California agency tries to slow growth in healthcare spending

With healthcare spending growing faster than inflation for many years, various institutions have tried to curb its growth. KFF Health News reported on California establishing an Office of Health Care Affordability in 2022 to accomplish this goal. Earlier this year, the agency approved of a target growth rate of 3.5% in 2025, dropping to 3% by 2029. This plan allows more growth in spending than the original target of 3%, but is substantially less than the 5.3% growth requested by the California Hospital Association. Understandably, both the California Hospital Association and the California Medical Association have objected to lower number, citing a variety of factors including the growing need for mental health treatment, labor shortage, patient access, and quality of care.

Apparently, starting 2030, the agency has authority to fine health provider groups who exceed the growth targets. If this measure is the only tool in the agency's arsenal, it seems unclear how effective the agency will be. For example, if a healthcare provider dominates in an area and threatens to reduce services, will the agency still follow through on its threat of a meaningful fine? Alternatively, if a provider group can cite a host of plausible reasons (e.g. higher minimum wage, shortage of healthcare workers), what will the agency do? While the motivation behind establishing such an agency seems positive (checking rampant growth in healthcare pricing), the implementation details are surely challenging.