In early July, Gov. Gavin Newsom signed legislation establishing the Office of Health Care Affordability, a new, far-reaching agency that will hold significant sway over how health care is paid for and delivered in California in the future. Following his signature, California became the 10th state in the nation to have state agencies or oversight that establish targets for health care cost growth.
CHA played a critical role in improving the legislation, fighting to ensure nearly all key parts of the health care system are responsible for reductions in the rate of cost growth and subject to office oversight.
The office will take several years to reach full operational capabilities, but broadly, it is charged with advancing five goals:
- Increasing transparency on cost and quality
- Developing cost growth targets
- Enforcing compliance through financial penalties
- Monitoring and reviewing market transactions
- Establishing new standards for quality, equity, workforce, and more
The key to success in working with this new office will be to ensure that the regulators responsible for these goals are not only informed as to how their decisions will affect patients and communities, but also to help them understand, in a meaningful way, the interconnectedness of every element within the health care ecosystem — like the balloon that is squeezed on one end only to have the bubble appear at the other.
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. In 2026, the first enforceable target will be set, and sector-specific targets will be set beginning in 2027. The first potential enforcement actions on cost targets for 2026 will not take place until 2028.
A CHA presentation delivered in late August has more details on the timeline, as well as other aspects of the new office. 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.
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.