Dear Susanne,

On May 22, join us for a Journal Club to discuss "California's COVID-19 Vaccine Equity Policy: Cases, Hospitalizations, and Deaths Averted in Affected Communities."

States Across the Political Spectrum Address Health Spending Grow

Welcome back to Health Spending!

This month, we focus on the role of states in moderating health care spending growth.  

As readers of this newsletter know, in the absence of coordinate federal action, many states are addressing health spending proactively by setting overall spending growth targets for all payers.  

Maryland and Massachusetts have led the way with this work, and other states are following suit, with California being the latest – and largest – state to hop on board. 

Notably, all of the states engaged in this kind of work – the three noted above, plus Connecticut, Delaware, Minnesota, Nevada, New Jersey, Oregon, and Rhode Island – can be characterized as either leaning toward, or firmly entrenched in, the “blue” side of the blue/red state divide in the US.

 
This approach has been less popular in more conservative (“red” or “purple”) states. It’s an issue, among others, that has caused some experts to question how scalable such target-setting can be.

A different – but complementary – approach to spending growth moderation that may have broader political appeal is to focus on price transparency – or putting clear and accurate health care price information in the hands of patients, payers, and regulators.  

The federal government has already taken significant steps in this direction, with the 2019 passage of rules on price transparency for hospitals and insurers. Several bills seeking to codify and expand on these rules are currently under consideration in Congress.

Even as the federal government is taking up this issue, states are doing what they have always done – moving ahead with initiatives of their own, as highlighted in two recent Forefront articles.

Making it Easier to Find Pricing Information

In a recent article, Maanasa Kona and Nadia Stovicek note, “states, as primary regulators of both hospitals and health insurers, can support federal efforts [to improve price transparency] and help policy makers, researchers, and employers gain access to key information to make health care more affordable.”

Notably, in their overview of state activity, Kona and Stovicek highlight several states that are not among the more left-leaning “usual suspects” in conversations about state-level attempts to control spending growth. For example:

• Arizona not only gave its Department of Health Services the task of overseeing compliance with federal price transparency rules, but also required the agency to publicly post information about noncompliant hospitals. This tactic could improve reporting compliance, which has been fairly low among hospitals.
• Similarly, Arkansas imposed state-level financial penalties – on top of federal penalties – for hospital noncompliance with the federal reporting requirements.
• Colorado prohibited hospitals from pursuing patients for unpaid bills until they demonstrate compliance with the federal requirements.
• Texas has gone several steps further than these other states by codifying the federal hospital rule into state law and extending the federal insurance rule to types of health plans that are otherwise not required to disclose prices, such as short-term limited duration plans. Kona and Stovicek report, “for these plans, Texas has issued detailed rules and guidance to improve standardization of the data, and make it easier to analyze.”

Making it Easier to Use Pricing Information

In another recent Forefront article, Jonathan Wolfson and colleagues focus on states that have not only made pricing information more transparent, but have also cleared some of the barriers to its use. 

Specifically, the authors discuss “discounted cash prices,” which are “discounted from charges (or chargemaster prices) and paid by uninsured patients and insured patients who choose not to use their insurance.” 
Prior to price transparency rules, patients were in the dark about these charges and what they might have to pay out-of-pocket if they were either uninsured, or insured but facing high cost-sharing.

As the authors explain, thanks to the federal rules, these prices are now widely known, but barriers remain to patients actually being charged such rates, which are often lower than the rates that insurers negotiate with providers (and which many patients pay if they have not yet met a deductible).

Insured patients are often discouraged from paying these discounted charges as they aren’t counted toward deductibles or out-of-pocket spending limits.
Wolfson and colleagues explain that some states are stepping in with regulation to overcome barriers to using cash prices. And, as with the states highlighted by Kona and Stovicek, they are not the usual left-leaning suspects.  

For example:

• Tennessee and Texas have both passed laws for the individual and small group markets, requiring that insurers provide “deductible credit” to patients who access cash prices – and such credit is automatically triggered when direct cash payment prices are lower than the insurer’s average in-network rate.
• Several other states require insurers to reward patients directly for choosing the lower cash price for care “by paying them a savings incentive, such as a check, premium reduction, or gift card for part of the savings.” These states include Virginia, Florida, Oklahoma, and Tennessee (as well as the “bluer” state of Maine).

What's Next?

States’ current efforts to address health spending growth illustrate the classic tensions between market-based and command-and-control based interventions. 

It remains to be seen which approach – or combination of approaches – will be most successful in moderating health care spending growth.  
It’s early days for all of these interventions.  

What we do know, however, is that the wide diversity of political climates in the US will no doubt continue to generate creative ideas – after all, the states are the laboratories of democracy – thereby also providing important fodder to the research and policy communities looking to find the most effective solutions.

--

Laura Tollen

Senior Editor

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