Impact of State Level Healthcare Spending Targets on Health Spending

• In Event: Health Financing and Spending

Abstract

Introduction: In recent years, several U.S. states have introduced regulatory interventions aimed at curbing the growth of healthcare spending. Early efforts included hospital rate-setting, budget reviews, and health system performance targets. Research Question: This paper investigates the impact of state regulatory initiatives on healthcare expenditures and healthcare delivery across multiple dimensions, including major sectors (hospital, physician, etc.) and by payer (Medicare, Medicaid, Private Insurance). Data: We use nationwide, state-level healthcare spending data from the Centers for Medicare & Medicaid Services (CMS) for the period 2010 to 2020 and exploit the staggered implementation of spending-target interventions across states to identify causal effects. We focus on annual per capita spending across key service categories - including hospital care, nursing home care, dental services, physician services, and prescription drugs- and per enrollee expenditures within Medicare, Medicaid, and Private Health Insurance.  Research Design: We apply newer Difference in Difference (DID) methods robust to treatment effect heterogeneity and control for demographic and economic differences across states to ensure comparability and robustness. Preliminary Results: While our Two-Way Fixed Effects (TWFE) estimates show modest but statistically significant reductions in overall personal healthcare (approximately 1.25%) spending in states that implemented aggregate spending targets, the constraining effects are not backed up statistically by DID estimators robust to heterogeneous treatment effects across treatment cohorts. In light of the aforementioned contrasting findings, we check the efficacy of individual state policies using a synthetic control approach. Implications: We discuss the implications for healthcare use and delivery in these states. As part of the analysis, we examine changes by sector (hospital, physician, nursing home, etc.) in response to these policies and their effect across payers. With emerging state efforts to contain aggregate state healthcare spending and control healthcare cost effects on state budgets for both Medicaid and state employees, these findings provide insight into early state efforts at cost control and potential insights for more recent efforts at state regulation.

Author

• David Patrick Redmon, BRG
  Presenting Author