Why Should Delaware Care?
Delaware has some of the highest healthcare costs in the country. Nearly a decade ago, the state began measuring how much it spends on healthcare in an effort to tamp down costs on consumers and the state budget. But since tracking that goal began in 2018, the state has continued to blow past self-imposed spending goals.
Healthcare spending in Delaware is yet again on the rise.
Earlier this month, state officials announced that medical spending by consumers topped $11.3 billion in 2024, a more than an $876 million jump from the prior year. It was their first report since lawmakers defanged one of the few entities able to use this data to bring down costs.
Every year, a group of state revenue analysts predicts the level at which they believe healthcare costs will burden Delaware taxpayers – called healthcare benchmarks – in an effort to keep growth contained.
Delaware has blown past its self-imposed healthcare spending goals nearly every year since its inception in 2018. According to the state report, 2024 spending rose nearly three times higher than the state’s benchmark goal of a 3% increase.
Some of the highest spending in 2024 included hospital inpatient spending at $2.2 billion, prescription drug benefits at $2 billion and hospital outpatient spending at $1.8 billion.
In almost every category, spending increased by at least 6%, with some categories as high as 15%. The state pulled its spending numbers from claims data from different insurers including the private commercial plans, the Veterans’ Health Administration, Medicaid and Medicare.
Officials announced the spending hike during a Delaware Health Care Commission meeting on May 7, where they also discussed how costs continue to rise while the state continues to fall behind on different quality benchmarks like the prevalence of obesity and cancer screenings.
Following the meeting, the state’s health secretary called the growth “unsustainable.”
“What we are doing isn’t working, and we need to take rapid steps to transform the way care is delivered and paid for,” Delaware Department of Health and Social Services Secretary Christen Linke Young said in a LinkedIn post.
History of the benchmark
In 2018, then-Gov. John Carney created the healthcare benchmark by signing two executive orders. One of the orders also formed a subcommittee on the Delaware Economic and Financial Advisory Council (DEFAC) responsible to study that spending and recommend a manageable level of increases.
In 2022, state lawmakers passed a bill codifying many of the initiatives created by Carney’s executive order. Delaware is one of eight states with a government-mandated benchmark meant to stem healthcare prices, including neighbors Maryland and New Jersey.
Years later, Delaware officials introduced legislation that would have given an oversight board the ability to hold hospitals accountable to the annual benchmark by, in part, vetoing hospital budgets it deemed excessive.
That law, House Bill 350, was challenged in court by ChristianaCare in 2024, ending in a settlement nearly a year and a half later that watered down the board’s power to enforce the benchmark.
That new law, Senate Bill 213, was signed into law earlier this year by Gov. Matt Meyer.
Before SB 213, the Diamond State Hospital Cost Review Board’s oversight – the board with the power to reject excessive hospital budgets – would have followed a four-step process.
Hospitals would submit detailed financial documents, which board members would review. If they deemed hospital spending to be too large, they would put the facility on a “performance improvement plan.”
If a hospital failed to correct its overspending, the board could then modify or veto its budget.
When SB 213 became law, the board no longer had the power to modify or veto hospital budgets of hospitals it deemed to be too profligate. After ChristianaCare sued the state over the constitutionality of those powers, a judge was set to examine that question, should the lawsuit have continued.
The new bill also made technical adjustments to language in the original HB 350, including renaming the performance improvement plan, a “benchmark compliance plan.”
At the center of those plans are whether hospitals keep their spending below the annual benchmark for how much DEFAC believes healthcare should cost Delawareans.
If a hospital’s spending exceeds the state’s projected benchmark, the cost review board now would require it to send in a compliance plan outlining how it intends to bring prices down.
The law also introduces “meaningful cost containment arrangement” plans, which are described as “contracts between hospitals and payers” meant to hold the hospitals responsible for controlling health care spending in a specific area.
Hospitals can enter these agreements and be exempt from the benchmark plans for one year, the law said. But it does not exempt them from the financial reporting requirements outlined in the law, like sharing budget information and labor costs.
The amendments are primarily technical, but the one with the most substance would require hospital CEOs to attest to whether their companies are in compliance with their meaningful cost containment arrangement plans.
Health Care Commission meeting
At the May 7 Delaware Health Care Commission meeting, members discussed the growing costs to patients and the continued explosion of expenditures each year.
Young, Delaware’s health secretary, said she agreed with another member of the commission who said Delawareans are not receiving the maximum value from the healthcare system.
“We are spending more money every year, and we are not getting what the people of Delaware want and should be getting from our health care system,” Young said during the meeting.
Young added the state is pushing to make changes to how patients pay for care and incentivize treatment that keeps patients healthy, instead of billing for every procedure they receive, effective or not, as is done now.
The conversation then shifted to primary care, and the difficulties of scheduling time with a provider. Commissioners’ remarks come as lawmakers are set to weigh a primary care reform bill aimed at rewarding providers that keep patients healthy and away from costly trips to emergency rooms.
But the bill faced strong opposition from the state’s hospital systems that do not support price cap provisions included in the legislation meant to tamp down the costs on patients and the state.
Lawmakers in the state Senate unanimously passed that bill, Senate Bill 1, on Tuesday.
