Hospitals want to raise prices. California is trying to curb them

By Amanda McAllister-Wallner and Kiran Savage-Sangwan, especially for CalMatters

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New survey shows 8 out of 10 Californians are worried about health care costs and they want the state’s next governor to cut out-of-pocket costs.

Without action, the burden of health care costs will worsen next year for 1.5 million Californians because Republicans in Congress refuse to extend the federal subsidies that make health insurance available through Covered California.

Instead of making care more affordable, the California Hospital Association recently tried to block a state initiative designed to slow the stratospheric rise in health care costs and prevent Californians from being kicked out of life-saving care.

this legal action by the hospital group demonstrates that even as state leaders work to minimize the damage from federal health care cuts, they must also continue to hold the health care industry accountable for providing quality care without wasting our precious health care dollars.

As advocates for health care consumers and marginalized communities, we believe that curbing the growth of health care costs is both fair and important. Increases in health care costs have significantly outpaced inflation and wage growth.

Yet research shows that more expensive health care has not improved our health outcomes, equity, or access. According to the California Health Foundation, “health care costs and medical debt are making Californians sick.”

A 2024 study found that more than half of Californians have skipped or delayed care because of costs. Among low-income Californians, that number rose to 3 in 4. More than half of those who missed care said their health was worse as a result.

Consumer advocates supported the creation of the California Health Care Affordability Office in 2022 and have worked closely with it to develop strategies to reduce costs. The board spent years hearing from experts, advocates and ordinary Californians. Before that, he looked at different approaches to reducing costs setting an annual price growth target of 3%.in line with typical wage growth for workers.

Profit grabbing

Hospitals may not like the result because it ends their ability to set whatever prices they want — no matter how much they hurt consumers and our economy. This lawsuit is a clear attempt to change the rules of the game.

Hospital executives argue that the high prices for health care services reflect the hospitals’ focus on equity or superior compensation paid to health care workers.

Yet data from the California Health Care Foundation shows that approx 25 cents of every dollar in the health care systemor up to $73 billion a year, “doesn’t help patients get better care or get healthier.”

Instead, these costs result from such factors as administrative bloat and the excess profits the health care industry generates by eliminating competition.

Hospitals’ claims of financial stress also deserve further scrutiny. While some hospitals are struggling, major health systems are turning a profit while working families struggle to pay bills.

Kaiser Foundation Hospitals, the state’s largest hospital chain, had revenues over $32.7 billionnet assets over $46 billion and a CEO paid over $12 million in 2023.

Other wealthy hospitals, such as Cedars-Sinai Medical Center, Scripps Memorial Hospital and Loma Linda University Medical Center benefit from tax relief which far exceed their charitable and community contributions.

Particularly galling is that the hospital’s lawsuit refers to “fairness” no fewer than 50 times in an attempt to justify the exorbitant pricing.

In fact, high prices exacerbate inequality because they make people of color more likely to delay or skip care. If hospital leaders truly cared about equity, they would work to reduce costs, not advocate for pushing care out of reach.

Governor Gavin Newsom and California state leaders have led groundbreaking efforts to address health care affordability. Now they oppose President Donald Trump and Republican leaders’ push to end Medi-Cal coverage for millions and raise costs for Covered California enrollees.

The hospital industry’s lawsuit underscores that protecting the health of Californians—and our pocketbooks—requires simultaneously holding the industry accountable.

Supported by the California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a cost they can afford. Visit www.chcf.org to learn more.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.