Delaware Seeks a Solution as Health Costs Rise

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By Leslie A. Pappas

One of the smallest states has become a big spender on health care, and officials in Delaware are looking for solutions.

Delaware Gov. John Carney (D) on Feb. 22 ordered the state to form an advisory group to set a benchmark that would help slow the state’s rising health care costs.

“Delaware has consistently ranked among the states that spend the most on health care, yet we’re not seeing the best results,” Carney said in a statement after signing the executive order Feb. 22.

The push for benchmarks came after an analysis in June from the Centers for Medicare & Medicaid Services (CMS) showed that Delaware’s per capita health-care costs were more than 27 percent above the U.S. average, behind only Alaska and Massachusetts. Delaware’s per capita spending in 2014 was $10,254, compared to the U.S. average of $8,045, CMS found in its analysis of insurance payers, including Medicare, Medicaid, and private insurance.

Ranked 31st in Overall Health

Yet Delaware ranks 31st among states in terms of overall health, with higher rates of cancer, diabetes, obesity, and chronic disease, Dr. Kara Odom Walker, secretary of the state’s Department of Health and Social Services (DHSS), told Bloomberg Law in a phone call Feb. 23.

“We were surprised and wanted to look more into what was driving spending,” Walker said. The group will gather data to help better answer why costs are going up, she said.

Health-care costs have been putting an increasing strain on the state’s budget. Between 2010 and 2016, for example, state spending for Medicaid and health-care costs for state employees went up 42 percent, Walker told Bloomberg Law.

The executive order comes five months after the passage of legislation that gave DHSS authority to establish a benchmark that would link the growth rate of health-care spending to the state’s rate of economic growth.

The order creates an advisory group that includes the secretary of DHSS, the director of the Office of Management and Budget, representatives from hospitals, primary care providers, the insurance industry, insurance brokers, business, and other stakeholders. The group will meet at least once beginning in March and will work to define total health-care spending, analyze available data, and formulate a benchmark that can be used beginning in 2019.

Massachusetts Example

Delaware is using states like Massachusetts and Oregon as a models, and hopes to “leverage state purchasing power and transparency” to keep health-care costs in check, Walker told Bloomberg Law.

Since 2012, Massachusetts has used a benchmark to limit how much health-care expenses can grow each year, limiting the growth rate of overall health-care costs to 3.6 percent annually. The Massachusetts Health Policy Commission (HPC), the entity that administers the state’s cost containment program, this year lowered the target rate to 3.1 percent.

Another group, the Center for Health Information and Analysis, collects an exhaustive amount of info each year from all public and private health entities to help the HPC set limits and rein in costs.

Industry: Be Careful

Delaware needs to be careful about setting benchmarks that aren’t realistic or inadvertently increase administrative burdens, according to Wayne A. Smith, president and CEO of the Delaware Healthcare Association, a trade organization that represents Delaware’s hospitals, health systems, and other health organizations.

“We have significant concerns in terms of what a benchmark would be, how much it would encompass, what kind of bureaucratic expense might be associated with it,” Smith told Bloomberg Law in a phone call Feb. 23. Benchmarks tied to the state’s rate of economic growth, for example, may not account for unusual cost increases, such as a heavy flu season or the use of an expensive blockbuster therapy, he said. “A more relevant benchmark might be more general health-care cost inflation,” he said.

Highmark Delaware, an affiliate of Pittsburgh-based Highmark Inc. that insures 440,000 Delawareans, said it is working collaboratively with the state on the benchmark.

“We are actively engaged in this process and recently co-hosted a Payer-Purchaser Summit with Secretary Walker that focused on value based innovations in health care,” Highmark Delaware spokesman Matt Stehl told Bloomberg Law in an email Feb. 23. “As health care costs continue to rise in Delaware, it is important that all the stakeholders work together to address rising cost and increasing access to high quality health care for all Delawareans.”

—With assistance from Adrianne Appel

To contact the reporter on this story: Leslie A. Pappas in Philadelphia at lpappas@bloomberglaw.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bloomberglaw.com

For More Information

The Executive Order is at http://src.bna.com/wCG

Copyright © 2018 The Bureau of National Affairs, Inc. All Rights Reserved.

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