During its inaugural meeting on March 21st, the newly formed California Office of Health Care Affordability’s Health Care Affordability Board (HCAB) discussed healthcare spending in the state, elected its first chair, and reviewed potential state spending targets.
The HCAB falls under the Department of Health Care Access and Information (HCAI). Its eight members were appointed on Feb. 28th. The members offer a broad range of expertise, and will work to increase public transparency regarding total healthcare spending in the state.
The board—created through Senate Bill 184 in 2022—is focused on developing healthcare cost growth targets to curb ever-increasing affordability issues among Californians. From 2001-2020, California had the second highest average annual percent growth rate in per enrollee spending for those privately insured. In 1991, per capita healthcare spending in California was $2,659 while in 2020 it was $10,299. The average annual growth of per capita healthcare spending in California from 1991-2020 was 4.8%.
High healthcare costs disproportionately impact Black and Latino/x Californians, with 36% of Black individuals reporting that they or a family member had difficulty making payments—or were unable to pay medical bills—in the past 12 months. For Latino/x individuals, it was 40%.
Testimony on impact of high healthcare costs
Clementina Gonzalez drove three hours to share her experiences with the HCAB about an expensive hospital located in Monterey County. She lives in Marina and works as a housekeeper in Monterey.
“About 10 years ago, I went to a community hospital in Monterey for treatment for a blood alignment,” Gonzalez said. “I was hospitalized, [and] received transfusions and other procedures. Even with the health insurance that I had, I had to pay over $10,000—and I don’t have that.”
Gonzalez described how she did her best to pay the hospital for services within a timely fashion, but regardless of her attempts, the hospital sent her to collections and—she said—ruined her credit.
“My family and I are very stressed and depressed when we had to cut back on food and other needs just to pay these bills back,” Gonzalez said. “During this time, my daughter was supposed to start college and she decided to stay home for a couple of years just to take care of me.”
While her daughter made a major sacrifice for her health, Gonzalez said during the months that followed, her condition worsened, and she sought care at a local community hospital in Monterey. She thought the community hospital would be more affordable, but it was just as expensive, she said.
“I was billed more thousands and thousands and thousands of dollars just to keep me going,” Gonzalez said. “Even though my insurance did cover some of the bills, I’m now in debt again, and I am worried. Please do what you can to lower these costs. I tried to avoid going to the hospital, but I’m too sick sometimes, and I need treatment.”
Gonzalez was one of numerous individuals who provided testimony to the board about unaffordable costs that come from unpreventable healthcare issues.
Members elect HCAB chair
Following public testimony, HCAB members invited nominations for the board chair. David M. Carlisle, MD, PhD, nominated California Health and Human Services Secretary Mark Ghaly, MD, and members were quick to second the motion.
“I’m worrying about how quickly everyone seconded that motion,” Ghaly joked. “I will say it would be a tremendous honor to be chair of this board. I think the role of chair, not just to work with Elizabeth [Landsberg, HCAI director] and your very capable team, but to garner really the expertise of the board members, make sure we’re paying attention to the North Star that is the people who just left this room—the people who just talked about their struggles.”
Spending target example: Massachusetts
Michael Bailit, president of Bailit Health (a consulting firm in Massachusetts), showed the board examples of the variety of spending target processes that are currently in place in several states, with a focus on Massachusetts.
“The spending target in and of itself will not be sufficient to slow healthcare spending in California—at least that’s my prediction,” Bailit said. “There needs to be complementary actions.”
In 2012, Massachusetts adopted legislation to establish a spending target program, and as soon as it was implemented, spending fell below the national rate of growth yearly—or about $7 billion of reduced commercial spending, according to Bailit.
“For me, this is the most telling indication that their target had an impact in the commercial market, which is the market that most needs to have the impact,” Bailit said.
He acknowledged how the data in 2020 and 2021 rose back up, and acknowledged how the goal of spending targets is not to reduce spending costs for individuals, but rather slow the rate of growth in healthcare spending.
“The people who testified today and talked about their out-of-pocket spending—this does not solve their problem,” Bailit reiterated.
Next steps for the HCAB
Spending target development for California will involve numerous board meetings to discuss design decisions, which include levels of reporting, calculations for year-over-year percentage change, strategies to ensure data is reported completely and accurately, and adjustments of spending target performance. This will be a top focus of the HCAB’s until Q3 of this year.
This fall, the HCAB will finalize recommendations and issue regulations for the 2022-2023 total healthcare expenditure data collection for their baseline report. In the spring of 2024, a statewide spending target will be adopted, and that summer, payers and fully integrated delivery systems must submit their 2022-2023 total healthcare expenditure data to the Office of Health Care Affordability.
To start off 2025, spending targets will be implemented but are not subject to enforcement, and in the spring, recommendations will be made for the 2026 statewide spending target and the baseline health spending report will be published. The board would also have the ability to adopt multi-year or annual spending targets.
The statewide spending target in 2026 will be subject to enforcement. By 2027, the first annual report covering spending target performance for payers and fully integrated delivery systems from 2024-2025 will be published. By that fall, the HCAB will define initial healthcare sectors so that the board can set specific targets for each sector.