California regulators just approved a new rule to cap health care costs. This is how it works | KQED

Assemblyman Jim Wood, a Ukiah Democrat, at the meeting urged the board to send a clear message to Californians that the state is serious about accessibility. Wood spearheaded the legislation that created the office in 2022.

“It’s not an exaggeration to say that people are deciding whether to put food on the table or get their medicine,” Wood said. “This is not an exercise. This is an effort to impact the real-life experiences of the people of California.”

How will providers reduce healthcare costs?

Ultimately, it depends on the healthcare organizations.

The board expects healthcare organizations to crack down on inefficient and wasteful healthcare spending, such as administrative inefficiency and redundant or poorly coordinated testing. But he doesn’t want to discourage spending on primary care and behavioral health. The Office of Affordability will monitor spending in these areas to ensure that organizations do not reduce services or access to preventive care.

Will Californians See Cheaper Health Care?

Yes, but you might not like it.

The growth cap is not a mandate for suppliers to lower prices. Californians won’t pay less for health insurance next year than they did this year. For those who can no longer afford health care — some estimates put that number at more than 50 percent of Californians — the cap won’t bring any immediate relief.

The purpose of the cap is to prevent future prices from rising out of control. This year, health insurance premiums on the state’s Affordable Care Act Exchange rose 9.6 percent statewide, with double-digit increases in many regions. Personal health spending soared 60% between 2010 and 2020, reaching $405 billion, according to federal data. That’s $10,299 per person. Household health care spending has also grown twice as fast as wages, according to the Kaiser Family Foundation.

In an effort to recognize how many Californians cannot afford health care, the affordability office tied the cap to average annual growth in household income, which has historically been about 3 percent over the past two decades.

Will California succeed?

California is not the first state to try to reduce health care costs. Eight other states have similar cost benchmarks, though California’s is one of the more aggressive targets.

Massachusetts, the first state to set a health spending benchmark, has largely met its target growth rate of 3.6% over the past 10 years.

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

Who opposed the spending cap?

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

Pan and groups representing hospitals and doctors have argued that the state should have set a more “realistic” goal instead of one that most organizations won’t meet.

In a letter to the board, the California Hospital Association proposed a 6.3 percent goal by 2025 and urged state regulators to consider how inflation, aging and a new law that would increase pay state minimum for healthcare workers would increase costs. The association’s president, Carmela Coyle, said in a statement after the vote that the new regulations will worsen access to care as organizations are forced to make cuts.

“The office is mandated by law to do more than limit spending,” Coyle said. “It is imperative that the board consider the impact of its decision on patients and create a process to reconsider future goals to protect access to equitable, quality care for all Californians.”

The California Association of Health Plans, which represents most insurers, and the California Medical Association, which represents doctors, expressed support for the 3 percent phase-in goal this week, but have previously pushed the affordability office to consider other options.

“Adopting a 3% healthcare spending growth target, which most medical practices and healthcare entities will not be able to meet, will negatively impact access to healthcare for Californians,” he wrote medical association president Dr. Tanya Spirtos before the vote.

Who supported the health care spending cap?

The new regulations have the support of unions, employers and consumer advocates. Supporters took to the ballot to give examples of how housekeepers, waitresses, teachers, carpenters, nurses and other workers can’t afford health care even with insurance and often forego raises to pay the ever-increasing medical expense.

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