For states with cost growth targets, 2023 spending growth was high across the board

Health Affairs – Friday, August 29, 2025
By Jessica Mar, January Angeles

Connecticut, Delaware, Massachusetts, Oregon, and Rhode Island have released their 2023 performance data comparing actual health care spending growth against their statewide targets. These states are among eight that have established cost growth targets to promote transparency and help rein in rising health care costs. Data collected as part of this effort provide a comprehensive view of statewide health care spending patterns, aggregating information across commercial, Medicaid, and Medicare Advantage payers for each state’s population. Unlike other data sources, these data include both claims and non-claims transactions.

This article is the third annual analysis of spending growth trends across cost growth target states, following publications focused on 2021 and 2022 spending. This year’s analysis examines 2023 health care spending trends in these five cost growth target states, finding that all of them exceeded their targets. Spending increased across all service categories in all states. And, in most states, Medicare or Medicaid spending grew faster than in previous years. As these states consider shifting their affordability strategies from transparency and monitoring toward action, it will be essential for state legislatures to equip agencies with robust enforcement authority to hold health care providers, insurers, and other entities accountable for exceeding targets and complementary cost containment policies.

All States Far Exceeded Their Spending Growth Targets In 2023
As shown in exhibit 1, all states exceeded their 2023 cost growth targets. Most targets were near 3 percent, although Rhode Island raised its target to 6 percent to account for the lagged effects of 2021’s high inflation on the health care system. Oregon, Rhode Island, and Connecticut recorded their highest spending growth rates since tracking began, with increases of 5.2 percent, 7.8 percent, and 7.9 percent, respectively. Massachusetts saw an 8.6 percent increase—more than double its 3.6 percent target—while Delaware had the highest growth at 9.1 percent, nearly triple its 3.1 percent target.

All Markets Experienced Significant Growth In 2023

In 2023, spending growth was high across the commercial, Medicare, and Medicaid markets in all five states. Since 2019, the commercial market has seen the highest average annual spending growth in each state (see exhibit 2). But in 2023 specifically, commercial spending growth was highest only in Delaware. Medicare spending grew faster than the other markets in Connecticut and Rhode Island, while Medicaid spending grew faster than the other markets in Massachusetts and Oregon (see exhibit 3).

This is a notable shift from prior years when modest growth in Medicaid and Medicare helped offset steep increases in commercial per capita spending. In 2021, when states experienced double-digit cost growth in the commercial market, Medicare growth remained in the single digits and Medicaid spending remained flat or decreased slightly. In 2022, individual state reports showed that commercial growth was highest in three states, Medicare was highest in two, and growth in Medicaid was stagnant across most states.

Spending For All Service Categories Grew In 2023

Spending on hospital outpatient services and prescription drugs rose significantly in 2023. In some states, these categories saw double-digit increases. The increased spending on prescription drugs was anticipated, largely due to the rapid uptake of expensive glucagon-like peptide 1 drugs for diabetes and weight loss.

Less expected, however, was that all service categories saw spending increases across the board (see exhibit 4). This is in stark contrast with what occurred in 2021 and 2022, when spending growth for outpatient hospital services and retail prescription drugs far outpaced all other categories. In 2023, spending on physician services increased between 2.6 percent and 8.0 percent. Spending on other professional physician services increased by 9.7 percent for Massachusetts, 9.5 percent for Rhode Island, 8.2 percent for Delaware, and 3.6 percent for Connecticut. Growth in spending on hospital inpatient care was modest in most states, falling between 2.0 percent and 3.0 percent, but much higher in Rhode Island (7.5 percent).

Notably, categories that typically see low growth surged in 2023. Spending on other medical services—which mostly encompasses spending on freestanding ambulatory surgical center services—grew by 8 percent to 20 percent across the states. Non-claims payments, which reflect payments based on financial arrangements between providers and health insurers rather than individual claims, also rose sharply in some states. In Connecticut, non-claims spending more than doubled (114.0 percent increase), and Delaware and Massachusetts saw substantial growth (40.1 percent and 39.5 percent, respectively).

Price And Utilization Were Both Cost Drivers In 2023

In previous years, spending growth in the commercial market across major service categories—hospital services, retail pharmacy, and professional services—has been driven almost entirely by price increases. However, separate analyses of 2023 data conducted by Connecticut, Oregon, and Rhode Island using their all-payer claims databases show that in these three states both price and use contributed to spending growth. In Connecticut, Oregon, and Rhode Island, increases in unit payments and use had shared roles in driving spending growth for inpatient, outpatient, and professional services, and retail pharmacy. While the degree of impact varied, both factors played roles in driving overall spending increases.

High Spending Across The Board Highlight The Need For Bold Action
The latest data reveal that high health care spending growth was widespread across all markets and service categories in 2023; it is not limited as a concern to just commercial markets. The variation across states in which payer types are contributing most to health care cost growth, alongside national cost drivers such as the rising use of GLP-1 medications, underscores the need for nuanced, multilevel policy responses.

The pervasive nature of this cost growth suggests that current containment strategies may not be sufficient, highlighting the need for comprehensive, cross-market approaches that address both price and use across the full continuum of care. State-level affordability strategies must be customized to reflect local market dynamics, while also aligning with federal efforts to address systemic cost drivers. Ensuring long-term sustainability of our health care system will require coordinated policy action at the state and federal levels.

Health care affordability has been a longstanding challenge, and recent trends, including 2026 health insurance rate filings in multiple states (Connecticut, Massachusetts, and Washington state, for example) indicate it has worsened. This inflection point coincides with the maturation of state cost growth target programs, as some states begin to shift from transparency and reporting to taking concrete action to contain spending growth. To hold health care providers, insurers, and other entities accountable when exceeding established targets, however, state agencies will need strong policy tools and robust enforcement authority from their legislatures.

State cost growth targets—when paired with complementary strategies such as site-neutral payment policies, price growth caps, prescription drug price and pharmacy benefit manager oversight, and delivery system reforms—can serve as a critical framework for controlling health care costs. Now more than ever, policy makers must act decisively to strengthen and scale these efforts to ensure a more affordable, sustainable health care system.

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