California bill would create healthcare price controls
- A new California bill would give the state government power to set price controls on hospital stays, doctor visits and other medical services.
- The proposal, amended in the state assembly on Monday, would authorize an independent commission to set prices on private health plans, including those offered by employers and purchased individually. The rates would be based on what Medicare pays for the same services.
- The bill is supported by unions and consumers, but is opposed by the healthcare industry.
The nine-member price-setting commission would be made up of political appointees with no requirement for experience in healthcare delivery. The measure prohibits healthcare professionals from participating on the commission, according to the California Medical Association.
“No state in America has ever attempted such an unproven policy of inflexible, government-managed price caps across every healthcare service,” CMA President Theodore M. Mazer said. “It threatens to reverse the historic gains for health coverage and access made in California since the passage of the Affordable Care Act.”
The bill is similar to Maryland’s all-payer model, which regulates what hospitals can charge in exchange for CMS paying a larger share of Medicare costs. Launched in 2014, the idea was that setting a fixed annual budget for hospitals, instead of reimbursing them on a fee-for-service basis, would allow more flexibility and promote value-based care while holding down costs.
According to a report by the state Health Services Cost Review Commission, the model saved Medicare $586 million in hospital payments and $461 million in total care costs between 2014 and 2016. The report also touts improvements in quality of care and patient complications.
The initiative was launched on a smaller scale in 2010 with the aim of controlling costs at rural hospitals, but was not as successful. Maryland introduced global budgets for eight rural, acute care hospitals, expanding the all-payer model statewide in 2014. But an analysis by University of Pittsburgh and Harvard Medical School researchers of the initial eight hospitals found that model did not reduce utilization or spending.
The next committee hearing date for the California bill is April 24.