In recent media coverage of insurance company premium hikes for plans sold through Covered California, national for-profit insurers are once again playing a tired and disingenuous blame game.
Stories this month in the Los Angeles Times and The Mercury News quote insurance industry representatives as saying that hospital spending is a primary driver of the premium increases, statements that fly in the face of the facts and basic common sense.
First and foremost, we should acknowledge that health care spending continues to grow and that the cost of care is becoming unbearable for too many Californians. That’s a serious problem that requires serious solutions, not the same old mud-slinging.
California hospitals are indeed spending more on care — because our population is getting older, sicker, and the cost to provide services for them in a high-cost state like California continues to rise. Consider:
- Labor costs that make up 53% of hospital spending have grown by 38% over the past five years, in part due to a new $25 minimum wage (even when adjusted for cost of living, California nurses are the highest paid in the country — $150,000 per year and 34% more than the national average)
- Lifesaving pharmaceuticals like Ozempic and others cost hundreds of millions of dollars annually
- Thousands of state and federal regulations that hospitals must comply with all increase the cost of care by billions of dollars each year (a bill passed just last year to require metal detectors at every hospital entrance will cost nearly $1 billion by 2029)
The bottom line: In 2024, the most recent year of full data, California hospitals collectively lost $2.6 billion delivering patient care. This was at a time when for-profit commercial insurance companies took in billions in revenue. That same year, Blue Shield of California had $24 billion in revenue; Blue Cross of California had $18 billion. By comparison, the median hospital in California in 2024 had a little over $200 million in revenue, less than 10% that of Blue Shield.
Is it any wonder that California leads the nation in net hospital closures over the past two decades, shedding 41 in all? Texas, by the way, leads the nation in building new hospitals, gaining 40 over the same time period.
Every one of those closures means lost jobs, lost economic activity, and lost health care services for those in need.
But this isn’t about numbers or spreadsheets. It’s about people.
Hospitals provide high-quality care that millions of Californians count on to be available 24 hours a day, 365 days a year for any and all health care emergencies. With nearly half of the state’s hospitals operating at a loss and emergency department volumes at record highs, that care is at grave risk. And people’s lives and well-being are at risk as well.
Some 44% of hospitals lose money every day delivering care for patients, operating on negative margins while bracing for the impact of coverage losses, Medicaid cuts, and state policies that will make it impossible to maintain the services people need.
Hospitals are a high-cost health care setting because they care for people with the most complex and acute health needs, and that care is delivered by health professionals who rely on goods and services that patients need. If we’re going to address the high cost of health care, it must start with the drivers of health care prices.
More importantly, it must start with a clear understanding of the facts, not accusatory rhetoric.
