California's new rules aim to limit rising health care costs – CalMatters

You may not notice it right away, but California's new government agency took a big step this week toward reining in health care costs that seem to be spiraling out of control.

The Affordable Care Agency approved the state's first cap on health industry spending growth, capping growth at 3% by 2029. That means hospitals, doctors, and health insurance companies will need to find ways to cut costs to avoid overshooting annual per capita spending. target. From 2015 to 2020, per capita health spending in California increased by more than 5% annually, according to federal data.

The board and the Legislature appointed by Gov. Gavin Newsom approved the new regulations Wednesday by a 6-1 vote.

Dr. Mark Ghaly, the board's chair and secretary of health and humanities, said the regulations recognize that Californians struggle every day to pay for health care and the state has a role to play in helping them. .

“We have room to strive to be more affordable,” Gurley said.

Hospitals, doctors and insurance companies fought for months over the regulations, arguing that inflation and rising labor costs made the goals impossible. The previous proposal would have moved more aggressively to limit costs. The final version will give the industry time to rein in spending.

Gurley said he is confident healthcare industry leaders can find solutions to achieve the new goals. “If that happens, it will be great for Californians.”

How does it work?

Increases in health care spending often result in increased out-of-pocket costs for consumers in the form of premiums, deductibles, and copayments. The annual spending benchmark requires health care providers to limit spending growth to 3.5% next year and reduce it to 3% by 2029. Health care providers, including hospitals, physician organizations and health insurance companies, would be required to submit spending data to the state to demonstrate increased spending. Complying with caps.

The Affordability Department also has the power to enforce performance improvement plans and penalties, including fines, for organizations that exceed benchmarks. The penalties will not take effect until 2029.

Rep. Jim Wood, a Democrat from Ukiah, attended the meeting and urged the board to send a clear message to Californians that the state takes affordability seriously. Wood spearheaded legislation to create the agency in 2022.

“It's no exaggeration to say that people are deciding between putting food on the table and getting medicine,” Wood said. “This is not an exercise. This is an effort to impact the real-life experiences of Californians.”

How do healthcare providers reduce healthcare costs?

Ultimately, it depends on the medical institution.

The committee expects health care providers to crack down on inefficient and wasteful health spending, including administrative inefficiencies and redundant or poorly coordinated tests. But they don't want to hinder spending on primary care or behavioral health. The affordability office monitors spending in these areas to ensure organizations do not reduce access to services or preventive care.

Will Californians have access to cheaper health care?

Yes, but it may not feel that way.

Growth caps do not obligate providers to reduce rates. Californians will not pay less for health insurance next year than they did this year. For people who already can't afford their health care costs (some estimates put that number at more than 50% of Californians), the cap won't provide immediate relief.

April 22, 2024April 22, 2024

The purpose of a cap is to prevent future prices from rising uncontrollably. This year, health insurance premiums on state Affordable Care Act exchanges increased an average of 9.6% across the state, with double-digit increases in many areas. Personal health spending jumped 60% between 2010 and 2020, reaching $405 billion, according to federal data. That's $10,299 per person. According to the Kaiser Family Foundation, household health spending is also growing at twice the rate of wages.

In an effort to recognize how many Californians cannot afford their health care costs, the Office of Affordability has capped the average annual median household income growth rate, which has historically been about 3% over the past 20 years. Ta.

Will California succeed?

California is not the first state to try to reduce health care costs. Her eight other states have set similar cost benchmarks, but California is one of the more aggressive targets.

Massachusetts was the first state to set a benchmark for health care spending, and has nearly achieved its target growth rate of 3.6% over the past 10 years.

However, in recent years, states have found it difficult to contain costs due to the impact of the coronavirus disease (COVID-19) pandemic. The states of Connecticut, Delaware and Massachusetts significantly exceeded their spending targets in 2020-2021, largely due to increased health care utilization, according to a report in the policy journal Health Affairs.

Who opposed spending caps?

Former state Sen. Dr. Richard Pan was the lone vote against the new regulations, arguing that the state needs to recognize how changing population needs, such as an aging population, will affect future health care spending. .

Pan and groups representing hospitals and doctors say the state should have set a more “realistic” goal, rather than one that most organizations would not be able to meet.

In a letter to the board, the California Hospital Association proposed a 6.3% target for 2025, and state regulations to address how inflation, an aging population and a new law raising the state minimum wage for health care workers will drive up costs. We asked the authorities to consider it. Association President Carmela Coyle said in a statement after the vote that the new regulations will worsen access to health care while organizations are forced to make cuts.

“The agency is mandated by law to do more than limit spending,” Coyle said. “It is imperative that the Board develop a process to analyze the impact of its decisions on patients and reconsider its future goals to ensure that all Californians receive equitable, high-quality care.” .”

The California Health Plans Association, which represents most insurance companies, and the California Medical Association, which represents physicians, each this week expressed support for a phased-in 3% goal, but previously told the Office of Affordability He asked them to consider other options.

“Adopting a 3% health care spending growth goal that most physicians and health care organizations are unable to meet will have a negative impact on Californians' access to health care,” Medical Association President Dr. Tanya Spirtos said ahead of the vote. wrote.

Who supported caps on health spending?

The new regulations are primarily supported by unions, employers, and consumer advocacy groups. Supporters turned out in droves to vote, helping housekeepers, bartenders, teachers, carpenters, nurses, and other workers who, even with insurance, cannot afford to pay for ever-increasing medical bills. He gave an example of how employees often forego salary increases in order to

“Consumers, especially people of color, are burdened with record medical debt and are making daily choices between health care, housing, and food,” said Kiran Savage Sangwan, executive director of the California Pan-Ethnic Health Network. he said at the meeting. “If you want different outcomes, you have to change the incentives in the system.”

Anthony Wright, executive director of Health Access California, said the new spending goals are “long overdue, but welcome news for Californians.”

“California consumers, patients and payers have been crying out about the costs for years,” Wright said. “This will put some downward pressure on ever-increasing health care costs.”

Supported by the California Health Care Foundation (CHCF). People will be able to receive the care they need, when they need it, at an affordable price.visit www.chcf.org You can learn more.