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Uploaded: Sunday, July 17, 2022, 8:39 am In 2017, a rare viral infection hospitalized Bernadette Moordigian for three weeks and paralyzed her for almost nine months. Even though he had health insurance, the hospital sent him a bill for $80,000. He appealed and got financial help, but was still $10,000 short. In 2018, Los Angeles Neighborhood Legal Services attorney Shelly Tsai took on a client who chose to give birth at home with a midwife. Insurance wouldn’t pay the $8,000 bill, despite it costing three times less than a hospital birth. Last year, Laila Dellapasqua reduced her family’s health insurance as premiums rose. Their annual deductibles total more than $31,000. Stories like this are becoming more and more common. California and the nation are in the midst of a health care affordability crisis. The Golden State has taken a multifaceted approach in its efforts to control skyrocketing costs, the latest effort being a new Office of Health Care Affordability tasked with investigating the causes of rising prices and holding those in the health care sector accountable. In California and nationally, the most cited reason why people are uninsured or underinsured is cost. Even people with strong insurance sometimes struggle with hospital bills and medication. Some are taking extreme measures, such as rationing doses or traveling south of the border for more affordable care. According to a report by the California Health Care Foundation, half of Californians will skip or postpone medical care in 2021 because of cost.” Despite what has been said about inflation over the past year, if gas prices rose as much as health care last year. we would see $5 to $6 a gallon, just $30 to $40 a gallon,” said Anthony Wright, of the consumer rights organization Health Executive Director of Access California. “What worries people today about inflation has been about health care for decades.” The recently approved state budget includes $30 million to create an office whose primary mission is to set and enforce limits on cost growth in the industry, including hospitals, health insurers and physician groups. The office has been working for years. Industry representatives, lawmakers and Gov. Gavin Newsom are squabbling over specifics. In its final form, it will be housed in the Department of Health Care Access and Information and led by Elizabeth Landsberg, the department’s director.” specifically about how much of the health care dollar comes out of people’s pockets — it puts a strain on their family budget — how much of it goes to administrative costs and profits,” Landsberg said. But the office’s work doesn’t translate into immediate savings for people and immediate loss of stories like Moordigian or Dellapasqua. Expectations should be tempered, Landsberg said. The goal of the office may not be to reduce g costs, but rather to slow the growth of those costs. “It may not look so great to consumers who already feel they are paying too much, but we are keeping costs under control get, and we think that’s going to have a significant impact,” Landsberg said. Household health spending has grown twice as fast as wages, according to the Kaiser Family Foundation, and medical inflation is 1.5 times higher than general inflation. State spending on health and human services, which include Medi-Cal, a health program for low-income people, make up nearly lmandiku. According to the Commonwealth Fund, a health care think tank, Californians’ health insurance premiums and deductibles have steadily increased over the past decade, amounting to 10.5% of median household income in 2020. Assemblyman Jim Wood, D-Santa Rosa, who was involved in negotiations to create the office. The Office of Healthcare Affordability is trying to get at the root of the problem: Providers can charge patients virtually whatever they want, with no incentive to lower prices. Gary Cohen, an adviser to the Obama administration and head of the health consulting group Health Management Associates. Cohen previously led Blue Shield of California’s negotiations to form the office as vice president of government affairs. In California, the Office of Health Care Affordability is responsible for examining the health care market as a whole. Currently, parts of the system are controlled separately by three departments and the Attorney General’s Office. Fragmentation often results in industry parties blaming each other for rising costs. The new office plans to identify key drivers of cost growth, including individual facilities with higher-than-average prices. It collects data on expenses, including doctor visits, hospitalizations, drugs and medical supplies. The data should help determine how much is spent on the company’s administrative costs and profits. An eight-member advisory board sets limits on spending growth for different sectors and regions. Anyone who exceeds the limits and shows no improvement can face financial penalties. States have limited power to regulate the pharmaceutical industry, so drug companies are not subject to the agency’s cost targets. However, the agency will analyze the role of drug manufacturers in overall health care costs, Landsberg said. In an effort to reduce drug costs, the Newsom administration is also working on its own line of generic drugs, starting with insulin. Eight other states have created similar health services. affordable offices with moderate success. From 2017 to 2020, they surpassed the first office created health care costs in Massachusetts in two out of four years. California’s office has the toughest enforcement mechanisms, Landsberg said. “The (force) teeth are important just to convey how important this initiative is and that if the parties fail to comply, the state has the ability to take action,” Landsberg said. Landsberg is responsible for enforcing cost growth limits through a variety of means at its disposal, from requiring violators to submit performance improvement plans to imposing fines. Advocates and researchers are counting on the agency’s ability to create price transparency and bring more competition to the health care market. Melnick, a health economics expert at the University of Southern California’s Sol Price School of Public Policy. “The problem is that our health care system is far from that model.” The office also reviews mergers and acquisitions that remain unregulated in California. It was a hard-won battle to get there, albeit a sensible policy move. In 2014, a California ballot initiative to regulate health insurance rates narrowly failed. Three years later, a state bill to create a single-payer health care system was shelved without a hearing. Earlier this year, another single-payer bill died without a vote after contentious and impassioned hearings. Although those efforts failed, the powerful California Nurses Association, which sponsored the bills, said it remained committed to promoting single-payer. The message to health care providers was clear: make health care more affordable or the government will do it for them.” a need for single payer,” said Paul Markovich, president and CEO of Blue Shield. Newsom, who had campaigned for single payer, was an early supporter of the agency’s more moderate mechanisms. Alex Stack, deputy director of communications, said making health care more affordable and accessible was a top priority for the administration. . Newsom first introduced the Office of Health Affordability in his January 2020 budget proposal, but the pandemic sidelined it. In 2021, Assemblyman Wood drafted legislation to clarify the office’s role, but after lawmakers and industry officials failed to reach an agreement, he announced , that discussions will continue this year. “In order for this policy to make sense, it needs to include all stakeholders in health care, and they all have a say in the profession,” Wood said as he released the bill last September. “One change after another has been requested. , trying to minimize the impact on them and s push attention to other actors in the health care system.” Initial iterations of the proposal took a tough stance on controlling the costs of medical goods and services. capping prices even lower than current prices. Instead, industry officials and lawmakers compromised as it stands, targeting only future cost growth for the bureau.”We proposed rate regulation and got pushback from the industry,” said Wright, Health Access California. “(The Bureau) was an attempt to do it differently with the same goal.” Consumer advocates and health economists say the bureau has the authority to make health care more affordable, but some of its power fell in negotiations. Earlier versions of the proposal included financial penalties. The version that was adopted says that violations “may” result in penalties. The California Medical Association, which lobbies for doctors, tried to succeed lt to achieve groups of doctors consisting of less than 25 doctors, which are exempted from billing. Association spokeswoman Shannan Velayas said the group “worked to ensure that the agency’s Health Affordability proposal focuses primarily on those entities that have enough market power to influence health care costs.” Another lobby, the California Hospital Association, successfully asked the bureau to create a public panel of industry experts to advise the bureau. The lobby also called for all industry players to be subject to the office’s rules without exceptions. “It can’t just be behind hospitals.” On the insurance side, California Blue Shield was one of the first industry players at the table. Markovich said it is “very, very difficult” to get other insurers, hospitals and doctors to agree, and that difficulty underscores the need for the office’s work. “There is too much inertia, resistance, and passivity in health care today. This office has the opportunity to inject much-needed urgency and accountability,” Markovich said. Moordigian — a Fresno resident with an $80,000 hospital bill — has a doctorate in clinical psychology and teaches part-time at Fresno City College. However, he does not receive health benefits as a part-time employee. Instead, Moordigian is enrolled through Covered California, the state’s health insurance marketplace. He pays only $1 a month after federal aid. The trade-off is that his deductible and annual maximum are high, at $6,300 and $8,200, respectively. It’s the lowest insurance option available, but with rent and student loans eating up most of her take-home pay, it’s all she can afford. Moordigian said he often skips the doctor. s’ appointments or laboratory tests due to cost. “Every time I doctor the root de I go, I ask, “Is it free? Is it included in the price?” and it’s a terrible way to get care,” she said. Dellapasqua, another assistant professor at the community college, said one of her employers offers insurance through Kaiser Permanente, but the premium is more than $2,200 per paycheck. “I would work for free in a year. to get health insurance for my family of four,” Dellapasqua said. She opted for the Covered California plan instead. “I get anxious every time I open enrollment. What’s it going to cost? Do you know if it’s going to work?” But even those with employer-sponsored insurance are feeling the burden of rising costs, said Dellapasqua. Tsai, an attorney with Neighborhood Legal Services, said a recent client was hospitalized twice for heart problems and had a $4,000 deductible. Meanwhile, his wife received a $10,000 medical bill. Although he worked full-time at a factory and had employer-based insurance, his family didn’t have the money to pay for what wasn’t covered. “What are you doing, squeezing water out of a rock?” Tsai said. Last year, the average annual employee premium was $7,739 for an individual and $22,221 for a family, according to the Kaiser Family Foundation. Much of the cost of increasing premiums has been absorbed by employers, but is still passed on to workers. As health care costs increase, wages remain flat, said Laurel Lucia, director of health care at the UC Berkeley Labor Center. and buy a new car every year,” said Lucia. Union officials joined staunch supporters of the Office of Health Care Affordability at the start of negotiations, mainly to fight wage growth. “Healthcare costs are the number one issue at the bargaining table,” California Labor said. Union Communications Director Steve Smith. “It’s awfully hard to get a raise when health care eats up so much of the overall benefit.” The office can benefit both employers and employees paying high premiums. Bill Kramer, executive director of health policy at Purchaser Business Group on Health, which represents employers, said he is struggling to make ends meet. It’s really a jobs and wages bill.”
In 2017, a rare viral infection hospitalized Bernadette Moordigian for three weeks and paralyzed her for nearly nine months. Even though he had health insurance, the hospital sent him a bill for $80,000. He appealed and received financial assistance, but was still $10,000 short.
In 2018, Los Angeles Neighborhood Legal Services attorney Shelly Tsai took on a client who chose to give birth at home with a midwife. Insurance wouldn’t pay the $8,000 bill, even though it costs three times less than a hospital birth.
Laila Dellapasqua again reduced her family’s health insurance coverage last year as premiums rose. Their annual deductibles are collectively over $31,000.
Stories like these three are becoming more common. California and the nation are in the midst of a health care affordability crisis. The Golden State is taking a multifaceted approach in its efforts to contain skyrocketing costs, the latest effort being a new Office of Health Care Affordability tasked with investigating the causes of price hikes and holding health care providers accountable.
In California and nationally, the most cited reason why people are uninsured or underinsured is cost. Even people with strong insurance sometimes struggle with hospital bills and medication. Some are taking extreme measures, such as rationing doses or traveling south of the border for more affordable care. According to a report by the California Health Care Foundation, half of Californians will skip or delay medical care in 2021 because of cost.
“If you look at the inflation talk over the last year, if gas prices went up as much as health care prices over the last couple of decades, we wouldn’t see $5 to $6 a gallon, we’d see $30. $40 a gallon,” said Health Access California, a consumer rights group. Managing Director Anthony Wright. “What worries people today about inflation has been in health care for decades.”
The recently approved state budget includes $30 million to create an office whose primary mission is to set and enforce limits on cost growth for industry, including hospitals, health insurers and physician groups.
The bureau has been years in the making, with industry representatives, lawmakers and Gov. Gavin Newsom haggling over specifics. In its final form, it will be housed in the Health Services Access and Information Division and will be led by Elizabeth Landsberg, director of the division.
“We’re certainly shedding light specifically on how much of the health care dollar that comes out of people’s pockets — that burdens their family budget — how much of that goes to administrative costs and profits,” Landsberg said.
But office work doesn’t bring immediate savings for people, and it doesn’t immediately eliminate stories like Moordigian or Dellapasqua. Expectations should be tempered, Landsberg said.
The goal of the office is not necessarily to reduce costs, but rather to slow the growth of those costs. “It may not look so good to consumers who already feel like they’re paying too much, but we need to get costs under control, and we think that’s going to have an absolutely significant impact,” Landsberg said.
According to the Kaiser Family Foundation, household health care costs have grown twice as fast as wages, and medical inflation is 1.5 times higher than general inflation. State spending on health and human services, which includes Medi-Cal, the health program for low-income people, makes up nearly a third of the state budget. Health insurance premiums and deductibles for Californians have risen steadily over the past decade, accounting for 10.5% of median household income in 2020, according to the Commonwealth Fund, a health care think tank.
“At the end of the day, health care is too expensive, the rate of growth is unsustainable, and we have to do something,” said Assemblyman Jim Wood, D-Santa Rosa, who was involved in negotiations to establish the office.
The Office of Health Care Affordability is trying to get at the root of the problem: Providers can charge patients virtually whatever they want, with no incentive to lower prices.
“Whenever we’ve tried to make health care more affordable, we’ve done it by increasing subsidies, but that doesn’t help the root cause,” said Gary Cohen, a former Obama administration adviser and director of Health Management Associates. healthcare consulting group. Cohen previously led Blue Shield of California’s negotiations to form the office as vice president of government affairs.
In California, the Office of Health Care Affordability is responsible for examining the health care market as a whole. Currently, parts of the system are controlled separately by three departments and the Attorney General’s Office. Fragmentation often results in industry parties blaming each other for rising costs. The new office plans to identify key drivers of cost growth, including individual facilities with higher-than-average prices.
It collects data on expenses, including doctor visits, hospitalizations, drugs and medical supplies. The data should help identify how much is spent on administrative costs and profits of the economic entity.
The eight-member council sets limits on the growth of costs for different sectors and regions. Anyone who exceeds the limits and shows no improvement can be fined.
States are limited in how they regulate the pharmaceutical industry, so drug companies are not subject to the agency’s cost targets. However, the agency will analyze the role of drug manufacturers in overall health care costs, Landsberg said. In an effort to reduce drug costs, the Newsom administration is also working on its own line of generic drugs, starting with insulin.
Eight other states have established similar health care affordability offices with moderate success. Between 2017 and 2020, Massachusetts, which established the first office, exceeded health care costs in two of the four years. The California office has the toughest enforcement mechanisms, Landsberg said.
“(The) cogs are important precisely to convey how critical an initiative this is, and that if the parties fail to deliver, the state has the ability to act,” Landsberg said.
Landsberg is responsible for enforcing cost growth limits through a variety of means at its disposal, from requiring violators to submit performance improvement plans to imposing fines. Advocates and researchers are counting on the bureau’s ability to create price transparency and bring more competition to the health care market.
“If you look at other parts of our economy that are market-driven but competitive, it’s consumers who set the prices. They make trade-offs for service, quality and access,” said health economics expert Glenn Melnick. from the Sol Price School of Public Policy at the University of Southern California. “The problem is that our health care system is far from that model.”
The office also reviews mergers and acquisitions that remain unregulated in California.
It was a hard-fought battle to get there, albeit a shrewd political move by many in the healthcare industry.
In 2014, a California ballot initiative to regulate health insurance rates narrowly failed. Three years later, a state bill to create a single-payer health care system was shelved without a hearing. Earlier this year, another single-payer bill died without a vote after contentious and impassioned hearings. While those efforts failed, the powerful California Nurses Association, which sponsored the bills, said it remained committed to promoting single-payer.
For healthcare intermediaries, the message was clear: make healthcare more affordable or the government will do it for them.
“If this fee can actually make the private system work in a consumer-friendly and accessible way, it could very well eliminate the need for single payer in the long term,” said Paul Markovich, president and CEO of Blue Shield.
Newsom, who had campaigned for a single-payer system, was an early supporter of the bureau’s more moderate mechanisms. Deputy Communications Director Alex Stack said making health care more affordable and accessible is a “top priority” for the administration.
Newsom first introduced the Office of Health Care Affordability in his January 2020 budget proposal, but the pandemic sidelined it. In 2021, Assemblyman Wood drafted legislation to clarify the office’s role, but after lawmakers and industry officials failed to reach an agreement, he said discussions would continue this year.
“For this policy to make sense, it needs to be inclusive of all the stakeholders involved in health care, and they’ve all had a say in the profession,” Wood said when introducing the bill last September. “One change after another has been requested to minimize their impact and shift the focus to other actors in the health care system.”
Early iterations of the proposal took a tough stance on controlling the costs of medical goods and services, capping prices even below current prices. Instead, industry officials and lawmakers compromised as it stands with the agency focusing only on future cost growth.
“We proposed rate regulation and we got pushback from the industry,” said Wright, Health Access California. “(The Office) was an attempt to try to do it differently with the same goal.”
Consumer advocates and health economists say the agency has the authority to make health care more affordable, but some of its power has been whittled away in the negotiations. Earlier versions of the proposal included financial penalties. The adopted version says penalties “may” be imposed for violations.
The California Medical Association, which lobbies for physicians, successfully sought to exempt physician groups of fewer than 25 physicians.
Shannan Velayas, a spokeswoman for the association, said the group “worked to ensure that the Office of Health Care Affordability’s proposal focuses primarily on those entities with sufficient market power to influence health care costs.”
Another lobby, the California Hospital Association, successfully asked the bureau to create a public panel of industry experts to advise the bureau. The lobby also demanded that all industry participants should be subject to the Office’s rules without exception.
“Our position has always been that this is a comprehensive proposal,” said Jan Emerson-Shea, spokeswoman for the California Hospital Association. “It can’t just be behind hospitals.”
On the insurance side, Blue Shield of California was one of the first industry players at the table. Markovich said it is “very, very difficult” to get other insurers, hospitals and doctors to agree, and that difficulty underscores the need for the office’s work.
“There is too much inertia, resistance and parochialism in health care today. This profession has an opportunity to inject a needed sense of urgency and accountability,” Markovich said.
Moordigian — a Fresno resident with an $80,000 hospital bill — holds a doctorate in clinical psychology and teaches part-time at Fresno City College. But he doesn’t get health benefits as a part-time worker.
Instead, Moordigian is enrolled through Covered California, the state’s health insurance marketplace. He pays only $1 a month after federal aid. The trade-off is that his deductible and annual maximum are high, at $6,300 and $8,200, respectively. It’s the lowest insurance option available, but with rent and student loans eating up most of her take-home pay, it’s all she can afford.
Moordigian said she often skips doctor’s appointments or lab tests because of the cost. “Every time I go to the doctor, I ask, ‘Is it free? Is that included?’ and it’s a terrible way to get care,” she said.
Dellapasqua, another assistant professor at a community college, said one of her employers offers insurance through Kaiser Permanente, but the premium is more than $2,200 per paycheck.
“I would work for free to have health insurance for my family of four,” Dellapasqua said. He chose the Covered California plan instead.
“I get anxious every time it’s open enrollment. What’s it going to cost? You know, is it going to work?” Dellapasqua said.
But even those with employer-sponsored insurance are feeling the burden of rising costs.
Tsai, an attorney with Neighborhood Legal Services, said a recent client was hospitalized twice for heart problems and had a $4,000 deductible. Meanwhile, his wife received a $10,000 medical bill. Although he worked full-time at a factory and had employer-based insurance, his family didn’t have the money to pay for what wasn’t covered.
“What are you doing, squeezing water out of a stone?” Tsai said.
Last year, the average annual premium for workers was $7,739 for individual coverage and $22,221 for family coverage, according to the Kaiser Family Foundation. Much of the cost of increasing premiums has been absorbed by employers, but is still passed on to workers. As health care costs rise, wages will stagnate, said Laurel Lucia, director of health care at the UC Berkeley Job Center.
“A lot of workers probably don’t realize that family insurance premiums have gone over $20,000 a year. To put it in perspective, that means the employer and employee get together every year and buy a new car every year,” Lucia said.
Union officials joined staunch supporters of the Office of Health Care Affordability early in the negotiations, mainly to fight wage increases.
“When we get to the bargaining table, health care costs will come first,” said Steve Smith, director of communications for the California Labor Union. “It’s awfully hard to get a raise when health care eats up so much of the overall benefit.”
The office could be beneficial for both employers paying high premiums and workers struggling to make ends meet, said Bill Kramer, executive director of health policy at the Buyers Business Group, which represents employers. “This is not just a health care bill. This is really a jobs and wages bill.”
Email Kristen Hwang and Ana B. Ibarra at [email protected] and [email protected] respectively.
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