Health care prices are just too high. Last month when Attorney General Xavier Becerra sued Sutter Health, one of California’s largest hospital chains, for anti-competitive practices and prices, he pointed to a problem not just with one provider, but to out-of-control health care pricing.
We are co-sponsoring Assembly Bill 3087, the Health Care Price Relief Act, to institute new price controls and oversight to provide a fair, but not inflated, rate to doctors, hospitals and health plans – and to stop health care price-gouging. The bill, introduced by Assemblyman Ash Kalra, D-San Jose, is to be heard Tuesday by the Assembly Health Committee.
The bill would leverage the purchasing power of Medicare, the popular program for seniors and people with disabilities. It would set a benchmark at a percentage above Medicare rates, which are already accepted by most doctors and hospitals, making up much of their business.
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The dirty secret of our health system is that what we pay has little relation to how much it costs to provide the service, the quality of the care, or our health outcomes. Instead, prices are largely determined by the relative monopoly power of the health provider and health plan. A recent UC Berkeley study detailed significant consolidation in California’s health care system and how that inflates prices. In concentrated markets – including 44 of 58 counties and especially in Northern California – there is less competition and prices are driven up. Californians pay a markup of 33 percent to 66 percent for physician services, and almost 80 percent for inpatient services.
Americans pay more than anyone else in the world for health care, and it’s not because we use health care more. Unlike other countries, we allow our health providers – including hospitals, health plans, doctors and drug companies – to charge whatever they want with little or no oversight. Our system is financially breaking uninsured and underinsured patients, stunting middle-class wage growth and creating an unsustainable health system.
Under AB 3087, an independent California Cost, Quality and Equity Commission will ensure that doctors and hospitals would be guaranteed a certain percentage over the Medicare rate, but require them to justify prices higher than that. This is not a new idea, and is similar to how California handles hospital bills for the uninsured and for out-of- network doctors. States such as Maryland and Massachusetts also have parts of AB 3087 in place.
When patients go to a doctor’s office or hospital, they often don’t know the cost, nor can they turn down treatment in most cases. The proposed commission will bring light to a system that has kept consumers in the dark, and allowed health care prices to climb faster than inflation or wages year after year.
This common-sense reform would provide oversight in health care very similar to that for utilities and other essential services. Like regulated utilities, health care providers would be guaranteed financial viability and even a return on investment, but they wouldn’t be allowed to use their monopoly power to take advantage of consumers.
California has already shown leadership to achieve big goals in health care, implementing the Affordable Care Act to dramatically reduce the uninsured rate from nearly 20 percent to less than 7 percent. With AB 3087, as well as other health reforms, we can take meaningful steps to lower costs and ensure that our health care system works for everyone.
Anthony Wright is executive director of Health Access California, a consumer advocacy coalition. He can be contacted at email@example.com.