Bill won’t control health care costs in California, but it will devastate hospitals

Patients arrive at Sutter Medical Center in Sacramento.
Patients arrive at Sutter Medical Center in Sacramento. Sacramento Bee file

Last week, a bill that would dismantle California’s health care delivery system as we know it was introduced in the Legislature. Assembly Bill 3087 would penalize millions of patients through massive cuts in services and result in as many as 175,000 hospital workers losing their jobs.

The sponsors of AB 3087 – which is to be heard Tuesday by the Assembly Health Committee – falsely believe that this bill would lower health care costs by imposing a mandatory rate-setting system on doctors, hospitals, dentists and insurers.


They claim their proposal is based on a similar system that operates in Maryland. As the former head of the Maryland Hospital Association, I know that nothing could be further from the truth.

AB 3087, introduced by Assemblyman Ash Kalra, D-San Jose, is entirely different from Maryland’s rate-setting process. The bill simply caps payment rates for services covered by commercial health insurance and does not address the chronic payment shortfalls that plague Medicare and Medi-Cal.

Carmela Coyle

Maryland has had “all payer” system in which the state sets payment rates for hospital services for all payers – Medicare, Medicaid, private insurers and the uninsured. No matter who is paying the bill, a hospital receives the same amount for the same service in the same hospital. That’s a huge contrast with the California proposal.

In our state, Medi-Cal pays hospitals only 68 cents for every dollar of care provided to patients, and Medicare roughly 77 cents for every dollar. AB 3087 does nothing to increase the rates paid by these programs, resulting in huge losses for California hospitals.

Another difference: In Maryland, the state is required o pay rates that at least cover the cost of care delivered by efficient providers. AB 3087, by contrast, ties payment rates to a percentage of what Medicare pays. Medicare rates, set by Congress, are often based on political priorities in Washington, D.C., not California.

The Maryland system also was designed to control the annual rate of increase in the cost of inpatient hospital services. The California proposal is not about controlling the rate of increase at all. Instead, it would actually cut and “re-base” amounts paid to providers and plans to some unspecified percentage of Medicare payments.

In Maryland, payment rates were based originally on the different costs of different types of hospitals – urban, rural, academic research facilities and community facilities. AB 3087 creates a one-size-fits-all payment rate, regardless of whether the hospital is in Chico or Los Angeles. That makes no sense.

Finally, Maryland’s rate-setting commission is selected based on experience in health policy, not political constituencies. But it, like the one proposed in California, allows a handful of people to exert enormous control over the economics of health care.

Based on nearly 10 years of experience in Maryland, I can say that one of the most impractical parts of AB 3087 is its so-called appeals process. This clumsy approach would set all payment rates the same and then force doctors, dentists and hospitals to appeal for more equitable payments. In reality, the appeals process is an empty promise because the bill’s stated goal is to cut payments to hospitals, doctors and other caregivers without regard to the actual cost of care.

AB 3087 will cripple patient access to care and do nothing to reduce health care costs.

Carmela Coyle is president & CEO of the California Hospital Association. She can be contacted at