California’s Office of Health Care Affordability (OHCA) was established in 2022 in response to widespread cost-related access challenges among California residents. OHCA’s enabling statute emphasizes that it is in the public interest that all Californians receive health care that is accessible, affordable, equitable, high quality, and universal.

OHCA has three primary responsibilities:

1. Slow underlying spending growth. Health care has become unaffordable for far too many California families. Experts agree that a significant driver of the affordability crisis is excess spending within the health care system, which can be reduced without harming access or quality. OHCA will collect, analyze, and publicly report data on sources and drivers of spending across the health care system. To reduce excess spending, OHCA will establish a cost growth target for the system as a whole, and accountable entities within that system.

2. Promote high-value system performance. OHCA will promote adoption of alternative payment models (APMs), which compensate health care providers based on the quality (not quantity) of care they provide. OHCA will measure quality, equity, investment in primary care and behavioral health, and workforce stability to ensure the state’s health care system is delivering value commensurate to the resources it receives.

3. Assess market consolidation. California’s health care marketplace is heavily consolidated, and research shows that consolidation among hospitals, health plans, and provider groups contributes to higher costs with little to no increases in quality. Through cost and market impact reviews (CMIRs), OHCA will analyze transactions that are likely to significantly impact health care market competition, the state’s ability to meet targets, or affordability for consumers and purchasers. Based on the review, OHCA will coordinate with other state agencies to address consolidation as appropriate.

Structure

OHCA is part of the California Department of Health Care Access and Information. OHCA’s work is conducted primarily through the following entities:

The Health Care Affordability Board has eight members and is the decisionmaking body charged with setting health care spending targets and approving key benchmarks, such as alternative payment model adoption.3 The board includes representatives from the California Health and Human Services Agency and CalPERS (non-voting), as well as appointees of the governor, California State Assembly, and State Senate.

The Health Care Affordability Advisory Committee provides input to the Health Care Affordability Board on a range of topics but has no approval authority. Members are appointed by the Health Care Affordability Board and represent consumer and patient groups, organized labor, health care workers, fully integrated delivery systems, hospitals, physicians, and health care purchasers.

The OCHA Investment and Payment Workgroup supports the development of alternative payment model, primary care, and behavioral health standards and benchmarks.

Total Health Care Expenditures Data Submitter Workgroup is a forum for data submitters to receive information on submission requirements, troubleshoot data submissions, and address technical questions.

Progress to Date

As of June 2024, some major milestones in OHCA’s work include the following:

• Establishing a statewide health care spending target. In April 2024 OHCA adopted a statewide spending growth target of 3% annually, to be phased in over the next five years. This 3% annual growth target aligns with the average growth in Californians’ median income over the last two decades. The spending growth target will apply to entities within the health system, including health plans, providers groups (with more than 25 physicians), and hospitals.
• Proposing APM standards, workforce stability standards, and primary care investment benchmarks. The OHCA board is considering standards and adoption goals for APMs. The office has further proposed a core set of metrics and standards to promote workforce stability with organizations and across the broader health care marketplace. Finally, the board is considering a statewide absolute benchmark of 15% of medical spending going to primary care by 2034. For updates on these proposals, check the “Promote High Value System Performance” section of the OHCA website.
• New disclosure around mergers and acquisitions. OHCA has established new disclosure requirements following certain transactions in the health care marketplace, including mergers and acquisitions. Those transactions that OHCA determines may lead to anticompetitive impacts in the health care system may be subjected to formal CMIRs and referred to the California attorney general if necessary.

Key Future Milestones

Below is a high-level timeline of key milestones in OHCA’s work over the next few years. Check the OHCA
website or sign up for the OHCA listserv for the most up-to-date information.