California Attempts to Control Healthcare Costs

On Monday, California Assemblyman Ash Kalra officially unveiled a new bill designed to harness soaring costs of healthcare in the state. The new legislation would establish an independent state healthcare commission that would set one price for healthcare services no matter which commercial insurance company was covering the cost.

Kalra, who represents California's 27th State Assembly district in San Jose, first introduced Assembly Bill 3087 on February 16. It was referred to the Committee on Health last month where it was amended. On April 2, the bill was bumped back to the Committee on Health for additional review.

The bill is part of an effort to stymie the growth of healthcare costs in California. Since 2002, premiums for employer-sponsored health insurance in California have risen by more than 230%. In that same time, inflation has risen by only 40%. Costs have been particularly high for small businesses with less than 200 workers, and recent surveys have shown that more than 25% of California businesses are planning to defer more of the cost of rising premiums to their employees in the near future.

With the new legislation, California hopes to follow the lead of Maryland's all-payer model which has helped to keep healthcare costs low in the state. In a recent study by the Network for Regional Healthcare Improvement, Maryland ranked above states like Utah, Oregon, Minnesota and Colorado in healthcare savings. Unlike Maryland's hospital payment system, the proposed system in California would only include commercial insurance plans available through employers or on the healthcare exchange.

The bill has met opposition from medical associations and physicians, who state that the legislation may discourage doctors from practicing medicine in California and make it hard to attract new doctors looking for their first position. Meanwhile, other critics say that the bill is too conservative and the state needs to institute single-payer healthcare to assuage the cost of medical treatment.

Proponents of the bill include the California Labor Federation and the Service Employees International Union. These labor groups argue that new legislation is needed to control the rising costs of healthcare procedures for its members, many of whom can not afford to pay for treatment at current rates.

The exponential growth of healthcare costs in California is also playing out across the United States. Largely due to an aging population and the development of pricey new treatment methods, costs rose by more than 4% in 2017. Experts have estimated that healthcare costs in the United States will reach $5.7 trillion by 2026.


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