California doctors, hospitals and health insurance companies will be limited to 3% annual price increases starting in 2029 under new rules approved Wednesday by state regulators in the latest attempt to rein in rising health care costs in the United States. It was decided that it would be done.
The amount Californians spend on health care has increased by about 5.4% each year over the past 20 years. Democrats, who control California's government, argue that this is too much, especially given that most people's incomes grew by just 3% annually over the same period.
The 3% cap approved Wednesday by the Affordable Care Commission will be phased in over five years, starting with 3.5% in 2025. Board members said the cap would likely not go into effect until the end of 2010.
A new state agency, the Affordable Care Agency, will collect data to enforce the rule. Providers who do not comply may be subject to fines.
“We want to be proactive,” said board chairman Dr. Mark Gurley, but acknowledged the cap “presents a really big challenge” to the medical industry.
Voting is just the beginning of the process. Regulators will now decide how to apply cost targets to the state's various health care areas. And enforcement will be gradual, with several opportunities for providers to avoid fines.
California's health care industry supports the idea of a statewide cost target, but argues the 3% cap is too low and nearly impossible to achieve. The Centers for Medicare and Medicaid Services announced in December that U.S. health care costs will increase by 4.6% this year alone.
The board established the goal based on an average annual change of 3% in California's median household income from 2002 to 2022. Dr. Tanya W. Spitos, president of the California Medical Association, which represents physicians, wrote a letter to the board, saying the numbers were “artificially low because they included the period of the Great Recession when incomes dropped dramatically.” ” he pointed out. A better judge would be to look at the past 10 years, when median household income increased by an average of 4.1% per year, he said.
The hospital claims that much of the bill is outside its control. More than half of a hospital's costs come from staff salaries, many of which are determined by collective bargaining agreements with labor unions. Additionally, a new state law that goes into effect this year will gradually increase the minimum wage for health care workers to $25 an hour.
With more than half of California's 425 hospitals in the red and many rural facilities at risk of closure, the state Legislature approved an emergency loan program last year.
“The fat is already gone” when it comes to hospital finances, said Carmela Coyle, president and CEO of the California Hospital Association. He said the hospital regularly performs complex, life-saving surgeries such as quadruple bypass surgery.
“If you think it's cheap or can be done cheaper, you're fooling yourself,” she says.
According to the Centers for Medicare and Medicaid Services, U.S. health spending has more than doubled over the past two decades, reaching $4.5 trillion in 2022. Eight other states have set state-wide health industry cost targets. Experts say California's cap is unique both because of the staggering size of the state's health care industry and because of its plan to enforce the cap through fines.
Health care providers may exceed the cap if they have a valid reason, such as a pay increase for health care workers. These issues have not yet been resolved and will be considered on a case-by-case basis.
California has made several moves in recent years, including using taxpayer money to offer deep discounts to some middle-income residents and offering free insurance to all low-income adults regardless of immigration status. We have significantly expanded access to health insurance. State lawmakers have resisted more ambitious policies, including a single-payer system.
“Making quality health care affordable is a top priority for our administration,” Democratic Gov. Gavin Newsom said in a statement released by his office. “This action is outrageous. “This is an important first step in our efforts to contain health care costs and reduce the burden of health care costs.” Make healthcare more affordable. ”
Wednesday's vote marks the state's first effort to reduce health care costs in California, which spent $405 billion ($10,299 per person) in 2020, the 22nd highest in the nation. Still, costs have increased significantly for people who buy health insurance through work. In 2006, only 6% of California workers had deductibles of $1,000 or more. In 2020, it was 54%.
“We currently have a system where incentives are not about getting the most cost-effective services,” said Anthony Wright, executive director of California Health Access, which advised the board on the new cost limits. ” he said. “This is an attempt to introduce that incentive into a market that values being bigger rather than better.”
