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California Capping Healthcare Cost Spikes

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Sacra,emtp. CA — A plan to cap the yearly increases in healthcare costs in California is raising concerns from industry groups.

On Wednesday, state regulators mandated that healthcare costs in California can rise only 3% each year, starting in 2029. The California Health Care Affordability Board cited that costs have gone up by an average of 5.4% each year over the past two decades, while people’s income only increased 3%, yearly, during that period.

A newly created agency, the California Office of Health Care Affordability will gather provider information and enforce the rule. Hospitals, doctors, and insurance companies that do not comply could face fines.

Healthcare industry groups have supported some form of cost target, but argue that the 3% figure needs to be higher. The California Hospital Association argues that it is unrealistic to implement a cap that low as numerous factors outside of their control impact costs.

Governor Gavin Newsom put out a statement in favor of the board’s decision, “This action is a crucial first step forward in our efforts to reign in outrageous health care costs and make health care more affordable.”

The Associated Press reports that over half of California’s 425 hospitals are losing money and the action could further negatively impact their bottom line.