How CA hospital bills end up depressing take home pay

By Glenn Melnick, especially for CalMatters

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Rising health care costs are among the biggest financial concerns for California families.

A recent survey by the California Health Care Foundation found that 7 in 10 Californians say health care costs put a strain on their household budgets, with nearly 2 in 3 worried about unexpected medical bills — more than those worried about rent or groceries. Many report that they already are missing or delaying health care as a result.

Rising out-of-pocket health care costs are only part of the troubling financial picture for families.

Millions of working Californians get health insurance as part of the compensation paid by their employers, but it’s far from free. In California, the cost of employer-sponsored family health coverage has skyrocketed — from $22,818 in 2022 to $28,397 in 2025 — a 24 percent jump in just three years.

This far outstrips headline inflation (12%) and wage growth (14%). California premiums are growing faster than the 6% national average.

When employers spend more on health insurance, there is less money available for wages. Rising premiums are actually a hidden wage cut for working families. This sad story — stagnant or declining wages due to rising health care costs — has been documented by economists at UC Berkeley’s Labor Center and the Federal Reserve.

California created the Office of Health Care Affordability to monitor and limit the growth of health care costs. But hospital industry groups opposed their goals, arguing they would deprive patients of care and threaten patient access. The California Hospital Association has filed a challenge case accessibility agency actions.

Hospitals are under real operational pressures and these concerns deserve to be heard. But the main argument against the Office of Health Care Affordability’s goals doesn’t hold up.

First, the agency’s accessibility policy does not require budget cuts. It is designed to slow the growth of health care costs, not to make real cost reductions.

Family premiums in California are growing at 7 percent annually — well above the Office of Health Care Affordability’s approved spending growth limits of 3.5 percent in 2025, tapering to 3 percent by 2029.

Even this moderate delay can significantly free up employers’ budgets for workers’ wages.

It makes sense for the affordability agency to target hospital costs first. It is the biggest cost driver of health insurance premiums. Payments to hospitals account for more than a third of total premiums.

Data reported by hospitals to the state shows that operating expenses at all general acute care hospitals in California in 2024 totaled $148 billion, of which 40% ($59.4 billion) went to overhead costs — including administration, fiscal services and other functions unrelated to patient care.

This represents a significant opportunity for efficiency gains and cost savings that should not affect direct patient care. Add to that the rapidly expanding role of artificial intelligence in streamlining administrative functions, and hospitals have more tools than ever to achieve a modest growth goal without sacrificing a single bed or nurse.

California workers have waited long enough for help. The Office of Healthcare Affordability’s spending goals are a reasonable, overdue course correction.

Now is the time to put them to work.

Each year’s delay means thousands more California workers will go without a raise — not because their employers won’t give them one, but because rising premiums driven by rising health care prices have already taken their toll.

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