A holistic remedy to lower health care costs

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With eight in 10 Californians citing rising health costs as a top concern, state legislators can take bold action in 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, policymakers will soon vote on a comprehensive new approach to rising health care costs: a new Office of Health Care Affordability.

Inflated health care prices make us sicker. According to a recent California Health Care Foundation poll, more than half of California families delayed or skipped care due to cost, and nearly half said their conditions had worsened as a result. High costs make us poorer, too, crowding out wages and benefits as employers grapple with increased insurance prices.

What’s worse, our health care costs are much higher than other countries’, even though we don’t require more care or have better outcomes. We simply pay more. But that doesn’t have to be the case. We know that better care costs less and that improving care quality can also improve affordability.

California policymakers and advocates have addressed the rising cost of care through specific reforms on prescription drugs, anti-competitive industry practices and “surprise” medical bills. But attempting to tackle each separately is a game of whack-a-mole. The creation of an Office of Health Care Affordability is a comprehensive effort to take on this issue systemwide.

The proposed new office is the result of years of stakeholder negotiation. It has the backing of Gov. Gavin Newsom, along with an uncommon grouping of supporters among patient advocates, employers and labor unions. A related bill — Assembly Bill 1130, by Assembly Health Committee Chair Jim Wood — passed the full Assembly last week.

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

It would allow the state to look at real-world costs experienced by insurers and providers, and use that data to set a target for each health care sector. Costs could not exceed that target without penalty or explanation.

The goal is to give high-performing health care providers a fair playing field by identifying price gougers and market failures, and addressing waste in the system. 

Studies show that if costs continued to rise only at the rate of general economic growth, the proposed Office of Health Care Affordability could save Californians billions of dollars every year.

The idea received broad support from health policy leaders, stakeholders and academics from three California universities during an 18-month dialogue facilitated by Convergence Center for Policy Resolution. Despite sometimes being on different sides of issues, we and other participants agreed that an effort to collect cost data and set enforceable cost targets is what California needs now.

We understand that real change must be industrywide, as the system is interdependent. The proposed office will recognize the role hospitals, health plans, medical groups and other sectors of the system play together, rather than singling out any one part of the industry.

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

Had this office been in place before the pandemic, a centralized health oversight agency looking at the big picture could have helped manage the crisis. It could provide a world of help in the next public health emergency.

We can’t meet goals we never set. With an Office of Health Care Affordability, California can lower health care costs and increase access to care, while improving quality and health equity. Let’s get California ahead of the health care cost curve, instead of falling further behind it.