CSAC Bulletin Article

California’s Health Care Affordability Board Approves Statewide Health Care Spending Target

April 25, 2024

On April 24, the Department of Health Care Access and Information (HCAI) announced that the Office of Health Care Affordability’s Board approved a statewide health care spending target of 3 percent to be phased in over time (target initially starts at 3.5% for 2025 and 2026, to be lowered to 3.2% for 2027 and 2028, before ultimately reaching 3% for 2029 and beyond). This target was based on the average change in median household income for the 20-year period from 2002-2022.

In recognition that health care affordability has reached a crisis point as health care costs continue to grow, the Office of Health Care Affordability’s statutory charge specifies that the spending target is required to promote the goal of improved affordability for consumers and purchasers of health care, while maintaining quality and equitable care, including consideration of the impact on persons with disabilities and chronic illness.

According to the HCAI announcement, the spending target will apply to health care entities, including health plans, provider organizations (with at least 25 physicians), and hospitals. Beginning with the 2025 target, the Office of Health Care Affordability can begin taking progressive enforcement action against health care entities that exceed the spending growth target. Progressive enforcement approaches include technical assistance, requiring an explanation at public meetings, imposing performance improvement plans, and ultimately, if warranted, assessing financial penalties.

The statewide health care spending target was proposed through recommendations by the Office of Health Care Affordability to the California Health Care Affordability Board.

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