Health Care Cost Commissions: How Eight States Address Cost Growth

With health care spending continuing to rise rapidly across California — including monthly health premiums that have grown 300% in the last 20 years — the state is considering establishing a new Office of Health Care Affordability that would be charged with measuring and monitoring the growth in the cost of care, and enforcing growth targets. As policymakers pursue this idea, they can learn from states that have established state-based commissions or new regulatory authority to lower costs and improve value across the health care system.

This issue brief documents efforts in eight states — Connecticut, Delaware, Massachusetts, Nevada, New Jersey, Oregon, Rhode Island, and Washington — that have established new independent commissions or increased the authority of an existing regulatory body to monitor and limit unnecessary growth in health spending. The paper updates a 2020 CHCF report that studied a smaller group of states, Commissioning Change: How Four States Use Advisory Boards to Contain Health Spending.

While each of these initiatives has unique features, the new report identifies six universal components that have emerged across state models. These include (1) establishing authority for the program, (2) establishing a governance body and administrative infrastructure, (3) setting targets for cost growth and delivery system reform, (4) collecting data to measure and monitor cost growth at the payer level, (5) collecting necessary data at the subpayer level to identify and analyze cost drivers, and (6) developing and implementing strategies and procedures to enforce targets.

While state-level cost benchmarking has proven effective, the report finds that these programs alone do not guarantee success. Much greater transparency around spending trends and cost drivers, inclusive stakeholder processes around challenges and opportunities, and broad authority for enforcement are all necessary to reduce cost growth in a health care market as large and complex as California’s. Fortunately, several states with equally unique and pressing affordability challenges have demonstrated that cost growth benchmarking and enforcement programs can help contribute to a health care system more accountable and accessible to all.

Authors & Contributors

Glenn Melnick

Glenn Melnick, PhD, is an expert in health economics and finance. He joined the USC Price School of Public Policy faculty in 1996 and currently holds the Blue Cross of California Chair in Health Care Finance. Previously, he served as a faculty member of the UCLA School of Public Health, a consultant at RAND, and an expert witness for the Federal Trade Commission. He has been published in American Journal of Public Health; Health Affairs; Medical Care; Journal of Health Politics, Policy and Law; Health Policy Reform: Competition and Controls; and the Journal of Ambulatory Care Management. He has also been principal investigator for a number of funded projects in Jakarta, Indonesia, and in Taiwan.