Earlier this month, the Office of Health Care Affordability delivered its first health care spending report, an annual release intended to inform both policymakers and the public about California’s health care spending trends over time.
This first report was notable in that it confirmed some of the things CHA has been sharing with lawmakers and regulators for years: that California hospital spending on health care services is efficient, and that regulating how much hospitals spend on care doesn’t address any of the underlying factors that make things more expensive for consumers — such as pharmaceutical costs, commercial insurance company profits, and more.
Highlights from the report:
- In all, total health care expenditures in California grew by 8.2% (from $378 billion to $409 billion) from 2022 to 2023.
- Nearly 17% of that growth supported higher health insurance company profits, not patient care.
- In fact, insurance company administrative costs and profits ballooned more than 23% in 2023, while hospital spending grew less than 5% (inpatient hospital spending grew at an even lower rate, a mere 2.3%).
- The biggest drivers overall of increased health care costs were insurance companies and pharmaceutical companies.
These data call into question OHCA’s rationale for focusing so intensely on hospitals (setting a 3.5% statewide growth target and even lower for hospitals it has deemed to be “high cost”) when other expenditures within the health care sector are growing far more rapidly. This suggests an arbitrary approach to reducing cost growth, one that carries overtones of unfounded bias against hospital care specifically.
The result of OHCA’s actions is that tens of billions of dollars in resources for patient care will be drained from California’s health care system at the same time Congress is poised to drastically cut Medicaid funding. Almost simultaneously, the state and federal governments are taking a wrecking ball to the health care services that millions of Californians rely on, without accounting for the impact their actions will have on people’s health and lives, local economies, the state’s shrinking middle-class job sector, and more.
In written and verbal comments, CHA continued to raise the alarm about OHCA’s adoption of the statewide spending cap and its “high-cost” hospital spending cap, urging the board to reconsider and re-evaluate its rushed action, particularly in light of pending cuts.
For hospitals concerned they may be facing an even lower spending growth target than OHCA’s 3.5% statewide goal, CHA has created a data tool to help members replicate calculations used by OHCA to identify so-called “high-cost” hospitals and assess how close they may be to the threshold.
Over decades, hospitals have always adapted and evolved to new and challenging circumstances. This current climate will be one of the most difficult in history to navigate, and it will take creativity, flexibility, and grit if hospitals are going to be able to continue to meet their mission of care.
