Delaware lawmakers passed a large health care bill This summer, that puts limits on growth in hospital prices and forces insurers to boost investment in primary care.
The multi-pronged bill also requires certain payers to link nearly half of their business to alternative payment models by 2023 and create a shared responsibility for both cost and quality of care. Essentially, it forces payers and providers to enter these deals faster, hoping to pay for quality rather than quantity of care.
Patterned after similar reforms in Rhode Island, the legislation passed both houses and is now awaiting the governor’s signature. John Carney, Democrat. However, providers managed to lobby for an expiration provision that will require lawmakers to renew certain aspects of the bill before January 1, 2027, including rate caps.
Still, one of the state’s health regulators is hopeful that the reforms will lower the cost of care while strengthening primary care.
“We believe it will have a profound impact,” said Trinidad Navarro, Delaware’s insurance commissioner, who characterized the bill as aggressive.
Delaware is the latest state to try to curb the rising cost of health care. Most recently, Nevada passed legislation to launch a public option plan that aims to offer residents the lowest priced plans in the Affordable Care Act market by requiring some insurers to sell plans with lower premiums. of a certain threshold.
Hospitals face price caps to boost investment in primary care
The Delaware bill tries to tackle a few issues at once to cut costs.
One of the main goals is to increase investment in primary care by requiring insurers to spend a defined percentage of their total health care spending on services such as annual checkups and chronic care management.
In Delaware, spending on primary care is below the national average. At the same time, the state is experiencing a decline in the number of primary care physicians, in part due to retirement and perhaps low reimbursements. At the same time, its residents tend to be sicker and older, according to a report from the state Office of Value-Based Healthcare Delivery in partnership with Freedman Healthcare, consultants who worked as independent contractors with department staff.
Some research has established a correlation between the proportion of primary care physicians in a region and overall health spending. In areas with a higher proportion of primary care physicians, Medicare spending tended to be lower that year, according to a report from Health Affairs, which suggests that a strong primary care network can double the total cost of care.
Delaware’s effort is based on the premise that more investment in primary care will eliminate health problems for patients sooner, before they become more expensive, and will lead to better outcomes and spend less overall.
To make insurers spend more on primary care, the bill seeks to restrict spending elsewhere, allowing fully insured payers with more than 10,000 members to set limits on hospital price growth in their contracts, the second aspect of the bill. By 2022, the growth in prices of non-professional services in hospitals may be the highest between 3% or the basic CPI plus 1%. And from 2024 to 2026, the higher between 2% or the basic CPI plus 1%.
The CPI, the consumer price index, measures the cost of goods and services and how it changes over time. And the underlying CPI excludes energy and food prices, which can be more volatile. By limiting hospital prices to the CPI, you ensure that increases are minimal and set a ceiling for sudden price increases.
However, the underlying CPI increased 4.5% over the previous year, the largest increase in 12 months since November 1991, which could mitigate the impact of the bill if prices continue to rise. Still, it puts a ceiling on growth in hospital prices, a field that previously had no limits.
Although not explicitly stated, the bill attempts to equalize the balance of power between providers and payers, which is hinted at in the Freedman report.
Like much of the U.S.Many of Delaware’s hospital markets are highly concentrated, making it difficult for insurers to shy away from the price increase proposed by a hospital system in any given year, according to that report. Of the six adult acute care hospitals in the state, two controlled more than 80% of discharges in their service areas in 2018, the report notes.
The third part of the bill attempts to steer providers and payers away from fee-for-service reimbursement by demanding how much care must be provided through alternative payment models.
That aligns with trends in the larger industry, as the nation’s healthcare system moves toward a system that pays for quality of services, not quantity.
ChristianaCare Health System, the state’s largest private employer, declined to comment. In an email, the Delaware Health Association, which represents hospitals, said it took no position on the bill.
Did it work in Rhode Island?
Delaware looked to Rhode Island as a model for its effort.
In 2010, Rhode Island implemented a series of what it called “affordability standards” to increase spending on primary care while curbing hospital price increases. Like Delaware, Rhode Island bet that the more it spent on primary care, the less it would spend overall on health care.
Strong evidence suggests that the strategy worked.
The researchers found total spending growth decreased without negatively affecting health quality measures, according to a study that examined spending over a decade.
“State regulators in Rhode Island achieved one of the largest changes in total healthcare spending seen from payment reforms to date,” reported the 2019 research article in Health Affairs.
The study compared spending among a large group of commercially insured Rhode Islanders with a cohort of a similar size, about 38,000 adults, located in other states to serve as a control group. The researchers began comparing spending between the two groups in the years before the reform and in the years after.
The results are amazing. The amount spent on care per adult decreased by $ 76 per member compared to the control group, a decrease of about 8.1% compared to 2009, before implementation. And Rhode Islanders ended up paying less out of pocket compared to their control group peers.
Rhode Island did not begin to see the effects until a few years after implementation.
Delaware lawmakers included an amendment that will require them to renew certain aspects of this law before 2027.
“That’s one of the challenges with these policies, as politically … it takes them a few years to show financial results, so longer-term evaluations are really important,” said Aaron Baum, one of the researchers on the Health Affairs study. . .