State policy makers are under increasing pressure to address the prohibitive cost of health care given the lack of action at the federal level. In 2020, the U.S. spent more on health care than any other country in the world—$4.1 trillion, representing 19.7% of the Gross Domestic Product (GDP). States are trying to better understand their role in health care spending and to think creatively about strategies to address health care cost growth. One way they are doing this is through the development and use of state-based all-payer claims databases (APCDs). APCDs are health data organizations that hold transactional information from public (Medicare and Medicaid) and private health insurers (commercial plans and some self-insured employers) and transform this data to useful information on health care costs and trends. This paper describes the use of APCDs by states and recent efforts that have provided opportunities and challenges for states interested in this unique opportunity to inform health policy. While challenges exist, there is new funding for state APCD improvements in the No Surprises Act and potential new federal interest will help states enhance their APCD capacity to better understand their markets, educate consumers and create actionable market information.

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