States Could Build Upon the Affordable Care Act to Cut Costs

The Affordable Care Act has had two main goals for the healthcare system: Increase health insurance coverage for Americans and lower healthcare spending around the country. At this point in time, the Affordable Care Act has brought health coverage to 20 million Americans and led to the creation of the Center for Medicare & Medicaid Innovation, which develops new payment models in order to stabilize rising healthcare costs.

A report from the Center for American Progress called State Options to Control Health Care Costs and Improve Quality Discussed some other benefits of the Affordable Care Act and the new models of  medical reimbursement coming from the Center for Medicare & Medicaid Innovation.

New reforms have been taking place within the Medicare and Medicaid programs as well as the Children’s Health Insurance Program (CHIP) to reduce medical spending and improve value of services. Some of these new healthcare delivery models include the development of accountable care organizations, bundled payments for hip and knee replacement surgeries, and reimbursement contracts tied to quality performance benchmarks.

The Affordable Care Act has played some part in slowing the rise of healthcare spending. The report states that, before 2014, there were five years of slow healthcare spending growth, which the Affordable Care Act could have contributed to. Nonetheless, current predictions show that healthcare spending will continue to grow faster than the US economy over the coming years.

As such, a greater focus on payment reforms is still needed for the healthcare industry so that the average American will be able to access healthcare services in future generations and the typical taxpayer does not have to take on the burden of significantly elevated Medicare costs.

The report from the Center for American Progress argues that creating payment reforms on the federal level may be more complex at this point in time. However, it may be possible to innovate healthcare reimbursement on the state level.

“There are several advantages to implementing reforms at the state level. State-level reforms can be tailored to work best for each state, depending on the structure of its insurance markets, the size of the state, and its demographics,” the report authors wrote.

“States also have considerable authority over the regulation of health insurance and the provision of health care within their borders. States control their own insurance markets: They run their Medicaid and CHIP programs and state employee plans, and certain states run the exchanges for individual health insurance. States also control the rate review process, scope-of-practice regulations, physician licensing, antitrust laws, and provider and insurer regulations. Lastly, states and governors have considerable convening power to bring together diverse stakeholders, making reform efforts more politically feasible.”

Since states have run their own Medicaid and CHIP programs as well as health insurance exchanges, they are well-equipped to handle innovating healthcare payment reform and health insurance transitions. The report encourages states to follow some of the examples set by successful payment reform strategies.

For instance, the states of Massachusetts, Rhode Island, and Maryland have established a cost growth goal, which other regions would benefit from following. Arkansas, Tennessee, Ohio, and Delaware have required all private health insurance companies and public payers to adopt bundled payment strategies.

When attempting to create a cost growth goal, state lawmakers will need to put “a cap on the growth of a state’s per capita health care spending,” the report states. Essentially, these cost growth goals show a public commitment aimed at controlling the growth in healthcare spending and making sure all stakeholders maintain their end of the bargain.

Cost growth goals also improve healthcare transparency and data collection methods across the state. Massachusetts was the first state to create such a goal in 2012. The Health Policy Commission was established in Massachusetts to manage the cost growth goal and stakeholder input.

Starting in January 2014, Maryland also implemented its own version of a cost growth goal and, more recently, Rhode Island’s Working Group for Healthcare Innovation has set up a flexible healthcare spending rate. The report urges other policymakers to follow in the footsteps of these state-based reforms.

“Additional improvements to the U.S. healthcare system would build upon the Affordable Care Act and accelerate the slowdown in healthcare cost growth. Controlling healthcare costs is necessary for the sustainability of the federal and state health care systems and to prevent health care spending from crowding out spending on other important services,” the report concluded.

“Because gridlock at the federal level will preclude significant new federal reforms, states should take the lead. Fortunately, states have significant incentives to implement healthcare reforms and numerous available tools with which to do so.”

In order for the healthcare industry as a whole to reduce spending throughout the country and ensure spending does not grow faster than the rate of the economy, it would benefit state lawmakers to innovate and follow payment reforms that other states have successfully implemented.