State Cost Growth Benchmark Programs and Total Medical Expenditures, 2010 to 2020

Area of Science:

• Health Economics
• Health Policy
• Healthcare Management

Background:

• US healthcare spending growth outpaces economic growth, necessitating cost-containment strategies.
• States are implementing cost-growth benchmark programs to control expenditure increases.
• Empirical evidence on the effectiveness of these programs is limited.

Purpose of the Study:

• To evaluate the association between statewide cost-growth benchmark programs and changes in per capita total medical expenditure (TME) growth.
• To assess the impact of these programs on payer-specific and spending category-specific expenditures.

Main Methods:

• Quasi-experimental, difference-in-differences analysis using 2-way fixed effects.
• Analysis of Centers for Medicare & Medicaid Services State Health Expenditure Accounts data (2010-2020).
• Inclusion of 561 state- and year-level observations across 50 states and Washington, DC.

Main Results:

• State cost-growth benchmark programs were associated with a 2.0% reduction in per capita TME growth (P=.004).
• Medicare spending growth decreased across all treated states (-2.4%, P=.009).
• Spending reductions were primarily observed in hospital and skilled nursing facility expenditures, with a notable increase in home health spending.

Conclusions:

• State cost-growth benchmark programs are linked to modest reductions in healthcare spending growth.
• Programs incorporating enforcement mechanisms or payment reforms appear more effective.
• These benchmarks may aid in slowing expenditure growth and promoting shifts to lower-cost care settings.