From now until June, the California Office of Health Care Affordability’s (OHCA) Health Care Affordability Board will begin regularly meeting, appoint its Health Care Affordability Advisory Committee, and begin the emergency regulations process to collect data on total healthcare expenditures from payers.
California’s Health Care Quality and Affordability Act, or Assembly Bill 1130, was designed to reduce the rate of cost growth across the state’s health sector. The 2022 California Health Care Foundation Health Policy Survey found that 83% of Californians surveyed identified healthcare affordability as an extremely important issue. AB 1130 allowed the creation of OHCA within the Department of Health Care Access and Information (HCAI), to which Governor Newsom allocated $30 million from his 2022-2023 budget.
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Three primary focuses of OHCA include analyzing the healthcare market for cost trends and drivers of spending, enforcing healthcare cost targets, and conducting cost and market impact reviews of proposed healthcare consolidations. A Health Care Affordability Board will be composed of eight members to advise OHCA’s key activities and to approve specific aspects of the initiatives, such as methodology for setting cost targets. The advisory committee will also make recommendations and represent hospitals, organized labor, healthcare workers, medical groups, and purchasers.
The California Hospital Association (CHA) spoke out in September about the formation of OHCA, where they explained how the association played a critical role in ensuring that all key parts of the healthcare system are responsible for reductions in the rate of cost growth.
“Already, CHA is building a team that will engage with the new office and while some are beginning to think about the impact the office may have on hospital operations, the first cost growth target, one that is non-enforceable, will not be set until 2025,” said President and CEO Carmela Coyle. “Engaging not only with the regulators who staff the office, but the Advisory Committee charged with providing input and recommendations on data reporting requirements and cost targets will be a priority for CHA in the coming years.”
Healthcare spending in California reached $10,299 per capita and $405 billion overall in 2020, which is 30% up from 2015, according to HCAI. Additionally, Californians with job-based health insurance coverage are facing greater out-of-pocket costs: The share of workers with a large deductible ($1,000 or more) increased from 6% in 2006 to 54% in 2020.
OHCA is responsible for setting overall statewide cost growth targets, and specific targets for different sectors of the healthcare industry. The Health Care Affordability Board will establish the overall healthcare cost growth target for per capita spending and set specific targets by healthcare sector, including fully-integrated delivery systems, geographic regions, and individual healthcare entities.
OHCA’s first public reporting on total health expenditure data will be the baseline for the healthcare spending report and will cover calendar years 2022-2023. Payers, including health plans, health insurers, and fully integrated delivery systems, will submit data on total healthcare expenditures by September 1st, 2024.
In advance of the data submission deadline, OHCA will obtain input from stakeholders through regulations, develop data specifications and guidance for submitters, and present key findings of the baseline healthcare spending report at a public meeting of the board. The baseline report will release on June 1st, 2025. It’s then anticipated that payers and fully integrated delivery systems will submit total healthcare expenditure data on an annual basis.
Cost growth targets will initially be set at a statewide level. The board will set cost growth targets for each year with the consideration of multi-year targets to support long-term planning. The cost target percentage will consider economic indicators, including gross state product, household income, and consumer price index. The board may also develop cost targets that apply to specific sectors, such as geographic regions, and will define sectors by October 1st, 2027, and set sector-specific targets by June 1st, 2028.
OHCA will also set statewide goals for the adoption of alternative payment models that promote shifting payments from fee-for-service to payments that reward high quality and cost-efficient care. OHCA will measure progress and goals towards adopting alternative payment method standards. Further responsibilities of OHCA include monitoring and addressing healthcare workforce stability, and promoting and measuring quality and equity through performance reporting on health plans, hospitals, and physician organizations.
“While its ultimate impact remains to be seen, the office may in fact be an important venue at which hospital leaders can help officials understand the competing pressures of cost growth reduction, improving access to quality care, and enhancement of services for unmet needs like behavioral health care and health disparities,” Coyle said.
From June until December 2023, the advisory committee will begin meeting and develop a statewide cost growth target methodology. Emergency regulations for data collections of total healthcare expenditures will also be completed. The board will set the state’s first cost target for 2025 on June 1st, 2024.