What’s happening: At its June 9 meeting, the Office of Health Care Affordability (OHCA) board discussed the office’s first baseline report, which highlights that total health care expenditures grew by 8.2% (from $378 billion to $409 billion) from 2022 to 2023.
What else to know: Notably, commercial and Medi-Cal health insurers’ administrative costs and profits grew by more than 25% in just one year, while hospital spending grew less than 5%.
The baseline report released on June 5 analyzes health care spending trends prior to the spending targets taking effect in 2025. Next year, OHCA will release another baseline report analyzing 2023-24 spending trends, as well as a report assessing spending growth against the spending targets; the latter report will be issued annually thereafter.
In written and verbal comments, CHA voiced continued concerns on OHCA’s adoption of the statewide spending cap and its “high-cost” hospital spending cap, urging the board to reconsider and reevaluate its rushed action, particularly in light of impending federal and state health care cuts.
The board’s discussion touched on multiple hospital-related issues, including the identification of an error in OHCA’s methodology for identifying “high-cost” hospitals. However, OHCA’s recalculations with a corrected methodology did not result in a different list of “high-cost” hospitals. CHA urged OHCA to exercise improved due diligence before future major decisions.
OHCA also provided updates to the board on its work to:
- Monitor pharmaceutical cost growth: OHCA is building its analytical and research capacity to address drug affordability and access, including analyzing drug spending trends, considering high-cost drugs as a potential reasonable factor for exceeding the spending target, and conducting research and analysis on the pharmaceutical market.
- Measure outpatient hospital spending: OHCA plans to reconvene the hospital spending measurement workgroup this summer to gather input on the provisional outpatient hospital spending measurement.
- Define behavioral health and set a benchmark for investment: Importantly, OHCA staff recommended that the board delay setting a behavioral health investment benchmark until spring 2028 so that staff can conduct further data analyses and evaluate the impact of recent behavioral health reforms. However, the board showed interest in setting the benchmark sooner; OHCA staff will determine whether this is possible.
