April 30, 2018
The California Health Care Price Relief Act (AB 3087) proposes the creation of an appointed Commission that would “control in-state health care costs and set the amounts accepted as payment by health plans, hospitals, physicians, physician groups, and other health care providers.” We offer an overview of the bill as a heads up to anesthesia providers that the measure could set a precedent if it became law.
A body called the California Health Care Cost, Quality and Equity Commission might sound benevolent enough, but the recently introduced California Health Care Price Relief Act (Assembly Bill 3087) that would create the Commission has stirred strong opposition from a coalition of three dozen healthcare organizations, including the California Society of Anesthesiologists (CSA), the American Society of Anesthesiologists (ASA) and the American Association of Nurse Anesthetists (AANA). If passed, AB 3087 would be the first legislation that would allow a state government to determine healthcare prices in a commercial market.
In a guest column by the ASA in Kevin MD, Linda B. Hertzberg, MD, past president of the CSA, described AB 3087 as “the latest effort by special interests to unilaterally implement state control of physician practices and payments” and “one of the most poorly conceived and dangerous bills regarding health care that we have seen in California in some time.”
California often leads the way in healthcare legislation, so we offer an overview of AB 3087 and arguments for and against it here as a heads up to anesthesia groups that the measure could set a precedent if it became law. The bill calls for the creation of a nine-member appointed commission that would, according to the proposal, “control in-state health care costs and set the amounts accepted as payment by health plans, hospitals, physicians, physician groups, and other health care providers,” using Medicare rates as a starting point.
The Commission would meet at least quarterly and set prices annually for all services covered by commercial health plans, including those offered by employers and those sold in the individual marketplace. The proposal incorporates an appeal process that would allow healthcare providers to challenge a decision by the Commission if they can prove it would cause financial hardship.
Proponents, including chief sponsor Ash Kalra of San Jose, assert that the bill is necessary; though California has made strides in increasing access to health insurance coverage through the Affordable Care Act, affordability remains a major problem, with rising healthcare costs continuing to impact patients statewide. "Access must be coupled with affordability. Just having access to healthcare by itself doesn't mean you're going to get the healthcare you need,” Mr. Kalra said in the Los Angeles Times.
According to the proposal, “In California, premiums for employer-sponsored health insurance increased 234 percent from 2002 to 2016, and new data disclosed by health insurance companies to state agencies . . . demonstrate that 83 percent of premium increases in the large group market in 2018 were due to price inflation.”
The Commission would use Medicare reimbursements as the benchmark for prices, weighing providers’ operating costs and geographic location in establishing rates. The legislation draws some inspiration from Maryland, which, since 1977, with a federal waiver, has operated under a hospital rate setting system that allows the state to set uniform rates for hospital services. All insurers pay approximately the same rate at a given hospital. (While the system has helped to keep spending growth relatively low, hospital admissions have increased.)
Opponents of the California measure argue that the strategy of capping prices would cause hospitals to cut back on services and drive physicians to leave the state, exacerbating the physician shortage and hindering recruitment. The California Medical Association (CMA) called the bill “a harmful government intrusion into the health care market that would . . . create state-sanctioned rationing and increase out-of-pocket costs for patients.”
Los Angeles physician Michael E. Mahler, MD, wrote in a published letter that “by capping healthcare revenues without capping the expenses of healthcare providers, the state would be penalizing providers,” noting that price controls such as those proposed in AB 3087 often lead to shortages of goods and services.
The California Hospital Association estimated the passage of AB 3087 would cause the loss of 175,000 hospital jobs and force many hospitals and medical practices to close. A CMA survey of 359 California physicians found that 92 percent opposed AB 3087, 57 percent believed the bill would force them to leave California and practice elsewhere, and 39 percent believed it would force them into early retirement.
“Unfortunately, the bill’s fundamental concepts could metastasize to other states,” added Dr. Hertzberg in Kevin MD. And in a letter to the California Assembly Health Committee, the ASA said using Medicare rates to determine healthcare prices is a “wholly inappropriate” strategy that “would move the state backward rather than forward.”
As we have seen in the past, legislative activity at the state level can significantly impact healthcare, including the practice of anesthesia. We will be keeping a close eye on this legislation and encourage anesthesia groups to do the same, and to contact their professional societies for further information. CSA and CMA members interested in voicing opposition to AB 3087 can do so here.
With best wishes,
Tony Mira
President and CEO
