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Connecticut health care spending outpaces economic growth

A health insurance claim form on a medical bill.
DNY59/Getty Images
A health insurance claim form on a medical bill.

Health care spending continues to increase across Connecticut, and it's increasing faster than targets set by state officials.

Spending rose 6% statewide from 2020 to 2021, exceeding the benchmark target of 3.4%, according to the Connecticut Office of Health Strategy’s (OHS) first benchmark full report.

The benchmark was established to help reduce health care costs in Connecticut, and the results of this first report suggest a need to reassess current cost control strategies and consider new measures.

Much of the increase was driven by an 18.8% surge in commercial health insurance spending, larger than other states with benchmarks such as Massachusetts, Rhode Island and Oregon. But Medicare and Medicaid spending barely went up, rising by just 1.4% and 0.8%, respectively.

Connecticut spent $34 billion on health care and insurance costs in 2021, compared with $31.9 billion in 2019 and $30.9 billion in 2020.

Costs increases were just as high or higher in hospital-affiliated advanced networks, where the hope is that coordination among providers would optimize resources and costs.

“This report will enable us to hold accountable those parties responsible for excessive increases,” Gov. Ned Lamont said in a statement to reporters.

The OHS has prioritized two areas of cost mitigation in 2023: pharmacy spending and hospital spending.

But Paul Kidwell, senior vice president of policy at the Connecticut Hospital Association, said stakeholders should look into Medicaid reimbursement policy as one of the causes of stretched hospital finances.

“The providers have to make up the difference in other places,” he said. “We have to be able to support patient care, and that unfortunately oftentimes comes in commercial spending or commercial rates being higher because of that subsidization of Medicaid payment.”

OHS does not expect individual income and economic growth to keep pace with health care spending at the current rate. The OHS consequently is targeting health care costs to increase by no more than 2.9% over the next two years.

“This target was set to better align household income, the state economy and health care costs,” said Dr. Deidre Gifford, executive director of the Office of Health Strategy. “The fact that health care increases are outpacing income and economic growth means that affordable health care is out of reach for many Connecticut residents.”

The report also showed that Connecticut met its target to spend 5% of total health care costs on primary care in 2021. The OHS has advocated increasing proportional spending on primary care as a way to rein in health care costs. Higher primary care spending is associated with better health outcomes and lower overall costs – the benchmark initiative has a target of 10% of spending on primary care by 2025.

Legislative proposals to lower health care costs: Democrat and Republican 

Democratic proposals include eliminating hospital facility fees charged at free-standing offices and clinics; getting Connecticut to join a multistate bulk purchasing consortium to negotiate prescription drug discounts that residents can access through a discount card at their pharmacy; and preventing price increases when patients get care from a provider who is not in their network.

Lamont is proposing to limit out-of-network costs for inpatient and outpatient hospital services to 100% of the Medicare rate for the same service in the same geographic area.

These reforms are included in House Bill 6669, which was recently approved by the Public Health Committee, and Senate Bill 983, which was recently approved by the Insurance and Real Estate Committee.

Health care is “not a politically partisan issue,” Senate Republican Leader Kevin Kelly, R-Stratford, and Sen. Tony Hwang, R-Fairfield, said in a statement. Hwang is the ranking senator on the Insurance and Real Estate Committee.

The Republican proposal to lower health care costs includes addressing business practices by pharmacy benefit managers (PBM), including what’s called spread pricing arrangements, manufacturing rebates that only benefit the PBM, and monopolistic ownership and corporate structures.

The Republican plan to lower insurance premiums is to invest roughly $80 million annually — less than 0.5% of the state budget — and leverage matching federal funds.

Sujata Srinivasan is Connecticut Public Radio’s senior health reporter. Prior to that, she was a senior producer for Where We Live, a newsroom editor, and from 2010-2014, a business reporter for the station.

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