Report: How States Can Advance Health Equity & Address Health System Costs

Budget limitations, systemic racism and a mandate to contain costs while maintaining access to quality care have been long-standing challenges for states. According to a National Academy for State Health Policy (NASHP) report, the rising cost of health care, particularly for racial/ethnic minorities, has created a barrier to accessing quality care. In 2018, 13% of Whites reported foregoing needed care due to its high cost. For all other racial/ethnic groups, this number ranged from 17% to 21%. These groups are disproportionately uninsured so they solely responsible for their care.

So how does a state advance health equity while addressing health system costs? One strategy for lower health care system costs is a global hospital budget approach. Under this system, a state works with a hospital to determine the hospital’s allowed revenues for the year. Maryland’s total cost-of-care model is one example. A hospital’s deviation from allowed revenues by more than a 0.5 percent margin – either surplus or deficit – results in penalties against the hospital’s budget the following year. With this approach, the state offers predictable payments to hospitals to incentivize them to avoid excess costs. Hospitals in Maryland have been able to rely on more consistent revenue and invest those funds within the community to address health disparities.

States can use cost-growth benchmarks and global budgets as strategies to advance health equity while addressing health system costs. These strategies offer states a way to retain much needed revenues while focusing upsteam spending on non-clinical interventions.

NASHP’s Model Act to Ensure Financial Transparency in Hospitals and Health Care Systems is designed to help state policymakers and the public access hospital financial information to better analyze a hospital’s assets, expenses and liabilities; evaluate the viability of the health system; identify strengths and weaknesses; and allow for appropriate executive and legislative actions to ensure access to care.