In summary

An Affordability Office of Health Care would end California’s whack-a-mole approach.

From Bill Kramer

Bill Kramer is Executive Director for Health Policy at the Purchaser Business Group on Health, wkramer@pbgh.org.

Anthony Wright, special on CalMatters

Anthony Wright is the Executive Director of Health Access California, awright@health-access.org.

With eight in ten Californians citing rising health care costs as a top concern, state lawmakers can take bold steps over the next week to give families better access to affordable health care and economic recovery in the wake of the COVID-19 pandemic. As part of the state budget, politicians will soon vote on a comprehensive new approach to rising health care costs: a new health care affordability office.

Excessive health prices make us sicker. According to a recent survey by the California Health Care Foundation, more than half of California families delayed or skipped treatment due to cost reasons, and nearly half said it made their conditions worse. High costs also make us poorer and crowd out wages and social benefits as employers struggle with rising insurance prices.

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What’s worse, our healthcare costs are much higher than in other countries, even though we don’t need more care or get better results. We just pay more. But it doesn’t have to be. We know that better care costs less and that improving the quality of care can also improve affordability.

California politicians and advocates have addressed rising healthcare costs through specific prescription drug reforms, anticompetitive industry practices, and “surprise” medical bills. But trying to tackle each one individually is a whack-a-mole game. The creation of an Office of Health Care Affordability is a major effort to address this issue system-wide.

The proposed new office is the result of years of negotiations with stakeholders. It has the backing of Governor Gavin Newsom, along with an unusual grouping of supporters among patient advocates, employers and unions. A related bill – Assembly Bill 1130, by Assembly Health Committee Chairman Jim Wood – passed the full assembly last week.

Real accountability makes the proposed Office of Health Care Affordability unique – and potentially effective. It would transform the way health care costs data are reported and would use that data to set annual, enforceable nationwide cost targets for health insurers, hospitals and health systems.

It would allow the state to examine the real cost of insurers and providers and use that data to set a target for each health sector. The cost could not exceed this goal without penalty or explanation.

The aim is to offer high-performance healthcare providers fair competitive conditions by recognizing price drivers and market failures and addressing waste in the system.

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Studies show that the proposed Office of Health Care Affordability could save Californians billions of dollars each year if costs only kept rising with overall economic growth.

The idea received widespread support from health leaders, stakeholders, and academics from three California universities during an 18-month dialogue moderated by the Convergence Center for Policy Resolution. Although we sometimes found ourselves on different sides of the problem, we and other participants agreed that California now needs an effort to collect cost data and set enforceable cost targets.

We understand that real change needs to happen across the industry because the system is interdependent. The proposed office will recognize the role that hospitals, health insurance companies, medical groups and other sectors of the system play together, rather than singling out just part of the industry.

The idea is not without precedent. The Massachusetts Health Policy Commission has been setting cost targets with real success since 2012. California can build on these and similar efforts in other states to meet our special needs.

If this office had existed before the pandemic, a centralized health oversight agency, looking at the bigger picture, could have helped manage the crisis. It could be a world of assistance in the next public health emergency.

We cannot achieve goals that we never set ourselves. With an Office of Health Care Affordability, California can reduce health costs and improve access to health care while improving quality and health equity. Let’s put California at the top of the health care cost curve instead of falling further behind.

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