Rhode Island's Affordability Standards Slow Health Care Spending

Rows of dollar bills

In a study published in HealthAffairsAaron Baum, PhD, assistant professor at the Ichan School of Medicine, Bruce E. Landon, PMD, MBA, MSc, professor of health care policy and medicine, Zirui Song, MD, PhD, assistant professor of health care policy and medicine, Russel L. Phillips, MD, director of the Center for Primary Care at Harvard Medical School and William Applebaum Professor of Medicine, and Asaf Bitton, MD, MPH, assistant professor of medicine and health care policy, examined Rhode Island’s 2010 affordability standards that aimed to slow health care spending growth.

Although a few other states have introduced regulations such as these, it remains unclear how successful these have been in actually controlling spending increases. Rhode Island required that commercial insurers increase spending on primary care related services over a 5-year period.  In addition, the state imposed inflation caps and diagnosis-based payments on contracts between commercial insurers and hospitals.

The researchers used a difference-in-difference design to compare spending before and after these interventions among insured adults in Rhode Island to insured adults in other states. After the policy was implemented, Rhode Island patients’ quarterly fee-for-service spending decreased by $76 per enrolled compared to insured adults in other states. Non-fee-for-service spending directed towards primary care services (primarily in the form of non-visit based payments) increased, but there still were overall net savings after the policy.

These results suggest that states may be able to mandate increased investments in primary care services without leading to increases in spending.  In addition, mandated price-control measures may effectively leverage state regulatory powers to reduce health care costs. Policies such as the one implemented in Rhode Island could also be useful for other states that seek to slow the growth in health care spending.