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Winter 2017

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Rising Healthcare Costs Among Challenges for Murphy Administration

Some experts argue that New Jersey should consider rate setting to stabilize costs and create a more sustainable system

holiday reading for governor

Protecting, or even expanding, access to healthcare has become a public priority in recent years, forcing policymakers to grapple with a number of complex factors, including a vexing and dependable trend: the growing cost of care itself.

Healthcare costs will be a constant factor for Gov.-elect Phil Murphy and his team as they debate how to sustain New Jersey’s Medicaid program and build on efforts launched by Gov. Chris Christie to integrate behavioral and physical health systems and grow addiction recovery services. The new Democratic administration could also be faced with a destabilized — and more expensive — state insurance market, thanks to changes expected as a result of the federal tax-reform law, which eliminated the penalty for not purchasing coverage.

A report published earlier this year by Rutgers University’s Center for State Health Policy makes a strong case for a renewed government focus on cost, specifically the price of medical treatments, which the authors said are the primary driver of this growth. The center — led by professor Joel Cantor, an NJ Spotlight contributor — argued that regulatory controls have worked well in other states and that New Jersey should also consider rate setting to stabilize costs and create a more sustainable system.

“Properly designed rate setting has been successful in controlling expenditures in the United States and elsewhere. What we have been doing is not working. Rate setting should be high on the policy and political agenda,” wrote the authors, Rutgers professor David Frankford and George Washington University professor Sara Rosenbaum. The authors, experts in healthcare law and policy, examined various state rate-setting systems, including Maryland and West Virginia, and explored past experiments in New Jersey, New York, and Massachusetts.

Healthcare costs, estimated to reach 20 percent of U.S. GDP within a decade, consume a growing portion of state and local budgets, and this expense remains a top concern for businesses in New Jersey. On average, we spend more than $9,000 per person on healthcare costs each year in this country, according to the report, and costs have been growing for more than three-and-a-half decades.

The CSHP report, funded in part by the Robert Wood Johnson Foundation (which also supports NJ Spotlight), argues that past efforts to control prices through the market and private insurance companies have encountered significant obstacles. But rate setting, when done right, consolidates buying power, gives government far greater cost control, and can result in large administrative savings.

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