public material change notice with the HPC. The HPC then evaluates whether the proposed change will likely impact competition or achievement of the healthcare cost growth benchmark. If so, the HPC conducts a Cost and Market Impact Review (CMIR), assessing the proposal’s potential impacts. While the HPC cannot prohibit a transaction, it can refer its CMIR findings and final report to the Massachusetts Attorney General’s Office, Department of Public Health, or other State agencies for further action.[35],[36]
The theory of the Massachusetts approach is that it not only curbs excessive market power but also ensures that material changes align with the broader objectives of healthcare reform in Massachusetts, emphasizing cost containment and quality improvement.
New York utilizes a multi-agency approach to perform more traditional oversight of healthcare consolidation, with the Department of Health and the Public Health and Health Planning Council (PHHPC) playing key roles. These bodies focus on ensuring that expansions and consolidations serve the public's health interests, reviewing proposals for establishing, constructing, and operating healthcare facilities. New York was the first state to enact a Certificate of Need (CON) law in 1964.[37] The CON process is designed to assess whether proposed mergers and acquisitions will improve access to care, enhance the quality of services, and maintain affordability while avoiding overconcentration, service duplication, or overlapping capacity. New York's approach, while comprehensive, has been critiqued for its complexity, raising concerns about its adaptability to the rapidly changing healthcare landscape. Variations of CON programs currently exist in 35 states, including most benchmark states,[38] and the type of health data and information made available to support regular performance evaluation against a benchmark can be valuable to more effective CON processes.[39]
Massachusetts also maintains a CON process (which it refers to as “Determination of Need” (DON)) that requires healthcare providers to obtain prior approval from the State DPH before initiating certain healthcare projects. This process includes a number of considerations for upholding patient access and care quality. The HPC CMIR process has some overlapping goals with the DON process, but it is indicated and conducted separately, often ahead of the DON process.
Both Massachusetts and New York share the objective of mitigating the negative effects of healthcare market consolidation, such as reduced competition and increased costs. However, Massachusetts adopts a centralized, collaborative, and transparent review process focused on market dynamics and cost containment, whereas New York's strategy involves a wide range of considerations, including public health outcomes, service accessibility, and impact on equity, managed through a more multi-faceted regulatory framework. The differences in these two oversight mechanisms reflect not only divergent health policy philosophies but also their unique healthcare market conditions and political landscapes.
In addition to oversight over the consolidation of regulated healthcare entities, New York recently adopted a requirement of a 30-day notice of material transactions for certain healthcare entities that are otherwise unregulated (i.e., beyond the licensure of their practitioners and with respect to Medicaid participation).[40] This transparency requirement will give the State more insight into the impacts on “cost, quality, access, health equity, and competition in the impacted markets” of private equity- and investor-backed material changes.[41] New York’s statute is modeled on similar legislation in Oregon and even more rigorous efforts in Massachusetts, Washington, and California.
A new bill designed to ensure public input on consolidation decisions, A.1633-B (Simon)/S.8843-A (Rivera), passed both houses of the NYS Legislature this session but has not yet been sent to the Governor. This bill would require public notice and public engagement whenever a hospital seeks to close entirely or close a unit providing emergency, maternity, or behavioral healthcare.
Consolidation within the healthcare industry reflects the tension between competing goals. On the one hand, there is evidence nationally and within New York that consolidation, by increasing hospitals’ market power, allows them to negotiate even higher reimbursement rates from private insurers, further widening the gap with Medicaid rates.[42] On the other hand, consolidation is often necessary to preserve the financial viability of the weaker partner.
In the future, the tension between these two goals may be influenced by federal antitrust authorities. For example, the Federal Trade Commission, in a comment letter to the New York State Department of Health in connection with a possible merger of SUNY Upstate and Crouse Medical Center, expressed its view that under federal law, there was a high bar for proving that increased financial sustainability realized through efficiencies from consolidation outweighed the restraints on spending growth associated with competition.[43]
Provider Sustainability
The issue of enforcement intersects with issues of provider sustainability. Once a State has enforcement power, it raises the question of whether action should be taken against any specific provider that is viewed as excessively contributing to cost growth above the benchmark, as Massachusetts has done with MGB.
The Milbank Memorial Fund published a "Playbook for States Implementing a Cost Growth Target.” One module, “Measuring Performance against the Target,” identifies considerations for states when determining what counts toward the benchmark and at what level, including defining the types of entities that are subject to enforcement actions.
For example, in Massachusetts, the PIP review process begins with the Center for Health Information and Analysis annually referring entities whose expenditure growth exceeds the benchmark for each line of business (i.e., commercial, Medicare, and Medicaid) to the HPC. The HPC then examines these entities closely and confidentially and may, from there, request a PIP submission.[44]
However, the definition of health status-adjusted total medical expense in Massachusetts [45] limits the types of entities that can be held accountable. For example, hospital spending is excluded from the benchmark for patients whose primary care provider is affiliated with the health system owned by other hospitals and for patients who are not attributed to any primary care provider.
States may choose to include only large provider organizations (e.g., at the medical group, health system, or independent practice association level) to ensure that each benchmark entity is large enough to potentially influence expenditures statewide. These distinctions can protect smaller, more financially vulnerable providers from the consequences of exceeding benchmarks.
States also have the option to make protective conditions for areas where spending growth is being encouraged as a matter of policy, such as primary care, behavioral health, or other services disproportionately provided by safety net and financially distressed providers.
The Role of Data
States with benchmarks typically create a robust health data infrastructure to measure change and conduct analyses that identify spending drivers. For a benchmark to be meaningful, the state must have a way to collect information on the benchmark’s components and track progress. The presence of a benchmark promotes more direct and organized data collection, with aligned measures enabling more coordinated analysis. States without benchmarks and without central health data resources frequently take a more fragmented approach, with data that run on different cycles, use conflicting definitions, or are reported irregularly.
The data infrastructure that supports benchmarks requires states to empirically analyze drivers of cost growth and respond with appropriate actions. Benchmark states can identify pockets of “excessive spending,” whether in services, products, programs, or settings of care, and intervene accordingly. These states access data directly from insurers and analyze the data annually, focusing on the state overall, then on performance within a market (e.g., Medicaid, Medicare, commercial), by payer within an insurance market, and by provider entity within an insurance market.[46] These analyses help answer fundamental questions of affordability impacts for different segments of the population, such as taxpayers, employers and employees, and individuals over 65.
For example, recent research evaluating cost growth in four other states with spending benchmarks (Connecticut, Nevada, Rhode Island, and Washington) found that hospital and pharmacy costs (and their prices more than their utilization) persist as dominant drivers of their cost growth. In particular, commercial prices and spending appear to be growing more than in Medicaid or Medicare. [47] This helped set the stage for developing policy solutions to address these issues.
In terms of data sources, most states will require more direct data input from payers than existed before the benchmark was put into place. This requirement involves upfront effort to standardize data submission and, on an ongoing basis, ensure compliance. In many cases, states will have already begun that work in connection with their All-Payer Claims Database (APCD). The Executive Director of the Massachusetts HPC has observed that an APCD helps states dig into the data more deeply, but states without APCDs can still do plenty.[48] Even with an APCD, collecting all the data necessary to measure performance against the benchmark is complicated because of the need to capture elements that fall outside of APCDs: pharmacy rebate data, which is necessary for calculating net pharmacy spending; information about non-claims transactions, such as incentives and shared savings within value-based payment arrangements; and data on self-insured groups, which typically represents the majority of states’ commercial members.[49] Given APCDs’ limitations, states have supplemented data with secondary resources and reporting focused on particular spending topics, such as tracking the adoption of alternative payment models or monitoring medical pharmacy prices.[50]
New York began implementation of its All-Payer Database (APD) in 2016. Although aspects of the APD are still being refined, it would be a valuable resource for generating analysis of some underlying causes of healthcare spending growth in New York.
Applicability of a Healthcare Cost Growth Benchmark in New York
In considering the applicability of the healthcare cost growth benchmark in New York, it is useful to examine in more detail the growth of healthcare expenditures in New York and the limited nature of cost-containment efforts under State policy.
Healthcare Expenditures in New York
Total healthcare expenditures in New York in 2020 were $271 billion,[51] representing approximately 6.6% of U.S. national healthcare expenditure of $4.1 trillion in that year.[52] New York’s per capita health expenditure was the highest in the nation at $14,007 in 2020, having grown 179% since 2000.[53] As discussed earlier, the cost of healthcare and the costs of premiums, deductibles, and co-pays have increased significantly. As of 2021, the overall burden of employer-sponsored health insurance (including premiums and deductibles) as a percent of average wages was 38.5%.[54]
The following chart compares New York State’s per capita health expenditure to the nine states with active benchmarks and against the U.S. average.
Expenditures by Sector
Hospital care is the largest category of healthcare spending in New York. From 2005-2020, spending in all categories at least doubled, except for dental care, which nearly doubled (96% total growth). Hospital care and prescription drug spending have tripled during that time. Note that the two charts below reflect prescription drug spending net of manufacturers’ rebates.
Healthcare Affordability and Cost-Containment Efforts in New York
New York State government’s efforts with respect to healthcare affordability have focused primarily on access to subsidized public payer programs, including Medicaid, Child Health Plus, and the Essential Plan (which alone covers approximately 1.4 million New Yorkers). Perhaps the most meaningful State initiative to increase the affordability of health insurance coverage has been the expansion of the Essential Plan over the last dozen years. The Essential Plan provides premium-free insurance coverage with almost no co-pays or deductibles for eligible New Yorkers. Last year, the State received authorization to increase the income eligibility thresholds for the Essential Plan from 200% of the federal poverty level (FPL) to 250% of the FPL.
New York has made great strides in covering much of its population under public payer programs in which affordability is not an issue (though access often is). However, the State’s affordability efforts in the commercial market have generally been limited in scope.
Regulation of premium increases in the commercial market creates at least some downward pressure on premium growth, thereby supporting consumer affordability. The New York State Department of Financial Services (DFS) has the authority to pre-approve premium rate increases in the individual and small group markets but has limited authority in the large group market and no role in self-insured employer-sponsored plans.[55] Despite DFS’s modifications to payers’ requested rate increases, rates still rose 13.5% in the individual market and 7.5% in the small group market for 2024. Although DFS is the State agency that feels an institutional responsibility to represent the interests of healthcare consumers, its actual impact on the affordability of health insurance is relatively small.
Although the State has sought to make healthcare more affordable for taxpayers by constraining spending growth in the Medicaid program, those efforts have produced mixed results. Moreover, while the State’s ambition has been that effective strategies for controlling costs and improving quality in the Medicaid program would become a catalyst for adoption of those practices by the commercial market, this has occurred only to a limited extent. Most of these Medicaid strategies, such as a transition towards value-based purchasing, promotion of care management, and more proactive primary and preventive care, were included in the 2013 Delivery System Reform Incentive Payments (DSRIP) 1115 Waiver.
In 2015, New York received a $100 million federal grant to advance these best practices across all payer types through what was known as the State Health Innovation Plan (SHIP).[56] However, the strategies gained little traction in the commercial market, and the SHIP evolved toward the worthy but narrow goal of providing technical assistance for primary care physicians to adopt the practices of the patient-centered medical home.
Aside from the Essential Plan and the role of DFS, New York State government has had a few notable policy initiatives designed to improve affordability or control the growth in healthcare costs. These include efforts to limit or eliminate co-pays and deductibles for certain categories of services, such as this year’s Budget initiative to eliminate co-pays for insulin for New Yorkers enrolled in State-regulated health plans. These initiatives reduce costs for certain populations but do not reduce the underlying costs, which are socialized across the wider population.
Another worthy but limited initiative involves medical debt. In this year’s Budget, the State adopted two measures that were hailed as representing significant consumer protections.[57] First, hospitals are now prohibited from suing patients who earn incomes less than 400 percent of the federal poverty level. Second, the Budget expanded hospital financial assistance programs to limit the maximum amount of monthly payments and the interest charged on medical debt. However, it will take some time to determine how many individuals benefit from these initiatives.
State strategies that would reduce costs for the wider range of participants in the commercial market remain elusive. New York has attempted to address high pharmacy costs by regulating pharmacy benefit managers, but federal preemption issues have stymied more direct efforts to control pharmacy costs in the commercial market. Scope of practice changes that could reduce the cost of delivering healthcare have consistently been rejected by the State Legislature. Finally, the State has promoted price transparency efforts among healthcare providers to enable patients to better manage their own healthcare costs. Nevertheless, the use of existing price transparency tools has been quite modest.
Pros and Cons of Adopting a Healthcare Expenditure Growth Benchmark in New York
Given the limited effectiveness of current and past policy efforts designed to improve healthcare affordability by constraining cost growth, the State, at some point, may consider whether to follow the example of nine other states and establish a spending target or benchmark.
The decision to adopt a healthcare cost growth benchmark in New York State requires careful consideration of the pros and cons. The success of a benchmark effort would significantly depend on the specifics of its provisions and its implementation—i.e., the benchmark level, how the benchmark is established, monitored, and enforced, and how stakeholders are engaged throughout the process. The benchmark’s design should complement, not undermine, efforts to improve access, quality, and provider sustainability throughout New York’s healthcare ecosystem.
The potential benefits of a healthcare cost growth benchmark can be summarized as follows:
Bending the Cost Curve: The primary benefit of adopting a healthcare cost growth benchmark is the potential to control and reduce the rate of growth in healthcare spending. By setting benchmarks, states are establishing a mechanism to address the drivers of expenditure growth, potentially leading to more sustainable healthcare costs.
Transparency and Accountability: Healthcare cost growth benchmarks require robust reporting from healthcare providers and payers at a level of granularity that often serves as a catalyst for a more transparent and comprehensive health data and information infrastructure. Such infrastructure makes it easier to track spending trends and ensure that providers are accountable for their costs and pricing decisions.
Centralization: Rather than approach cost containment through piecemeal interventions, states with benchmarks may be able to develop standardized, centralized approaches to evaluating and improving their healthcare delivery system, identifying opportunities that span provider and payer types, geography, and other factors.
Enhanced Policy Planning: With clear cost growth targets, policymakers can better plan and implement strategies for healthcare funding and reforms. Benchmarks and their associated data insights can help identify areas of alignment between outstanding needs and effective, tailored interventions.
Stakeholder Engagement: Establishing a benchmark can encourage regular collaboration among different healthcare stakeholders, including hospitals, insurers, and government agencies, to work toward common financial and quality goals. This can promote a more integrated and efficient healthcare ecosystem.
Potential for Innovation: To meet cost growth targets, providers might be more inclined to implement creative practices and innovative technologies that improve efficiency and effectiveness, potentially leading to better patient outcomes.
The potential cons include:
Risk of Reduced Access, Quality, or Provider Sustainability: Rigid, uniformly applied benchmarks could lead providers to limit access, reduce the quality of care, or impair their own financial sustainability to perform better.
Implementation Complexity: Establishing a healthcare cost growth benchmark process involves technically complex data collection, attribution processes, monitoring, and accountability mechanisms. If the administrative burden seems disproportionate to the perceived benefits, it will undermine support for the benchmark and its infrastructure.
Incentive Distortions: Benchmarks could inadvertently distort incentives in the healthcare market. For example, providers might focus more on cost-saving than on patient-centered care or could engage in up-coding to maintain revenue levels. Without proper protections in place, entities could game the system, thereby shifting costs rather than containing them.
Unintended Consequences: There are always unintended consequences with major policy shifts. For instance, providers may try to meet aggressive cost growth targets by delaying the adoption of better but more expensive technologies, potentially stifling innovation.
Stakeholder Resistance: Healthcare stakeholders may push back against benchmark measures, citing concerns over the perceived fairness of relevant calculations and rules, and potential impacts on providers’ financial stability and quality of care.
Recommendation
In light of the broader crisis of affordability in New York, the State has a responsibility to seriously explore all ideas for containing costs and improving affordability while maintaining access, quality, and provider sustainability. Our view is that the State should embrace the concept of a healthcare cost growth benchmark but implement such a policy carefully and gradually, with full appreciation of the potential benefits and risks of such an effort. The right balance of these concerns is a strategic, measured approach that builds confidence in the fairness of the benchmark among all stakeholders before enabling any enforcement authority.
The first crucial step for New York in establishing a cost growth benchmark is the development of a robust health data, information, and analysis infrastructure. As we have said in other writings, this does not involve reinventing the wheel. There are a number of good models the State can emulate, including Massachusetts’s – much of which has evolved to support its cost growth benchmark activity. It should be noted that Massachusetts followed the approach of gathering comprehensive data before its benchmark enforcement mechanisms went into effect.[58],[59] It will be essential to build a health data and information infrastructure that includes price and utilization data to measure spending in targeted areas, including behavioral health and primary care, and in various settings, including hospitals, ambulatory surgery centers, federally qualified health centers, and school-based health clinics. Spending should also be measured by every payer type, commercial and publicly funded alike. This is critical to understanding where spending is at baseline and where it is growing most rapidly.
The next step for New York would be to establish an independent commission responsible for analyzing this data, identifying spending growth drivers, and regularly publishing analytical reports. Given the challenges of providers’ financial sustainability in New York, part of this analysis should examine the dynamic between expenditure growth and changes in the provider landscape, from the effects of provider consolidation in specialty practices to changes in utilization and reimbursement levels at financially distressed hospitals.
Once New York has a comprehensive health data and information infrastructure available for analysis by an independent and expert commission, New York should establish a cost growth benchmark with a “glide path” that recognizes the challenges of bending the cost curve in healthcare. New York should be clear on whether the benchmark represents an aspirational goal or a realistic target based on achievable actions. To develop such a benchmark, the State can build upon the process outlined earlier in this Brief and leverage recommendations from publications designed to support states in these efforts.
There are many resources that New York could draw upon. For example, Section IV of the Mathematica Report, “The Massachusetts Health Care Cost Growth Benchmark and Accountability Mechanisms: Stakeholder Perspectives,” and the six modules of the Peterson-Milbank Program for Sustainable Health Care Costs, "Making Health Care More Affordable: A Playbook for Implementing a State Cost Growth Target," identify considerations for states pursuing a healthcare cost growth benchmark, as informed by the experiences of the current benchmark states.
Once a benchmark is established, we think there will be benefits from the “sentinel effect” due to greater accountability on the part of providers and payers and an accurate, data-driven understanding of the forces driving healthcare expenditure growth. Only when there is a sufficient level of trust in the benchmark would it make sense for New York to establish enforcement tools.
New York should also examine the advisability of establishing primary care and behavioral health spending targets. Prioritizing healthcare spending on low-intensity, high-value services (e.g., early, regular access to primary care and behavioral healthcare to prevent costly, later escalation of illness) should be part of the mission of improving the affordability of healthcare in New York. Various stakeholders have coalesced around this concept, including providers and advocates of public health and prevention programs and school-based and community-based services. Several states are pursuing overall cost growth benchmarks and primary care spending targets concurrently.[60]
Conclusion
New York’s healthcare system faces real challenges balancing the competing priorities of access, affordability, quality, and provider financial sustainability. Healthcare affordability—especially for the middle class who are not eligible for public payer programs—deserves more attention than it has historically received from the State. Even public discourse about the pros and cons of a healthcare cost growth benchmark would have the advantage of highlighting the affordability problem that is often overshadowed by other healthcare crises.
As highlighted earlier in this Brief, healthcare cost growth benchmarks are a relatively new phenomenon. Massachusetts established its benchmark in 2012, but the next state to do so only established its benchmark in 2018. Six of the nine benchmark states established their programs in 2020 or later. These are still new enough that their effectiveness in influencing healthcare spending and any unintended consequences cannot be definitively assessed.
The mere implementation of a benchmark and associated reporting activity does not necessitate dramatic changes in the healthcare sector, and it is telling that only three of the benchmark states have enforcement mechanisms in place. However, benchmarks have tended to serve as a catalyst for a stronger health data and information infrastructure and for the analysis required to better understand the healthcare delivery system.
If a healthcare cost growth benchmark works, it should enable cost-containment strategies that are responsive to the specific circumstances of New York’s payers and providers. Since market forces have been unable to reconcile the needs of producers and consumers, centralized State action through a benchmark should effectively stimulate transparency, more targeted regulation, more efficient business practices, and greater financial stewardship, thereby improving affordability.
Appendix: NASHP Matrix of States’ Healthcare Cost Growth Benchmark Programs
National Academy for State Health Policy. (2024, May 31). How states use cost-growth benchmark programs to contain health care costs.
Endnotes
[1] Step Two Policy Project. (2024, January). Using Health Data and Information to Better Measure the Affordability of Healthcare (p. 3).
[2] In Massachusetts, for example, the ''Health care cost [emphasis added] growth benchmark,'' is statutorily defined as: “the projected annual percentage change in total health care expenditures [emphasis added] in the commonwealth.…”
[3] Health Affairs. (2022, June 9). The role of prices in excess US health spending. Health Affairs Research Brief. DOI: 10.1377/hpb20220506.381195
[4] Anderson, G. F., Hussey, P., & Petrosyan, V. (2019). It’s still the prices, stupid: why the US spends so much on health care, and a tribute to Uwe Reinhardt. Health Affairs, 38(1), 87-95. https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2018.05144
[5] Cooper, Z. (2019). High prices drive high health care spending in the US, but so too do other factors: A response to Anderson and colleagues. Health Affairs Forefront. https://www.healthaffairs.org/content/forefront/high-prices-drive-high-health-care-spending-us-but-so-too-do-other-factors-response
[6] Massachusetts Health Policy Commission. (2020). 2019 health care cost trends report (p. 21). https://www.mass.gov/doc/2019-health-care-cost-trends-report/download
[7] Debate concerning the potential effects of the Affordable Care Act (ACA) both polarized the discourse around and catalyzed the search for solutions for cost containment. The ACA’s emphasis on insurance coverage, access to primary care, new delivery models and their corresponding payment reform, as well as cost transparency, drew outsized attention to healthcare costs, especially as compared to under other Presidential Administrations.
[8] Kaiser Family Foundation. Health insurance coverage of the total population. https://www.kff.org/other/state-indicator/total-population/
[9] Kaiser Family Foundation. 2020 Employer Health Benefits Survey: Summary of findings. https://www.kff.org/report-section/ehbs-2020-summary-of-findings/#figurea
[10] Agency for Healthcare Research and Quality. (n.d.). Medical Expenditure Panel Survey Insurance Component State Tables. https://meps.ahrq.gov/mepsweb/data_stats/state_tables.jsp?regionid=26&year=-1
[11] In January 2024, Step Two published analyses based on the Suite of Analytic Resources from the Peterson-Milbank Program for Sustainable Healthcare Costs in our Issue Brief, “Using Health Data and Information to Better Measure the Affordability of Healthcare.” These charts originate from that brief and the accompanying slides.
[12] McGough, M., Winger, A., Rakshit, S., & Amin, K. (2023, December 15). How has U.S. spending on healthcare changed over time? Peterson-KFF Health System Tracker. https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/#Average%20annual%20growth%20rate%20of%20GDP%20per%20capita%20and%20total%20national%20health%20spending%20per%20capita,%201970-2022
[13] This is not an exhaustive list but only highlights a few drivers that are particularly measurable.
[14] Davis, A., Batra, N., Dhar, A., Bhatt, J., Gerhardt, W., & Rush, B. (2023, February 28). US health care can't afford health inequities. Deloitte Insights. https://www2.deloitte.com/us/en/insights/industry/health-care/economic-cost-of-health-disparities.html
[15] For example, see slide 53: https://www.mass.gov/doc/2023-health-care-cost-trends-report-chartpack/download
[16] These states, in order of their benchmark adoption, are Massachusetts, Delaware, Oregon, Rhode Island, Connecticut, Washington, Nevada, New Jersey, and California.
[17] Some of this information is included in a helpful table published through the Milbank Memorial Fund. We incorporated Nevada to round out the full list of states with healthcare cost growth benchmarks:
Bailit, M. (2024, April 9). State health care cost growth target values and performance reports. The Milbank Memorial Fund. https://www.milbank.org/news/state-health-care-cost-growth-target-values/.
[18] Center for Health Information and Analysis. Total Health Care Expenditures, Total Medical Expenses and Alternative Payment Methods. Commonwealth of Massachusetts. https://www.chiamass.gov/thce-tme-apm/
[19] Gross state product (GSP) is the state complement to gross domestic product. GSP measures an individual state’s output, adding the value of all industries within the state. See Definitions section: https://www.kff.org/other/state-indicator/total-gross-state-product
[20] Keehan, S. P., Fiore, J. A., Poisal, J. A., Cuckler, G. A., Sisko, A. M., Smith, S. D., ... & Rennie, K. E. (2023). National Health Expenditure Projections, 2022–31: Growth To Stabilize Once The COVID-19 Public Health Emergency Ends: National health expenditure projections for 2022–31. Health Affairs, 42(7), 886-898.
[21] As noted in the 2023 Annual Report by the Massachusetts Center for Health Information and Analysis, “[total healthcare expenditure] does not include federal funding for public health activities, nor any COVID-19 relief funds distributed from the federal government directly to hospitals and health systems in 2020 and 2021.”
[22] Hostetter, M. (2024, May 6). To transparency and beyond: Snapshots of states using cost growth targets to improve health care affordability. https://www.milbank.org/wp-content/uploads/2024/04/Milbank-Peterson-Case-Study-Snapshots-ACCESS_v04.pdf
[23] California Hospital Association. (2024, April 19). Comments on the March 2024 Health Care Affordability Board and Advisory Committee Meetings. https://calhospital.org/file/cha-comments-on-march-2024-health-care-affordability-board-and-advisory-committee-meetings/
[24] Almendrala, A. (2024, March 8). California sets a health care spending cap, but new office faces a steep climb. KFF Health News. https://kffhealthnews.org/news/article/california-health-care-spending-cap-new-office/
[25] Angeles, J. (2023). Measuring performance against the target. In Making health care more affordable: A playbook for implementing a state cost growth target. Milbank Memorial Fund. https://www.milbank.org/publications/making-health-care-more-affordable-a-playbook-for-implementing-a-state-cost-growth-target/measuring-performance-against-the-target/
[26] Lipson, D. J., Berk, S., Lane, K., & Block, R. (2022). How States Are Holding Payers And Providers Accountable For Health Cost Growth. Health Affairs Forefront. https://www.healthaffairs.org/content/forefront/states-holding-payers-and-providers-accountable-health-cost-growth-evidence-date-and
[27] Oregon Health Authority. (2023, March 16). Cost Growth Target: Provider Organization FAQ. https://www.oregon.gov/oha/HPA/HP/Cost%20Growth%20Target%20documents/CGT-Provider-Org-FAQ.pdf
[28] Ibid, 15.
[29] Lipson, D. J., Berk, S., Lane, K., & Block, R. Ibid.
[30] Butler, J. (2022, February 14). Massachusetts Health Policy Commission takes steps to hold high-cost health system accountable. National Academy for State Health Policy. https://nashp.org/massachusetts-health-policy-commission-takes-steps-to-hold-high-cost-health-system-accountable/#:~:text=In%20January%202022%2C%20for%20the,take%20to%20achieve%20the%20goal
[31] UC Law San Francisco. Provider Rate Regulation: Cost Growth Benchmark. The Source on Healthcare Price and Competition. https://sourceonhealthcare.org/provider-rate-regulation/cost-growth-benchmark/
[32] Lipson, D., Orfield, C., Machta, R., Kenney, O., Ruane, K., Wrobel, M., & Gerovich, S. (2022, October). Massachusetts cost growth benchmark evaluation. Milbank Memorial Fund. https://www.milbank.org/wp-content/uploads/2022/10/MassCostGrowthBenchmarkEvaluation_Mathematica_Oct2022.pdf
[33] Waugh, L., & McCarthy, D. (2020, March 5). Massachusetts Health Policy Commission: Containing health care spending growth in a high-cost environment (p. 9). The Commonwealth Fund. https://www.commonwealthfund.org/sites/default/files/2020-03/Waugh_Massachusetts_hlt_policy_comm_cs.pdf
[34] Levinson, Z., Godwin, J., Hulver, S., & Neuman, T. (2024, April 19). Ten things to know about consolidation in health care provider markets. Kaiser Family Foundation. https://www.kff.org/health-costs/issue-brief/ten-things-to-know-about-consolidation-in-health-care-provider-markets/
[35] Lipson, D., Orfield, C., Machta, R., Kenney, O., Ruane, K., Wrobel, M., & Gerovich, S. Ibid, 47.
[36] Massachusetts Health Policy Commission. Information about material change notices/cost and market impact reviews. https://www.mass.gov/info-details/information-about-material-change-noticescost-and-market-impact-reviews
[37] Simpson, J. B. (1985). State certificate-of-need programs: the current status. American Journal of Public Health, 75(10), 1225-1229.
[38] National Conference of State Legislatures. (2024, February 26). Certificate of need state laws. https://www.ncsl.org/health/certificate-of-need-state-laws
[39] Butler, J. Ibid.
[40] These entities include but are not limited to: “physician practice, group, or management services organization or similar entity providing all or substantially all of the administrative or management services under contract with one or more physician practices, provider-sponsored organization, health insurance plan, or any other kind of health care facility, organization or plan providing health care services in this state” (NY Pub. Health L. § 4550(2)).
[41] NY Pub. Health L. § 4552(1)(f)(i)
[42] Desai, S. M., Padmanabhan, P., Chen, A. Z., Lewis, A., & Glied, S. A. (2023). Hospital concentration and low-income populations: Evidence from New York State Medicaid. Journal of Health Economics, 90, 102770. https://www.sciencedirect.com/science/article/abs/pii/S0167629623000474
[43] Federal Trade Commission. (2022, October 7). Federal Trade Commission staff submission to New York State Health Department regarding the Certificate of Public Advantage application of State University of New York Upstate Medical University and Crouse Health System, Inc. https://www.ftc.gov/system/files/ftc_gov/pdf/2210126NYCOPACommentPublic.pdf
[44] Lipson, D., Orfield, C., Machta, R., Kenney, O., Ruane, K., Wrobel, M., & Gerovich, S. Ibid, 10.
[45] Massachusetts Health Policy Commission, Market Oversight and Transparency Committee. (2021, October 6). Accountability for the Health Care Cost Growth Benchmark, Slides 44–45. https://www.mass.gov/doc/presentation-1062021-moat-meeting/download
[46] Angeles, J. Ibid.
[47] Bailit, M. (2022, August 9). Driving health care spending upward: States’ cost growth targets. Health Affairs. https://www.healthaffairs.org/content/forefront/driving-health-care-spending-upward-states-cost-growth-targets
[48] Seltz, D. (2022, July 21). How are State Leaders Approaching Benchmarking Accountability? The Massachusetts Model. State Health Care Cost Growth Benchmarking: New Strategies to Drive Transparency and Accountability. https://www.manatt.com/insights/webinars/state-health-care-cost-growth-benchmarking-new-str
[49] Angeles, J. Ibid, Module 4.
[50] Ario, J., McAvey, K., & Zhan, A. (2021, June). State benchmarking models: Promising practices to understand and address health care cost growth. (p.14). Manatt Health Strategies. https://www.manatt.com/Manatt/media/Documents/Articles/RWJF_State-Benchmarking-Models_June-2021_i_FOR-WEB.pdf
[51] Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. National Health Expenditure Data: Health Expenditures by State of Residence, 2020. Kaiser Family Foundation analysis available: https://www.kff.org/other/state-indicator/health-care-expenditures-by-state-of-residence-in-millions/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
[52] Centers for Medicare & Medicaid Services. National health expenditure data: NHE fact sheet. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/nhe-fact-sheet
[53] Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. National Health Expenditure Data: Health Expenditures by State of Residence (ZIP), 1991-2020. https://www.cms.gov/data-research/statistics-trends-and-reports/national-health-expenditure-data/state-residence
[54] Step Two Policy Project. (2024, January). Making the Case for State Healthcare Affordability (p. 19). https://www.steptwopolicy.org/_files/ugd/22bd58_d9ca958a2b22407cbc920f6edfdcb4b0.pdf
[55] Unlike Medicaid managed-care and Medicare Advantage, in which the government establishes a regional average rate that applies on a risk-adjusted basis to all plants in the region, the decisions of DFS to approve premiums are based on the expected experience of each individual plan, irrespective of how efficient the plan is.
[56] Plavin, H. (2015, January). SIM presentation to PHIP. New York State Department of Health. https://www.health.ny.gov/technology/innovation_plan_initiative/docs/sim_presentation_to_phips.pdf
[57] New York State Division of the Budget. (2024, April 22). Governor Hochul announces significant steps to improve New Yorkers’ health as part of FY 2025 budget agreement. New York State Division of the Budget. https://www.budget.ny.gov/pubs/press/2024/fy25-enacted-budget-improve-ny-health.html
[58] General Court of the Commonwealth of Massachusetts. (2008). An Act to promote cost containment, transparency and efficiency in the delivery of quality health care. https://malegislature.gov/Laws/SessionLaws/Acts/2008/Chapter305
[59] Office of the Attorney General, Commonwealth of Massachusetts. Reports on health care cost trends and cost drivers. https://www.mass.gov/lists/reports-on-health-care-cost-trends-and-cost-drivers
[60] Connecticut, for example, had an overall cost growth benchmark of 3.2% in 2022 and a primary care spending target of 5.3%. It narrowly missed both benchmarks, with THCE growth of 3.4% and primary care spending of 4.9%. For 2025, its cost growth benchmark is set at 2.9% and its primary care spending target is 10%.
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