Ever-rising health care costs and significant variations in quality have made health care reform a central theme in national politics over the past decade. As we gear up for the 2020 elections, health care reform continues to take a front seat in national politics. Amongst the crowd of Democratic presidential candidates, for instance, there is an active debate about Medicare for All versus other strategies to expand coverage.
However, while national political polarization has often stymied progress on health reform, the states have been active in passing new legislation aimed at health care cost and quality. Health care was a major topic in governors’ 2019 state of the state addresses; governors highlighted the need for reform in behavioral health care, the importance of Medicaid expansion and reform, the desire to address high and rising provider and pharmaceutical costs, and issues related to the health care workforce.
State laws might be grouped into five categories: price transparency, benefit design, provider payment, provider networks, and market power. Catalyst for Payment Reform and the Source on Healthcare Price and Competition at UC Hastings Law, with support from the Robert Wood Johnson Foundation, have jointly developed a public database that catalogues state laws using these categories.
One of the major challenges that the US health care system faces is the lack of transparency into health care prices. Consumers and patients often have little insight into the cost of their care. State legislatures have taken a variety of approaches to improve transparency. Sixteen states have implemented mandatory all-payer claims databases (APCDs), which collect and house health care price and quality information. Of these, eight make price and quality information directly available to the public through state-based websites.
However, policy makers also use APCDs to monitor price and quality variation in the health care system. Furthermore, patients often do not have clarity about which providers are in-network and can experience astronomical bills if their provider is out of network. Thus, more than half of the states have passed or expanded laws to protect patients from surprise and balance billing. Of those, nine states offer near comprehensive protections that limit patient responsibilities to their insurance cost-sharing amounts, while the others limit protections for patients to certain types of providers or care.
Payment Reform And Benefit Design Laws
Health care reforms have recently focused on eliminating waste through alternative payment models, which have been implemented in both the public and private sector. These payment models aim to counteract the incentives inherent in the legacy fee-for-service payment systems that reward high use and, oftentimes, wasteful or unneeded care. To address these concerns, some states have implemented payment reform and benefit design programs through the legislature. For example, some state Medicaid programs, such as Colorado and Maine, have implemented accountable care organizations supported by shared savings payment arrangements that encourage providers to improve the coordination of care and minimize unnecessary spending for Medicaid beneficiaries.
Maryland, Pennsylvania, and Vermont have used global budgets to control volume by putting a cap on hospital spending. Furthermore, Maine now requires some health plans to offer plan designs that encourage enrollees to shop for high-value health care and physicians to inform patients about lower-cost providers when making referrals.
Laws Encouraging Provider Competition
The ongoing tide of mergers and acquisitions have also spurred efforts by states to maintain or promote competition among providers. States have sought changes to existing legislation or implementation of new laws in hopes that creating a marketplace more conducive to competition will make health care more affordable for consumers.
In the 1970s, many states implemented certificate-of-need (CON) laws to limit the creation of excess health care facilities, which could contribute to overuse and increased costs. However, some believe that CON laws have thwarted competition and contributed to rising health care prices with little to no improvements in quality. As a result, 15 states have now repealed CON laws.
States have recently attempted to reduce provider scope-of-practice limitations, which contributed to shortages of primary care providers, higher costs, and longer wait times for appointments. In addition, states have begun to implement legislation banning anti-competitive contract terms that dominant health care systems and health plans have used to secure advantage, including gag clauses (prohibitions on the release of negotiated payment amounts), most-favored nation clauses (prohibitions on providers from offering services to other payers at lower prices), and anti-tiering and anti-steering clauses (prohibitions on activities that could encourage a patient to seek care from another health care provider, including putting the provider into a less favorable tier that requires higher patient cost sharing).
Laws Governing Oversight And Regulation Of Costs
Certain states have taken a regulatory approach to health care cost control, using various oversight methods such as supervising the market to ensure competition or regulating prices. States have implemented oversight commissions to review the impact of market consolidation or keep an eye on health care prices. However, states grant these commissions varying degrees of authority. For instance, the Delaware Health Commission, the Massachusetts Health Policy Commission, and the Pennsylvania Health Care Cost Containment Council have the authority to analyze health care cost data and make recommendations, while the Oregon Health Policy Board is charged with developing and submitting plans to improve health care in the state to Oregon’s Legislative Assembly.
Furthermore, states use different strategies to review and determine the reasonableness of the rates health plans propose to pay to providers. For example, Rhode Island has exercised a relatively large amount of regulatory control over insurers and providers, imposing limits on provider rate increases to no more than the Consumer Price Index-Urban. Other states allow plans to file their rates and grant them automatic approval to use them—“file and use.”
States have also begun to use benchmarking to control costs. The Massachusetts Health Policy Commission sets the state health care cost growth benchmark for all payers at 3.1 percent. Those that do not comply must implement performance improvement plans. Delaware, Oregon, and Rhode Island have recently begun initiatives to reduce spending growth through benchmarking as well.
States As Models
Whether experimenting with laws and regulations to address an imbalance of market power in their local health care markets, reforming provider and hospital payment methods in hopes of greater value, or ensuring greater price transparency for consumers, states are taking a variety of approaches to contain health care costs and improve quality. Monitoring the development and impact of these various laws helps to identify potential models for federal reform and other states. The recently proposed Lower Health Care Costs Act comprises several of these strategies, including the implementation of a federal APCD and an outright ban of some anti-competitive contract provisions, such as gag and anti-steering clauses.
While neither the federal nor state governments have cracked the code yet on the right mix of laws to ensure high-quality, affordable health care, states continue to be highly active, key players in developing approaches to address some of our most vexing health care challenges.