California Office of Health Care Affordability Outlines Roadmap to Deliver Better Benefits and Outcomes for Patients | Blue Shield of California

Left to right: Kristof Stremikis, Millie Virgil, Hector Flores, MD

California took another step toward slowing escalating health care cost growth for payers and providers — including hospitals — with the formal creation of the Office of Health Care Affordability at a Nov. 30 briefing in Sacramento and ensuring that the money we Spend better value and better results.

State policymakers established the bureau in response to the rising cost of care for California families and employers, which far outpaced inflation and wage growth. Gov. Gavin Newsom and several key players in the state health system, including Blue Shield of California, lobbied for the law.

“The average health care expenditure exceeded $10,000 per year for every Californian in 2020,” said Elizabeth Landsberg, director of the California Department of Health Care Access and Information. As a result, many people pay a rapidly growing portion of their income on health insurance, co-payments, deductibles, and medications.

According to Kara Carter, senior vice president of strategy and programs at the California Health Care Foundation, more people in the state say they worry about unexpected medical bills than the cost of food, gas, or housing. For half of all Californians, she said, spiraling health care costs have caused them to delay or even skip treatment for a health problem — something that can often lead to more serious problems and much more expensive treatment down the road.

The Office of Health Care Affordability will make California one of ten states with cost target programs. Vishaal Pegany, associate director of the Office of Health Care Affordability and current head of the new agency, noted that California will draw on lessons learned from other states in creating the program.

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The agency will initially collect, analyze and report data on the state’s overall health care spending. From this, a model is developed to determine what national healthcare spending should be in the coming years and how fast it should grow. That will eventually lead to targets being enforced by the state, with the first target being set in June 2024 for 2025 spending.

The state will take a “progressive approach to enforcement,” Pegany said, beginning with technical assistance to help providers, payers and integrated health systems balance their costs. Over time, this would shift to implementing performance improvement plans and escalating fines when companies fail to meet cost targets.

It is critical that the plan not only focus on reducing increases in costs, but also on improving the quality of care, health equity and ensuring access to care for all Californians. Regulators intend to focus on primary care, improved access to behavioral therapies, and realigning the state health care system to focus on early intervention and prevention.

“The intent isn’t simply to have a low-cost system,” Pegany said. “But to take the best ideas and align the system for the best value.”

A values-based approach to primary care has been shown to reduce costs and improve patient outcomes, which is particularly important for those on low incomes.

“The integration of behavioral health, oral health and public health is our next big leap,” said Dr. Hector Flores, medical director of the Family Care Specialists Medical Group in Los Angeles, which treats a large medical population.

“Collaboration among healthcare plans, providers, healthcare systems and others in the healthcare ecosystem is critical to ensuring the agency’s mission is a success,” said Millie Virgil, senior vice president of transformation and customer experience at Blue Shield of California. By working towards a more digital future with real-time sharing of patient data to guide care, it will be possible to consider both costs and benefits.

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Virgil continued, “The promise this office has of bringing different entities together to work together on the benefits that value-based models can bring us, along with sharing clinical data in real-time, those two things coming together are very effective.”

To see the full panel discussion, click here to watch the video.

For more information on the Office of Healthcare Affordability, visit cost curve.

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