Panel Says State Action Can Help Rein in Rising Health-Care Costs

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By Ralph Lindeman  

Jan. 8 -- Actions taken at the state level may be the most effective over the long term in helping to rein in rising health-care costs because of the variety of policy tools available to governors and state legislatures, according to a report released Jan. 8 by a panel of national health-care leaders.

State officials have significant control over spending in Medicaid and the Children's Health Insurance Program, insurance regulation, provider rates and medical malpractice laws, making states ideal laboratories to try new ways to deliver and pay for health care, said the 116-page report, “Cracking the Code on Health Care Costs.”

The report was released by the State Health Care Cost Containment Commission, a 12-member panel created in January 2013 by the Miller Center, a public policy organization at the University of Virginia.

The panel co-chairs are Michael Leavitt, a former secretary of health and human services in the George W. Bush administration and a former Republican governor of Utah, and Bill Ritter Jr., a former Democratic governor of Colorado.

The report follows news that health-care spending rose by just 3.7 percent in 2012, the fourth consecutive year of slow growth, according to Jan. 6 findings by the Centers for Medicare & Medicaid Services (see related story).

“While the rate of increase in the cost of health care has slowed over the last few years, it has still hit the tipping point and it is having a huge impact on consumer budgets,” said Gerald Baliles, the Miller Center's director and chief executive officer and a former Democratic governor of Virginia, who spoke at a press conference to announce the report.

Leads in Spending, Lags in Outcomes

The report outlined structural problems in the U.S. health-care system that it said result in the nation spending more than twice as much on health care than any other industrialized country.

The problems include high costs for physicians, facilities and drugs, as well as fragmented care among providers, a fee-for-service payment system that encourages wasteful and unnecessary procedures and high administrative costs.

At the same time, despite the increased spending, the U.S. ranks lower than other advanced countries in several measures of health-care quality, including life expectancy, infant mortality, obesity, diabetes and heart disease, according to the report.

The report, which is “based on conditions as they exist with the Affordable Care Act,” is intended to spark discussions in state legislatures, as many begin new sessions early this year, Leavitt said at the press conference.

Commission member Andrew Dreyfus, president and CEO of Blue Cross Blue Shield of Massachusetts, added that the state-focused report may be even more relevant because “some of the national standardization anticipated in the Affordable Care Act has not occurred.” For example, only about half the states are participating in a major expansion of Medicaid that began in 2014 under the ACA.


Specific recommendations in the report include:

•  Use existing state health-care spending programs to accelerate the trend toward coordinated, risk-based care.States should establish standards for managing costs and promoting quality care and then apply them to state health spending programs, including Medicaid, state employee health plans and plans offered on state health insurance exchanges;

•  Change state laws and regulations governing insurance, scope of medical practice and medical malpractice. States should review these policies to ensure they promote cost efficiency and expand the availability of risk-based, coordinated care;

•  Help promote population health and personal responsibility in health care. States can educate consumers and state employees to encourage them to maintain healthy diets and lifestyles; and

•  Define and collect data to create a profile of health-care spending in the state. States should identify quality-tracking measures, create process for collecting cost and quality data and conduct an annual analysis of where health-care spending is concentrated and outside national averages.


“The strategies proposed in this report largely rely on transparency, purchasing power, payer and provider cooperation, persuasion and 'soft' regulatory pressure to spur the transition to more efficient, quality care,” the report said.

“Over time, however, the state may need to consider additional corrective action for some high-cost outliers,” it said. “States have many levers at their disposal to encourage compliance with state goals.”


To contact the reporter on this story: Ralph Lindeman in Washington

To contact the editor responsible for this story: JoAnn Goslin at

The report is available at

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