Over the last 20 years, total and per capita health care spending in California (PDF) has roughly tripled.
While there is nothing inherently wrong with high or growing health care expenditures, both the absolute level and growth of health care spending in California are problematic for several reasons.
First, decades of health services research have demonstrated that there is no correlation between health care spending levels and health care quality. The example below shows that many California regions report higher costs and lower quality at the same time (see lower righthand quadrant).
Second, health care spending growth has consistently outpaced state gross domestic product (GDP), inflation (CPI) and median wage growth (PDF). This means that an increasingly large proportion of the state’s economic output goes into a sector that does not deliver any additional value or improvement for those resources, and working Californian families must dedicate an increasing share of their paychecks to health care expenses.
Third, there is wide variation in health care spending across the state, with no connection to the complexity of an individual case or the quality of the procedures that are performed. For example, a cesarean delivery in San Diego in 2018 was just over $20,000, compared to just over $30,000 in San Francisco, controlling for the clinical complexity of the patient and procedure. Prices vary even within a region: The minimum price for an outpatient appendectomy in the San Diego region is less than half the maximum price in the exact same geographic area, again regardless of clinical complexity or quality.
Unjustified variation in spending, coupled with the fact that more spending doesn’t lead to better quality, suggest that a significant portion of health spending could be eliminated without harming either access or quality. Experts have called this “excess spending.”
