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OHCAT Issues Reports on the Health Care Cost Growth Benchmark, Cost Drivers, and the ³Ô¹ÏºÚÁÏ Health Care Landscape

TRENTON, NJ – Five new reports released today by the Office of Health Care Affordability and Transparency (OHCAT) in the ³Ô¹ÏºÚÁÏ Department of Health (NJDOH) provide critical transparency into the scope and complexity of rising health care costs facing families, employers, and the State.

Two Health Care Affordability, Responsibility, and Transparency (HART) Program’s Health Care Cost Growth Benchmark reports analyze health care spending trends for two periods: Transition Year (2021 to 2022), and Performance Year 1 (2022 to 2023). Together, they reveal that cost increases are happening system-wide across all insurance markets, service categories, and nearly all insurance carriers and health care providers.

Two additional reports examine the factors that are driving increases in health care costs. Health Care Spending Trends for ³Ô¹ÏºÚÁÏ Residents with Commercial Insurance, 2017-2022, reviews the commercial market and finds that prices, rather than utilization, are driving cost increases. The Hospital Labor Costs Special Report examined the impact of the post-COVID health care labor market on costs and concludes that non-labor costs grew faster than labor costs from 2017 to 2023, and that direct patient care labor grew more slowly than non-direct patient care costs.

A fifth report – The Health Care Landscape in ³Ô¹ÏºÚÁÏ, 2025 – includes dozens of indicators to provide longitudinal insights into health care quality, accessibility, affordability, and workforce sustainability.

“We know that health care costs strain ³Ô¹ÏºÚÁÏ families. Addressing affordability requires each part of the health care system to examine its role and take meaningful action to make health care affordable in our state,” said Acting Health Commissioner Jeff Brown. “These reports are essential tools to inform that work, providing critical clarity to help us rein in health care costs.”

“The reports provide transparency into ³Ô¹ÏºÚÁÏ health care unlike ever before,” said Jim Lloyd, Executive Director of the Office of Health Care Affordability and Transparency at NJDOH. “The results presented in these reports can inform data-driven conversations to address this systemic problem, and everyone can play a role to enhance health care affordability.”

Taken together, the five reports:

• Provide unprecedented transparency into ³Ô¹ÏºÚÁÏ’s health care sector, which represents nearly 11% of state gross domestic product;
• Reveal that costs grew across the system, providing basis for identifying affordability interventions going forward;
• Indicate that direct patient-care labor costs were not a leading driver of health care cost increases; and
• Deliver additional clarity on areas for improvement within the health system, as well as health care access disparities.

Tracking Rising Costs

In 2021, faced with fast-growing health care costs that create barriers to obtaining care, Governor Phil Murphy brought together a diverse coalition of stakeholders from across the health care ecosystem to sign the Compact to Reduce the Rate of Health Care Spending Growth in ³Ô¹ÏºÚÁÏ. Signatories agreed to work to meet annual cost growth benchmarks to slow the rate of growth between 2022 and 2027 and take actions that make health care more affordable.

The Compact reflects the collaborative nature of the HART Program. For example, hospitals were the first to sign on to the document, and insurance carriers have been invaluable partners in implementing the cost growth benchmark measurements. Continued engagement by all stakeholders, including employers, purchasers, and advocates, is essential to make progress.

OHCAT partners with the ³Ô¹ÏºÚÁÏ Department of Banking and Insurance to collect data from the state’s largest health insurance companies, allowing it to calculate year over year changes in per person health care spending. The growth rates are presented at the state, market (commercial, Medicare, Medicaid - NJ FamilyCare), and – for the first time in this year's reports – the carrier and provider levels.

The Health Care Cost Growth Benchmark Report: Transition Year (2021-2022) covers a period that overlapped with the COVID-19 pandemic that uniquely challenged ³Ô¹ÏºÚÁÏ’s health sector. While no cost growth benchmark was established for this period and data was more limited, the report shows that individual health care expenses, on average, increased 3.6% from 2021 to 2022, from $10,292 per person per year to $10,663. Altogether, total spending on health care in ³Ô¹ÏºÚÁÏ, which reflects a growing population, increased by $3.95 billion or 5.1% from 2021 to 2022 (from $76.85 billion in 2021 to $80.80 billion in 2022).

The Health Care Cost Growth Benchmark Report: Performance Year 1 (2022-2023) shows statewide per-person health care spending increased more sharply from $10,663 per person per year to $11,319, a 6.1% increase. Total spending on health care, which reflects the state’s growing population, rose by 9.2% or $7.42 billion.

Performance Year 1 is the first year that insurance carriers and health care providers had their performance at the market level compared to the 3.5% benchmark established in the Compact. Performance across the state’s large provider entities by market was mixed, with some provider performance impacted by systemic factors including broader inflation and changes to the Medicare Advantage program at the federal level.

The benchmark reports also break down rates of cost growth in several service categories including retail pharmacy services, inpatient facility services, outpatient facility services, long-term care, and professional services. While all service categories saw growth, inpatient care saw the slowest increase – a notable exception since inpatient care is often the most expensive category of health care spending.

These benchmark reports build on and expand the analysis in the HART Program Pre-Benchmark report, released in late 2024 with data from 2018–2019.

Across both the Transition Year and Performance Year 1 report periods, costs for individuals covered by commercial insurers rose more slowly than for those covered by public insurers.

While the health care costs are shaped by a variety of factors, broader economic conditions contributed to the cost increases reflected in the reports. For example, the years covered by the reports were marked by dramatically rising and elevated inflation driven by supply-chain disruptions and other pandemic-era factors.

When compared to other, similar states tracking cost growth, ³Ô¹ÏºÚÁÏ's health care cost growth was comparable to or below the rates seen in Connecticut, Delaware, Massachusetts, and Rhode Island. While states across the country struggle to rein in the cost of health care, this indicates ³Ô¹ÏºÚÁÏ’s collaborative efforts to bend the cost curve may be making an impact. 

Examining Drivers of Rising Health Care Costs

The HART Program has also released two reports looking at the components of ³Ô¹ÏºÚÁÏ’s health care cost growth. Health Care Spending Trends for ³Ô¹ÏºÚÁÏ Residents with Commercial Insurance, 2017-2022, used commercial health care claims data to analyze what is responsible for the rising costs of health care for ³Ô¹ÏºÚÁÏans with commercial insurance. The key takeaway follows last year’s Commercial Cost Driver report: the increase in health care costs is primarily driven by increasing prices, not by increased utilization.

The health care spending report also looked more closely at primary care in ³Ô¹ÏºÚÁÏ, recognizing that access to primary care plays a critical role in maintaining patients’ health and can prevent costly complications and more significant interventions. The report found that ³Ô¹ÏºÚÁÏ spends substantially less on primary care than the national average, and that utilization was declining during the reporting period. These findings align with a , which showed ³Ô¹ÏºÚÁÏ’s Medicaid and commercial primary care payment rates are both well below national averages, and that the state struggles to retain primary care providers despite being a top trainer of new primary care providers.

The HART Program’s Hospital Labor Costs Special Report examined how the changing labor market after COVID-19 impacted hospital finances and contributed to overall spending growth. By examining hospital cost reports submitted to the Centers for Medicare and Medicaid Services, the report found that hospital operating margins decreased from 2017 to 2023, but non-labor costs were more responsible for the change than labor costs. Within labor costs, the greatest cost increase was for non-direct patient care.

A Snapshot of ³Ô¹ÏºÚÁÏ’s Health Care System

The Health Care Landscape in ³Ô¹ÏºÚÁÏ 2025 Report provides a comprehensive basis for understanding how the State’s health care ecosystem is performing and establishes a shared evidence base for future efforts from practitioners and policymakers.

Using a new, interactive format, the landscape report presents key performance indicators for quality, access, and affordability of health care services, as well as the adequacy of ³Ô¹ÏºÚÁÏ’s health care workforce. The dashboard includes comparisons to past years’ performance and, where data are available, between ³Ô¹ÏºÚÁÏ and rest of the nation.

The indicators in this report show that the health care delivered in ³Ô¹ÏºÚÁÏ is of high quality overall and compares well to the national average, but also shows areas of decline in a number of indicators—a departure from last year’s trends.

Additionally, the landscape report reveals that significant disparities persist in ³Ô¹ÏºÚÁÏ’s health care sector. Non-Hispanic Black ³Ô¹ÏºÚÁÏans recorded the worst outcomes for the quality measures in the report, and Hispanic ³Ô¹ÏºÚÁÏans fared worst in the measures related to access to health care. The report also shows significant geographic disparities, with lower-than-average performance on quality indicators concentrated in southern counties.

The HART Program is part of a wider set of Murphy Administration consumer-focused policies, including â€¯ advancing prescription drug affordability. The Administration has also advanced critical protections for ³Ô¹ÏºÚÁÏans against medical debt, including the , and provided direct consumer relief against medical debt, eliminating nearly $1.4 billion of debt for more than 828,000 ³Ô¹ÏºÚÁÏ residents. 

These are the first reports released by OHCAT since it was relocated to NJDOH by Governor Murphy in .

The reports are available at nj.gov/health/about/organization/offices/ohcat.