Health Spend Management

Faced with limited health care budgets, decision-makers must make trade-offs about how they spend their health care dollars. Utilizing sound data can help decision-makers avoid unintended consequences for patients and the health care system.

What is health spend management?  

With health care spending in the United States approaching 20% of Gross Domestic Product (GDP), many state and federal efforts are underway to keep this spending under control.  

There are several approaches to managing health spending, including addressing low-value care, building decision frameworks and the use of budget caps. 

Addressing low-value care requires that stakeholders engage to identify ways to reduce spending on low-value or unnecessary care, which can crowd out spending on treatments that can meaningfully improve patient health, employee productivity, and provide broader health system benefits.

Learn about low-value care.

How can decision frameworks help?  

Establishing frameworks for making decisions on health spending – and the tradeoffs that may be required – takes engagement with stakeholders to identify a deliberative process that can strike a balance between payers and budget decision-makers and patients seeking access to care. 

Often, we think of decisions related to health spending as relevant to business leaders, but one case study supported by NPC shows that employees who are who are meaningfully engaged in deliberating and designing their health care benefits may have a more positive role to play in decision-making related to their coverage options. 

The case study, “Prioritizing Health Care Spending: Engaging Employees in Health Care Benefit Design,” was based on an effort developed by Janet McNichol, SPHR, CAE, human resources director at the American Speech-Hearing-Language Association (ASHA), to redesign a benefit option offered at the association. It illustrates the potential to engage employees in health benefit conversations, to better determine how to allocate health care dollars. 

Read the case study.


Budget Caps: A Deep Dive 

One of the less-discussed strategies that’s gaining traction in the U.S. at the state level is the use of budget caps – a budget planning tool designed to help policymakers set a limit on annual health spending growth in relation to annually projected health care costs. 

What is the challenge of budget caps? 

Approaches used to rein in spending, like budget caps, may have unintended consequences. Cuts to spending may harm patient health and potentially create greater costs over the long-term.  

Budget Caps

What does the research tell us?  

Researchers from the National Pharmaceutical Council (NPC) and the Research Triangle Institute Health Solutions (RTI-HS) conducted a study to show how budget caps may impact patients’ health. Their research paper, “The Dollar or Disease Burden: Caps on Healthcare Spending May Save Money, but at What “Cost” to Patients?”, was published in the peer-reviewed journal, Value in Health

The study provides guidance on quality metrics and practices that can help budget decision-makers, state medical directors and state legislatures understand which budget cap features have the potential to lessen the impact on patient health and provides recommendations that could reduce any damage.  

If not done in a more thoughtful way, budget caps could worsen health outcomes by not encouraging innovation that could improve patients’ health. Caps also could harm patients if they’re not designed well. The researchers hope that the principles they developed from this study can guide the use of budget caps to improve patient health and avoid the negative consequences that can result from this approach to controlling health care spending. 


Budget Caps Study, Adjusted for Inflation vs. Inflation and Population Growth

What do budget caps mean for patient health?

Learn more about the study, published in Value in Health

Read more.