CHA News

OHCA Board Adopts First Statewide Spending Target: 3.5%, Ramping Down to 3%

What’s happening: On Wednesday, the Office of Health Care Affordability (OHCA) board approved a five-year statewide health care spending growth target for 2025 through 2029. 

What else to know: While the adoption of the target represents a major milestone, much more work will be needed to encourage the target’s regular reevaluation and clarify its enforcement. 

On April 24, the OHCA board approved the first statewide health care spending growth target for 2025 through 2029. By a 6-1 vote — with former Senator Richard Pan, MD, as the lone dissention — the board adopted a modified version of OHCA staff’s recommended target. The methodology of the approved target is based on historical median household income growth over the past 20 years. However, rather than starting at 3% as originally proposed, the board added a glide path that ramps the spending target down from 3.5% in 2025 to 3% in 2029. The table below displays the approved target by year. 

While the adoption of a glide path moves the target in the right direction, hospitals will undoubtedly struggle to meet these aggressive targets, which fail to recognize the growing health care needs of Californians, the cost pressures facing the health care sector and broader economy, and the acute financial distress from which hospitals are struggling to recover.  

Until the last minute, CHA urged OHCA to modify the proposed target, including in an April letter to the OHCA board and during public comment at Wednesday’s meeting. Following the board’s decision, CHA also released a media statement encouraging the board to analyze the target’s impact on patients.  

CHA will continue to warn of the dire consequences an artificially low spending target will have on California’s patients. CHA will push for a continual reevaluation of the target to ensure OHCA fulfills its statutory requirements to promote affordability while maintaining and improving access to high-quality, equitable care. CHA will now turn attention to how the target will be enforced, which remains uncertain. Close engagement from the hospital field will be critical to ensuring the rules are clear, fair, and acknowledge the true underlying drivers of spending growth in California’s health care system.