California has placed a 3% cap on annual healthcare price increases, despite opposition from radiologists and other physicians.
The rule change is set to take effect in 2029 after local lawmakers approved it on April 23. California becomes the ninth state to place such a ceiling on price increases, which legislators enacted to counteract escalating costs spanning 20 years, the Associated Press reported.
The California Radiological Society had lobbied against the law change, noting the escalating cost of providing care across the U.S.
“Adopting a 3% healthcare spending growth target, which most physician practices and healthcare entities will be unable to meet, will negatively impact access to healthcare for Californians…,” Matthew Peralta, executive director of the society, wrote to state authorities last month. “CRS urges the Health Care Affordability Board to take the time to explore alternatives to the unrealistic staff proposal before casting the most important vote you are charged with making.”
California joins eight other states that also have established statewide healthcare cost growth targets, according to the California Health Care Foundation. Others on the list include Connecticut, Delaware, Massachusetts, Nevada, New Jersey, Oregon, Rhode Island and Washington. The Golden State has seen healthcare costs climb an average of 5.4% annually, during a time when its residents’ income has risen only 3% each year, the board noted. The cap is slated to be phased in over five years starting with 3.5% in 2025, according to the AP.
Average household income is unrelated to the increasing cost of practicing medicine, the California Radiological Society countered. In December, the Centers for Medicare & Medicaid Services projected that the actual cost of providing care will increase 4.6% in 2024. Radiologists and other physicians cannot sustain themselves with costs continuing to outpace prices, the CRS said.
“If the board sets a target lower than the actual cost of providing healthcare, providers will be pressured to deliver less medically necessary healthcare,” Peralta wrote. “If Californians cannot access care, patients, their employers and taxpayers will be paying for insurance coverage they cannot use. Affordability is only meaningful if there is access to care. Moreover, if the state’s spending growth target is unrelated to the cost of providing healthcare, it will be difficult to get buy-in from the healthcare entities subject to the cost targets to make changes that are within their power without coming at the expense of quality patient care.”
California’s Office of Health Care Affordability, a newly established agency, will gather data to help enforce the rule. Those who don’t obey will face fines, though enforcement is progressive, giving radiology groups a chance to comply first, the AP noted. The board’s decision is only the start of a process, as regulators still must determine how to apply growth caps across various healthcare sectors.
The Office of Health Care Affordability further elaborated about the forthcoming process in an April 24 news update.
“Making quality healthcare affordable is a top priority for our administration,” Gov. Gavin Newsom (D) said in a statement. “This action is a crucial first step forward in our efforts to rein in outrageous healthcare costs and make healthcare more affordable.”
The California Medical Association also has voiced concern about the policy, believing 3% is too low of a cap. RadNet and Radiology Partners—two of the imaging industry’s largest provider organizations, which are both based in California—declined to comment on the decision when contacted by Radiology Business.
Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic.