Delaware nearly triples its intended healthcare spending goal for 2023, marking the third year in a row the state has outpaced its benchmark.
Former Gov. John Carney implemented a statewide healthcare quality spending benchmark in 2019 and it has hovered around 3% every year since, but the First State has at least doubled that annual goal since 2021.
Delaware actually decreased its medical spend in 2020, largely due to deferred medical treatments amid the COVID-19 pandemic.
Medicaid and Medicare costs makeup 65% of the First State’s total healthcare spend and increased collectively by 21% in 2023.
Although the state went through a period of Medicaid unwinding to return to regular operations following the pandemic, Delaware Department of Health and Social Services (DHSS) Director of Healthcare Reform Steven Costantino explains the costs are still rising despite enrollment decreasing.
“Within the Medicaid program we're seeing a lot of chronicity. We're seeing a lot of very complex cases that'll drive the cost up, as well as how the insurers negotiate with providers in terms of what they'll pay for each of these services. So it's a combination of both the cost of the service as well as the utilization of the service," Costantino said.
The Trump administration is threatening massive Medicaid cuts at the federal level, which Costantino says could shift even more cost to the states.
The implications won’t be known until a federal budget is passed by October.
Total medical expenditures — the total claims and non-claims incurred by Delaware residents — hit $9.9 billion in 2023, an increase of approximately 10.4% from 2022.
Hospital inpatient and prescription drug benefits were the largest medical expenditure service categories, each at $2 billion, followed by hospital outpatient at $1.7 billion, physician at $1.4 billion and long-term care at $1.3 billion.
One of the Delaware legislature's most contentious bills last session created the new Diamond State Hospital Cost Review Board, a politically appointed oversight body that will begin reviewing hospital budgets in 2026 to ensure they are adhering closely to the spending benchmark.
Hospitals argue it’s unfair they are the only market being held accountable to the benchmark, especially amid rising prescription drug costs.
Additionally, ChristianaCare is currently suing the state, arguing the oversight board is governmental overreach, but Costantino says cost-cutting measures have to begin somewhere.
“When you look at 37, 38% of the spend being on the hospital side, you can't just dismiss that. And listen, if this leads the hospitals to doing a more full assessment of the pharmaceutical industry, I have no problem with that — that's not for me to decide. But I think that you have to start somewhere.”
The board has held two meetings so far with its next scheduled for May 13 as it awaits a ruling.
As far as other cost-saving measures, Costantino says he is excited about an agreement between the state and Nemours Children's Health to create a new healthcare payment model centered on the 120,000 children covered by Delaware’s Medicaid program.
The change marks the first-ever pediatric global revenue budget model in the United States.
Unlike traditional arrangements in which providers earn more money for providing more medical services, Nemours Children’s will be incentivized to address both medical and non-medical drivers of children’s health in an effort to avoid unnecessary medical expenses.
"We're waiting for [Centers for Medicare and Medicaid Services] approval on the structure of the program, and that's one of the things — that value-based kind of arrangement — is one of the things I think we've always hoped that the benchmark numbers would drive, in terms of doing more of those kind of arrangements that looks at value, affordability and improved quality," Costantino said.
The 2024 healthcare spending benchmark is currently set at 3%.
