Systemic medical care cost pressures since the start of the millennium have led to a California legislative proposal to limit provider fees to Medicare reimbursement rates, overseen by a newly created state commission. This measure bears watching since it’s believed to be the first in the nation that would impose an across the board price limit on all medical care services, essentially stating a public policy principle that market forces alone cannot check the rapid rise in medical costs.
The measure, AB 3087, states among its findings that premiums for employer-sponsored health insurance in California increased 234 percent from 2002 to 2016 and 83 percent of 2018 premium increases in the large group market are due to price inflation.
Proponents and opponents of the measure have sharply divergent views on the proposed legislation. The basis of support dates back to the origin of employer sponsored medical benefit plans in lieu of wage increases during federal price and wage controls imposed in the 1940s during World War II. Labor groups backing the bill contend that tradeoff is holding down employee compensation as employers pay increasingly higher medical care costs for employees — a factor in slow wage growth despite strong job creation since the end of the 2008-09 recession.
“Every dollar that we spend on rising health care prices is a dollar that comes out of a worker’s pocket,” said Sara Flocks, policy coordinator for the California Labor Federation, a union coalition. “This is something that is eating up our wages and it is increasing income inequality. This is a fundamental question of fairness.”
Practitioners however warn limiting their fees would lead some to close their practices in the Golden State or retire. Hospitals contend the proposal would play havoc with their business models that rely on higher reimbursement rates from commercial payers to compensate for lower reimbursement rates from government programs, according to Dietmar Grellman, senior vice president of the California Hospital Association:
“They take money out of the system with rate regulation, but then they don’t address the huge gaping hole that’s created by Medicare and Medicaid.”
Grellman warns that revenue shortfall would lead to cuts in nurses and other hospital staff.
The proposed legislation joins another proposal to tamp down the cost of medical care by creating a state run single payer monopsony. Although legislation to implement it has stalled, single payer is a major issue in California’s gubenatorial race.
Source: California Bill Would Create Health Care Price Controls – The New York Times
3/23/2010 