Years of escalating health care costs show that, if left alone, this problem will only continue to get worse. Bold policies are needed from California policymakers along with the partnership of the health care industry.
The California Office of Health Care Affordability (OHCA) was established in 2022 to set and enforce targets that limit the growth in the state’s health care spending. This presents new opportunities to reduce growth in excess spending, which fuels the affordability crisis and provides no value to patients. OHCA can return savings to Californian families through an affordability fund that collects monetary fines from health care organizations that exceed spending growth targets. Other states have shown that it is possible to slow growth in health care spending without hurting access and quality.
In April 2024, policymakers at OHCA approved a target that would cap the growth in annual statewide health care spending at 3%, which aligns with growth in median household income in California. The spending target will be phased in over time, initially starting at 3.5% for 2025 and 2026. The target will then be lowered to 3.2% for 2027 and 2028 before ultimately reaching 3% for 2029 and beyond.
For context, data from the last decade show that if California’s health care spending had grown in line with the state’s economic growth (3.6% compounded annually), total health care spending would have been almost 5% lower in absolute terms. That’s a meaningful start to reducing the 20%–25% of excess spending in the system – and potential relief to Californians struggling with high premiums and deductibles as well as stagnant wages. The target of 3% would potentially have an ever greater impact.
One thing is certain: In a state where one out of two people skip care due to costs, and population-level health is getting worse because of it, anything less than fundamental change from the status quo risks the health and wellbeing of millions.
