Many states are transforming their health care delivery systems to improve health and control costs. Reducing health disparities — and addressing their social and economic causes — is at the heart of many of these efforts.
Burdened by high US drug prices that average 218 percent more than in Canada, innovative states across the country are exploring a range of approaches to give their residents the same access to affordable drugs Canadians have. To date, six leading states have passed laws that enable them to import drugs from Canada pending federal approval of their programs. Now, a second set of trailblazing states are exploring an alternative approach that does not require federal approval – importing Canadian drug prices.
A savings analysis NASHP facilitated for one state considering this legislative approach, showed annual savings of more than $32 million for just 35 drugs purchased by state employees alone. States are proposing setting reference rates for up to 250 drugs for all commercial payers, including Medicare advantage plans (Medicaid and traditional Medicare would be excluded), so total savings would far exceed that initial estimate.
Under the model legislation, any savings generated must be shared with consumers through mechanisms left to the discretion of a state. Options may vary by payer, ranging from reducing premiums for commercial payers, maintaining or expanding access to Medicaid services, and avoiding tax increases for public payers.
Oklahoma state Sen. Greg McCortney identified the potential for savings as key. “I do not believe that we can fix our broken health care system until we address the cost of care,” he said. “This bill, once fully implemented, should reduce insurance premiums for every person in the state by hundreds of dollars each year.”
The model law’s implementation process is designed to be easy for a state to administer and does not require costly infrastructure at a time when states are burdened by the pandemic and budgetary restraints. As a proxy for all commercial payers, the bill uses a state’s employee health plan to identify the costliest 250 drugs, determined by drug price times utilization.
- The state employee health plan shares the list of 250 drugs with the Department of Insurance.
- The department then establishes references rates by comparing publicly available data on drug prices in Canada’s four most populous provinces. The lowest price becomes the reference rate for payers within the state.
- No commercial payer could pay more than the reference price established by the state’s department of insurance, and a manufacturer that withdrew a drug or refused to negotiate in good faith would be subject to significant penalties.
As states move forward in their legislative sessions, states are adapting NASHP’s reference rate model and making it their own. They’re exploring variations in the roles their agencies would play, as well as possibly limiting the number of referenced drugs to a smaller group that would have maximum impact.
For more than a decade, Rhode Island has used a unique insurance rate review approach to keep hospital costs from rising any more than inflation plus 1 percent. As states confront COVID-19 and its accompanying budget crisis, Rhode Island’s approach that allows regulators to oversee hospital costs and requires insurers to invest in the state’s health priorities offers a new model for curbing health care costs.
From Medicare reference-based pricing to cost-growth benchmarks, states are exploring a number of innovative approaches to stabilize health care costs. Hospital costs are a particularly significant driver of insurance premiums rates. As health care consolidation increases, costs rise and insurers may be less likely to exert negotiating power to lower those costs.
As states renew their focus on health care costs, Rhode Island’s affordability standards, which require the inflation plus 1 percent cap in insurers’ negotiated prices with hospitals in order to have their premium rates approved, offers an avenue for health care cost controls. While the degree of regulatory oversight over insurance markets varies across the country, many states may be able to replicate Rhode Island’s approach.
The scope of rate review varies across states – some states only have authority over individual and small-group markets while others also have authority over the fully insured, large-group markets as well. Some states have “prior approval” authority, which allows them to reject, approve, or reduce proposed premium rates, while others have “file-and-use” oversight, which gives officials the authority to review, but not reject proposed increases. Whether states have prior approval or file-and-use authority can also vary based on the market – states typically have less oversight over the fully insured, large-group market than the individual and small-group market.
In 2015, Health Affairs reported that adjusted premiums in the individual market were lower in states that had “prior approval” authority along with MLR requirements from 2010 to 2013. While more stringent rate review is shown to keep premiums lower, some states have expanded the scope of their rate review processes to tackle issues of accessibility and affordability. Since 2010, Rhode Island has been using its unique regulatory structure with the Office of the Health Insurance Commissioner (OHIC) to better control rising hospital costs through insurance rate review.
Rate Review as a Cost Containment Tool
In 2004, Rhode Island enacted a law that split the Office of the Health Insurance Commissioner (OHIC) from the rest of its insurance department in order to better understand and oversee the relationship between insurers and providers. In Rhode Island, the health insurance commissioner has oversight over the individual market, the small-group market, and fully insured, large-group markets. Although the ACA required the OHIC to complete a more comprehensive review of consumer protections in the individual and small-group markets, the OHIC has the authority to review and approve rates for all three markets – including for fully insured, large-group plans.
The legislature also charged the newly created health insurance commissioner with promoting greater accessibility, quality, and affordability in the health insurance market – a unique charge compared to other states – that ultimately led insurance regulators to oversee negotiated rates between insurers and hospitals. The OHIC’s work to oversee hospital costs largely relies on a “public interest” criterion in the state’s insurance statutes. The rate review statute requires proposed rates to be, “consistent with the proper conduct of its business and with the interest of the public,” and the public has an interest in affordability. The 2004 statute also created the Health Insurance Advisory Council, which was responsible for making recommendations on a number of issues, including requiring that the market for small businesses be affordable and fair.
The council led efforts to better understand health care cost drivers in Rhode Island and found that hospitals were a main “pain point” for affordability. Insurers argued they did not have the leverage to negotiate lower rates in contracts with providers. In 2009, the council reviewed the state’s options to address these cost drivers and eventually developed the Affordability Standards and Priorities for Rhode Island Commercial Health Insurers, which emphasized the need for reduced insurance costs, and by extension, reduced hospital costs. In 2010, the insurance commissioner documented significant variances between the rates of payment for inpatient costs across health systems in Rhode Island, prompting additional questions about the contracted rates between insurers and providers. This finding, combined with a lack of insurer-motivated payment reforms, spurred the commissioner to adopt a set of four “affordability standards” for insurance rate review.
Rhode Island’s Affordability Standards
With the adoption of the affordability standards, the commissioner directed insurers to comply with four new criteria in order to have their premium rates approved:
- Expanding and improving primary care infrastructure;
- Spreading the adoption of the patient-centered medical home model;
- Supporting CurrentCare, the state’s health information exchange; and
- Working toward comprehensive payment reform across the delivery system.
The primary care criteria required insurers to increase their share of medical spending on primary care by 1 percent from 2010 to 2014, while not increasing consumer premiums. The additional investments also couldn’t lead to increased overall medical expenses – and instead were intended to reflect a shift to new payment strategies. Beyond primary care, the standards required insurers to provide financial support for the Rhode Island Chronic Care Sustainability Initiative, the all-payer, patient-centered medical home pilot project, and CurrentCare, the state’s health information exchange
As far as cost containment, the most striking change to Rhode Island’s rate review process was the implementation of the fourth standard – comprehensive payment reform. In order to set measurable goals to hold insurers accountable for this, the commissioner put six conditions into place that insurers had to adopt in their hospital contracts. The conditions included:
- Paying for inpatient and outpatient services using “units of service” that encourage efficient resource use.
- Limiting the average annual effective rates of price increase for both inpatient and outpatient services to a weighted amount equal to or less than Centers for Medicare & Medicaid Services’ National Prospective Payment System Hospital Input Price Index (“IPPS”) plus 1 percent for all contractual years.
- Giving hospitals an opportunity to increase total annual revenue based on meeting mutually agreed upon quality goals.
- Including contract terms to meet agreed upon obligations for administrative simplification.
- Including contract terms that promote and measure improved care coordination.
- Including transparency for these six terms in contracts.
The #2 condition, requiring insurers to limit the average price increases for hospital services, was groundbreaking in its impact on the contractually agreed-upon prices paid by insurers to providers. In addition to tagging rate increases to IPPS, the affordability standards also required that at least 50 percent of the annual hospital rate increases be earned through the agreed-upon quality measures. These hospital contracting provisions were an early and still innovative approach to regulating hospital costs.
Impact of Affordability Standards
A 2019 Health Affairs review found that implementation of Rhode Island’s affordability standards led to a net reduction in per enrollee spending by a mean of $55 from 2010 to 2016. The study showed that outpatient and inpatient utilization did not significantly change, but spending per encounter decreased in Rhode Island compared to a control group. Quarterly fee-for-service spending actually decreased by $76 per enrollee, but the requirement to increase non-fee-for-service primary care spending raised per enrollee spending by $21, netting out to a quarterly savings per enrollee of $55. In addition, patient cost sharing was lower in Rhode Island after the affordability standards were implemented compared to a control group.
Quality metrics did not change with implementation of the standards. In fact, interviews conducted for a 2013 review of the standards found that the “at-least-50-percent” provision for hospital contracting caused a “culture shift” among hospitals by focusing their attention to meeting quality measures.
The one challenge in understanding the impacts of Rhode Island’s affordability standards is that it is impossible to totally untie the provisions around hospital contracting from the primary care investments, making it somewhat difficult to know how a state might fare if it only enacted standards around payment reform without the primary care investment.
Since implementation in 2010, Rhode Island has updated its affordability standards over time to align with other goals, such as further promoting the patient-centered medical home model and alternative payment methods that emphasize value rather than volume. The most recent affordability standards, adopted in 2016, require insurers to spend at least 10.7 percent of their annual medical spend on primary care. Among other requirements, the standards also maintain the hospital contracting provisions. The standards require insurers to limit hospital rate increases so that the average rate increase is no greater than the Urban Consumer Price Index (CPI) (less food and energy) percentage increase plus 1 percent.
Future of Rate Review as a Cost Containment Tool
Rate review is a promising tool for cost containment. As evidence shows it can keep premiums low but can also be used to impact payer-provider negotiations as in Rhode Island. Placing responsibility for hospital cost containment alongside insurance rate review not only allows for coordinated reform across insurers, but also gives an insurance department, like OHIC, insight into where unintended consequences might occur or other costs might pop up as the state works to control other health care cost drivers.
States have begun to mirror Rhode Island’s affordability standards in their insurance rate review process to advance health policy goals. In 2019, Colorado enacted HB 19-1233, which established a Primary Care Reform Payment Collaborative that, among other things, was tasked with creating an affordability standard to require additional investment by insurers in primary care.
The collaborative recommended that commercial payers be required to increase the percentage of total medical expenditures (excluding pharmacy) spent on primary care by at least one percentage point annually through 2022. The collaborative said the Insurance Commissioner will have to address the risk of costs being passed on to consumers when the affordability standards are promulgated. This standard is similar to Rhode Island’s work to invest in its primary care infrastructure. Importantly, the Colorado collaborative noted in its recommendations that the Insurance Commissioner must include this new affordability standard alongside an effort to reduce overall health care spending. Otherwise, health care costs could rise in the state.
Similarly, Delaware enacted SB 116 in 2019 to create an Office of Value-Based Health Care Delivery within its Department of Insurance. The office’s goal is to reduce health care costs by providing high quality, cost-efficient health insurance products with stable, predictable, and affordable rates. To achieve this mandate, the new Delaware office has been working alongside the Delaware Primary Care Reform Collaborative to develop affordability standards and targets for primary care spending for carriers. In November 2020, the office presented draft affordability standards that would set targets for primary care investment, unit price growth for non-professional services, and the adoption of alternative payment models. Modeling Rhode Island’s work, the targets for primary care investment and capping unit price growth would be enforced through insurance rate review. The draft standards recommend using a phased approach to cap unit price growth beginning in 2022 and would decrease over time, eventually reaching Rhode Island’s cap of CPI plus one percent by 2025. According to a timeline in its November presentation, the office plans to publish the draft standards and accept public comments in February 2021.
With the implementation of Rhode Island’s affordability standards, the state was able to successfully cap growth in hospital costs and thereby constrain premium growth. Rhode Island’s use of rate review to control hospital costs can be a model for other states interested in curbing health care costs. The National Academy for State Health Policy will continue to track state efforts to implement affordability standards and will convene states interested in exploring this policy.
In its understandable urgency to build a long-needed national strategy on COVID-19, the Biden Administration faces a patchwork of state-based initiatives that can simultaneously support and confound a new national strategy. The previous Administration made states the frontlines against COVID-19 and, working with the US Centers for Disease Control and Prevention (CDC), states have built considerable infrastructure against the pandemic with the help of federal funding.
This work, however, reflects state variations in priorities and capacities, with many developing comprehensive approaches while others resisted a more fulsome approach to COVID-19 prevention. President Biden has made clear his intention to work collaboratively with states. He recognizes the considerable capacity that states now have in place, and knows his policies will require flexibility to accommodate the different state approaches now in operation. Importantly, the President’s $1.9 trillion stimulus package, which includes considerable funding to address Covid-19, still needs to be enacted by Congress and implemented by the federal government. State work necessarily continues as those political negotiations unfold.
Last week, the Biden Administration issued its National Strategy for the COVID-19 Response and Pandemic Preparedness, a comprehensive roadmap of actions and investments to address the pandemic head on. The National Academy for State Health Policy (NASHP) interviewed a diverse group of state officials from a cross section of states – red, blue, and purple, and large and small. This is a snapshot of those conversations – not a survey of all states – to take their pulse and hear how the transition to the Biden plan can be achieved to:
- Avoid redundancy and confusion between state and federal efforts;
- Build on investments made to state capacity to date; and
- Address the unique challenges in each state.
As they reflected on key provisions in the Biden plan, several common themes emerged, but underpinning their states’ operational issues is the urgent need for consistent, predictable, and adequate vaccine supplies.
Vaccine distribution and planning: State officials expressed frustration with the lack of consistent, reliable, and timely information about vaccine supplies, noting that the last-minute information about weekly vaccine allocations gives states little time to inform providers, determine how many doses can be administered that week, and inform the public. This leads to consumer confusion and may lead to vaccine resistance if consumers become increasingly frustrated as scheduled vaccination appointments are suddenly cancelled. Appreciating the manufacturing issues and challenge in keeping up with demand, state leaders nonetheless called for more advance notice so they can plan when doses are due, as opposed to the currently weekly announcements, and assurances that promised doses will arrive as scheduled. One state official likened it to declaring a moon shot and taking off without knowing how much fuel was available. State leaders believe more advance and reliable scheduling of doses will expedite getting shots into arms. Some urged the federal government to provide a more accurate and accessible dashboard of where vaccines are in the pipeline and when states can expect to receive them.
Vaccine prioritization: CDC, with input from its Advisory Council on Immunization Practices (ACIP), released guidance that prioritized frontline health care workers. Former Health and Human Services Secretary Alex Azar later included people 65 and older. States have all developed priority plans for their vaccine rollouts, but they have not consistently followed CDC guidance. States set their own priorities, some concluding that the federal recommendations were impractical because of limits in available dosages and the inflexibility of the federal guidance in addressing state-based priorities. Some states defined essential workers differently, some targeted those with chronic illnesses, while others noted the need to vaccinate families who live multi-generationally, rather than just the elder in the family. Some states opened vaccinations to all over age 65, and others limited to those over 70 or 75. (View each state’s vaccination priorities here.) Recognizing the disproportionate impact of COVID-19 on communities of color, some states have specifically identified people of color as a priority, but many have struggled to vaccinate them at equitable rates. Some officials noted that frontline health workers include many people of color, but others urged a more aggressive outreach to high-risk populations.
As more vaccine and supplies become available, federal priorities need to coordinate with state initiatives. Residents of a state may be in line for vaccines or expect to be next in line. If there is suddenly a different national prioritization, it may need to grandfather certain populations now in line for vaccines or consider allocating vaccines in such a way to maximize a seamless transition to new priority groups and assure a consistent national strategy.
Vaccine administration: Many states need a larger workforce to carry out their vaccination distribution plans and funding to expedite administration. Many have waived licensing and scope-of-practice rules to encourage more vaccinators, including approving dentists and veterinarians and recruiting volunteers from the ranks of retired health professionals. States are launching hotlines and dashboards to track vaccine availability and in some cases to schedule appointments. Scheduling, tracking, and managing vaccination programs will become an increasingly complex task as more vaccines are available and particularly as long as two doses are required.
States use different data systems, primarily CDC’s Vaccine Administration Management System (VAMS), the independent Prep MoD, and Immunization Information Systems, and each has its limitations. For example, VAMS does not allow a consumer to schedule a second appointment until the first is completed, which adds time and complexity to the process. The Biden Administration proposes to bolster data systems. Currently, only 21 of 46 reporting states and Washington, DC can track vaccines by race and ethnicity, complicating efforts to ensure equity in vaccine distribution. Timely efforts to streamline and speed appointment scheduling and reporting to immunization registries would be welcomed by many states.
State policymakers note that provider-based vaccination clinics are opening quickly and attract patients with health coverage, assuring providers receive reimbursement for vaccine administration. Health Resources and Services Administration funding is available for non-covered populations, but some states report that the billing system is burdensome. Providers, facing the pressure of getting shots in arms, may not be billing and reporting in a timely fashion, delaying efforts to document how many doses are in the pipeline and how many have been administered.
Mass vaccination sites: States, working with hospitals, health systems, clinics, and others are converting sports arenas, recreational centers, and even an unused racetrack to large-scale vaccination sites. Some are co-located with testing centers or food distribution sites. Systems are in place to register, schedule, and deliver vaccinations and hundreds of mass sites are operational within states. The Biden Administration has developed a draft plan, called Concept of Operations, to use the Federal Emergency Management Agency (FEMA) to establish clinics across the country and to authorize and fund states to use the National Guard to help staff the effort. Now under review by states, the plan would support implementation of mass clinics. However, some state officials admitted that was not where they need help right now. Others say mass clinics are in place but getting additional staff help would free up public health workers now staffing these clinics so they could seek out and vaccinate vulnerable populations. Mobile and small clinics could provide 250 doses a day, which would be useful in remote and rural areas. Close collaboration with states will be required both to build on current and planned clinic capacity and because it appears these FEMA-supported efforts will not receive additional vaccine allocations, but rather come from the state’s allocation.
As vaccine supply grows and mass clinics expand, states are contemplating the impact on claims volume and what issues might arise from such a massive, intensive activity, and the billing it will require.
Reaching vulnerable populations: Federal support may be best targeted to help states reach the homebound with limited or no internet or smart phone access, the homeless, uninsured, and those in rural areas. Special consideration needs to be given to populations of color disproportionately affected by COVID-19 and undocumented immigrants. The capacity to maintain vaccination sites on a 24/7 basis will expand access to those unable to come during normal business hours. State officials embraced the idea of FEMA spearheading home visits, particularly to homebound elders and those with disabilities for whom getting to a clinic would be challenging. Many of these individuals are enrolled in Medicaid and will require costly medical transportation if they must travel to a clinic for vaccination. Clinics in communities of color, staffed by trusted community workers, are important strategies designed to reach key populations. As statewide registration opens, some states are using data visualization heat maps to identify target populations and place clinics in appropriate locations. These and related strategies can inform federal initiatives so working with state officials they can effectively reach targeted populations.
Messaging: The Biden Administration plan includes a significant national education and publicity campaign to encourage vaccination and directly address vaccine hesitancy. A consistent national message delivered by trusted voices can significantly assist states, but collaboration will be required to understand the issues, minimize mixed messages, and effectively communicate with various populations, including those who are distrustful of large government vaccination efforts.
Preventing the spread of COVID-19: The Biden plan calls for expanded masking, testing, tracing, and data gathering and calls on governors to act. Presently, 41 states and Washington, DC have mask mandates in place and 20 have active social distancing requirements, although these are varied and subject to change. Most states limit capacity in indoor places and many have evening curfews for certain businesses.
However, enforcing mask mandates has been challenging as has expanding limits on indoor gatherings, particularly where people remove masks for eating or socializing. Whether the Biden Administration’s efforts to educate the public will result in more voluntary masking compliance remains a question and, as vaccines become more widespread, the importance of continued masking and distancing will require more aggressive explanation.
The Biden Administration, not yet a week-old, has moved with lightning speed to lay out a comprehensive and promising national strategy and to engage governors. Beyond vaccine availability and funding, two fundamental challenges confront its implementation.
First, over the last 10 months states have had the primary responsibility for addressing the COVID-19 crisis. They have met the challenge and established testing, tracing, treatment, and now vaccination strategies designed for that state. Any federal response now needs to contemplate how to minimize confusion and build on and integrate those states’ initiatives and the infrastructure they have established. An effective and long-awaited national strategy can prevent the state-to-state competition that was required to secure personal protective equipment and testing supplies early in the pandemic and instead develop a clear and well understood pathway to vaccinating all in the United States. These are logistical and political challenges – daunting to be sure – but resolvable with the partnerships and funding the Biden Administration has proposed, and if the supply chain to distribute vaccine becomes more reliable.
More demanding will be the individual state- policy variations designed to prevent the further spread of the pandemic, a compelling issue as viral mutations emerge. The challenges of controlling the disease and dealing with its economic fallout are real and test anew the concept of federalism.
NASHP has always supported the notion of states as innovators, launching experiments to try new ways to address problems. But the COVID-19 virus knows no national or state boundaries. At what point, then, does the urgency of our public health emergency override the authority of states? If the public information campaign based on scientific evidence led by the Administration to advance prevention strategies fail to secure compliance in states, conditioning federal funds on compliance may be the Administration’s only option to secure the prevention strategies required to protect the public’s health and win the war against COVID-19.
What does the tool do?
The tool uses publicly available Medicare cost reports (MCRs), which hospitals submit annually to the federal government, to calculate the costs incurred for providing hospital services, as well as its payer mix and more. It answers key questions, including:
What does “breakeven” mean and include?
“Breakeven” is an accounting term for the point at which revenues and expenses are equal. The breakeven point can help purchasers of health care services determine the appropriate baseline that covers a hospital’s costs for providing patient services. As some purchasers may choose to consider additional costs when establishing their reimbursement rate (e.g., the costs of non-hospital health care facilities within the health system), NASHP’s tool presents four breakeven point options. Each level, calculated as a percentage of Medicare rates, accounts for additional costs which are included in the hospital’s MCR.
- Reimbursing at Level 1 covers the cost of providing hospital patient services to commercially insured patients, plus any costs not covered by government programs, charity care, or uninsured patients.
- Reimbursing at Level 2 covers all Level 1 costs, plus all Medicare-allowed costs not allocated to other payers. Level 2 provides an additional degree of accuracy to calculating commercially attributable allowed costs.
- Reimbursing at Level 3 covers all Level 1 and 2 costs, plus Medicare disallowed costs, such as research, cafeteria expenses, and advertising. The tool excludes physician direct patient costs because they are reimbursed separately from hospital reimbursements through other channels, such as fee schedules.
- Reimbursing at Level 4 covers all Level 1, 2, and 3 costs, plus hospital non-operating income and expenses such as parking lot receipts and loss on investments.
Purchasers and hospitals may not agree on what level constitutes appropriate payment and may pursue a fifth baseline option offered by the tool: an average of Level 1 and Level 4.
How can information from NASHP’s Hospital Cost Tool be used to reduce health care spending?
Purchasers can use the tool to better determine what their baseline reimbursement to a hospital could be. Claims can then be run through a Medicare re-pricing tool to identify what is currently paid to each hospital as a percentage of Medicare. This information can aid purchaser negotiations with hospitals to achieve cost-based hospital reimbursement rates. The Montana State Employee Health Plan pursued this reference-based pricing to Medicare strategy and reduced its hospital reimbursements, increasing the plan’s reserves by $112 million within three years, allowing the plan to increase its sustainability without increasing premiums. Additionally, this data can be used to investigate costly drivers of hospital claims across hospitals, when adjusted for utilization. Hospital cost data can also inform state pursuit of cost-containment strategies, such as cost growth benchmarks, global hospital budgets, or public options.
Won’t lowering hospital reimbursements risk decreased access to care?
Every hospital selected by Montana for its new cost-based rates eventually agreed to the policy. Plan members ultimately kept full access to their network of providers. Before the one holdout hospital agreed to join the network at the new rates, the plan paid for members to receive care at a nearby in-network hospital free of copays and coinsurance, covering gas mileage and a hotel stay if needed. Nurse care managers also re-routed care as needed. As a result, members maintained access to care during this brief time period. Importantly, there were zero hospital closures as a result of the change, which maintained the community’s access to care.
Don’t commercial prices need to be so high because government programs underpay hospitals?
The RAND Corporation’s study, Nationwide Evaluation of Health Care Prices Paid by Private Health Plans, found no correlation between a hospital’s prices and the share of its case-mix-adjusted Medicaid and Medicare discharges.
If the question’s assumption was true, hospitals with higher prices would likely have had higher shares of Medicaid and Medicare patients – but that was not the case. NASHP’s Hospital Cost Tool allows purchasers to identify exactly what percentage of a hospital’s Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) costs are reimbursed. The tool also shows what percentage of a hospital’s total charges are attributable to each program, and a hospital’s profit margin for all government programs collectively. The tool’s breakeven levels calculate what the commercial rates as a reference to Medicare would be if commercial payers covered any potential shortfalls from public payers or the uninsured. The RAND study can further inform purchasers as it shows commercial prices at hospitals across the country.
Why address health care costs through hospital spending, particularly during a public health emergency?
Hospital spending is the largest health care expenditure in the United States. Combined with physician practices, which are increasingly being acquired by health care systems, hospital spending accounted for 53 percent of health care expenditures in 2018. According to the Health Care Cost Institute, the main drivers of rising health care spending are price increases, not increased utilization. At a time of diminished state budgets and profitable health care entities, addressing hospital prices presents the most significant potential to reduce health care costs. Analyzing hospital cost data through the tool’s could free up much-needed state revenue while still appropriately covering a hospital’s costs. For more information about health care costs, view the National Academy for State Health Policy’s Understanding the Health Care Cost Conundrum in 2020 slide deck.