Why Should Delaware Care?
The spending benchmark set by the state could have the power to be used as an enforcement lever against rising costs across across Delaware’s health care industry, but a recent settlement could place that accountability out of reach.
Delaware’s health care spending is expected to increase yet again in 2026.
A group of state business leaders, academics and government professionals who manage the state’s revenue projections approved an increased prediction Monday for how much they believe health care will cost Delawareans in 2026.
The Delaware Economic and Financial Advisory Council’s projected increase comes as another government oversight board meant to rein in hospital spending will likely become obsolete early next year, following a settlement between Delaware’s top health care system and the state.
At their meeting on Monday, DEFAC members approved an increased benchmark, or government spending goal, of 4.9% for health care costs. In 2024, that benchmark was set at 3%. That means the council expects Delawareans will spend nearly 5% more on health care-related expenses in 2026 compared to the previous year.
Those expenses include procedures paid for using commercial insurance, Medicare and Medicaid.
Delaware is one of eight states that set health care industry benchmarks. In 2018, then-Gov. John Carney created Delaware’s system by signing two executive orders.
Since then, Delaware has blown past its spending benchmarks almost every year they have been in effect. There is no enforcement mechanism to restrain health care systems, insurers and pharmaceutical companies to the benchmark rate.
Health care spending in Delaware increased 9.1% between 2022 and 2023 to nearly $11 billion, according to an annual assessment released by the Delaware Department of Health & Social Services in May.
That increase was nearly three times what the state recommended as its benchmark rate of 3.1%.
Leading those rising costs were inpatient hospital services and prescription drug benefits after rebates, each totaling about $2 billion, while outpatient hospital services ranked third at about $1.7 billion.
Rising benchmarks meet scaled back oversight
At Monday’s DEFAC meeting, Delaware Secretary of Health and Social Services Christen Linke Young discussed both the increased benchmark and the proposed changes to the state’s hospital oversight board, known as the Diamond State Hospital Cost Review Board.
Young defended the upcoming changes to how the state regulates its hospitals, saying prior to 2024, if the spending benchmark was not met health care providers, “nothing happened.” The state first created the hospital cost review board in 2018 in response to ballooning health care spending in Delaware.
But members of DEFAC questioned how the benchmark would be used as an accountability measure to reduce hospital spending going forward, given a recent agreement between the state and ChristianaCare, which sued the government last year, challenging the authority of the hospital oversight board.
That proposed settlement agreement would largely defang the hospital cost review board.
The settlement pauses the lawsuit until the new year. But if the state fails to enact legislation removing the key oversight ability of the board to modify and veto hospital budgets it deems excessive by the end of January 2026, the lawsuit may continue.
Previously, the review board used the benchmark to determine whether a hospital’s budget was pushing higher costs onto consumers.
If a hospital was found out of compliance, it could have been put on a performance improvement plan, allowing the review board to further scrutinize the hospital’s budget, and even adjust it.
However, the settlement strips the board of that power.
The agreement contends that hospitals will still be held accountable to the benchmark, but under the new version of the board, any accountability measures would lack punitive action from the state.
One measure that would remain in place following the settlement agreement is a $500,000 fine for hospitals that knowingly violate basic financial reporting requirements to the board, much of which information is already publicly available. The settlement would strip more detailed information from the cost review board’s purview.
At the meeting on Monday, Young called the new board responsibilities a “more collaborative process,” where the board and hospitals would work together to create plans with “dialed down” spending.
The hospital cost review board has been inactive since October and will not reconvene until after lawmakers meet to consider making changes to the hospital cost review board’s power. That bill has yet to be filed on the state’s legislative website.