Hospitals want to be free to raise prices. California is right to limit them

A new poll shows 8 out of 10 Californians are worried about the cost of health care and want the state’s next governor to bring down out-of-pocket costs. 

Without action, the cost burden of health care will worsen next year for 1.5 million Californians, because Congressional Republicans refuse to extend federal subsidies that make health insurance affordable through Covered California.  

Instead of making care more affordable, the California Hospital Association recently sued to block a state initiative designed to slow the stratospheric rise in health care costs and prevent Californians from being priced out of life-saving care.  

This legal action from the hospital group demonstrates that, even as state leaders work to minimize damage from federal health care cuts, they also must continue holding the health care industry accountable for delivering quality care without wasting our precious health care dollars. 

As advocates for health consumers and marginalized communities, we believe limiting growth in health care costs is both fair and essential. Increases in health care costs have vastly outpaced inflation and wage growth. 

Yet research shows more expensive health care has not improved our health outcomes, equity, or access. According to the California Health Care Foundation, “health care costs and medical debt are making Californians sicker.” 

A 2024 survey found more than half of Californians skipped or postponed care due to costs. Among Californians with low incomes, that number rose to 3 out of 4. More than half of those who skipped care said their health was worse as a result.

Consumer advocates backed the creation of California’s Office of Health Care Affordability in 2022 and have worked closely with it developing cost reduction strategies. The board spent years hearing from experts, advocates, and everyday Californians. It considered a variety of cost reduction approaches before setting an annual 3% price growth target, aligned with the typical growth in workers’ wages. 

Raking in profits

Hospitals may not like the outcome since it ends their ability to set whatever prices they want —  no matter how much they harm consumers and our economy. This lawsuit is a blatant attempt to change the rules of the game.

Hospital executives claim that high health care prices reflect hospitals’ focus on equity or superior compensation paid to health care workers. 

Yet California Health Care Foundation data show that about 25 cents of every dollar in the health care system, or up to $73 billion dollars a year, “doesn’t help patients get better care or become healthier.”

Instead, these costs result from such factors as administrative bloat and excess profits the health care industry generates by eliminating competition. 

Hospitals’ claims of financial stress also deserve further scrutiny. As some hospitals struggle, major health care systems are raking in profits, while working families struggle to pay bills. 

Kaiser Foundation Hospitals, the state’s largest hospital chain, had revenue over $32.7 billion, net assets over $46 billion, and a CEO it paid more than $12 million in 2023. 

Other wealthy hospitals, like Cedars-Sinai Medical Center, Scripps Memorial Hospital, and Loma Linda University Medical Center benefit from tax breaks that far exceed their charitable and community contributions.

It is particularly galling that the hospital lawsuit invokes “equity” no less than 50 times in an attempt to justify price-gouging. 

In reality, high prices worsen inequality, as they result in people of color being more likely to delay or skip care. If hospital leaders genuinely cared about equity, they’d work to lower costs, not defend pushing care out of reach.

Gov. Gavin Newsom and California’s state leaders have led groundbreaking efforts to tackle health care affordability. Now they’re pushing back against President Donald Trump and Republican leaders’ drive to terminate Medi-Cal coverage for millions and hike costs for Covered California enrollees. 

The hospital industry’s lawsuit underscores that protecting Californians’ health — and our pocketbooks — requires holding the industry accountable at the same time. 

Supported by the California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a price they can afford. Visit www.chcf.org to learn more.