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California Aims To Tackle Health Care Prices In Novel Rate-Setting Proposal

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Backed by labor and consumer groups, a California lawmaker unveiled a proposal Monday calling for the state to set health care prices in the commercial insurance market.

Supporters of the legislation, called the Health Care Price Relief Act, say California has made major strides in expanding health insurance coverage, but recent changes haven’t addressed the cost increases squeezing too many families.

To remedy this, Assembly Bill 3087 calls for an independent, nine-member state commission to set health care reimbursements for hospitals, doctors and other providers in the private-insurance market serving employers and individuals.

The bill faces formidable opposition from physician groups and hospitals.

“No state in America has ever attempted such an unproven policy of inflexible, government-managed price caps across every health care service,” Ted Mazer, president of the California Medical Association, said in a statement.

At a press conference Monday, Assembly member Ash Kalra (D-San Jose) and other sponsors of the bill said the commission would use Medicare reimbursements as a benchmark and then factor in providers’ operating costs, geography and a reasonable amount of profit to establish rates. More details on the legislation are expected during committee hearings.

Across the country, some employers have tried a similar approach by mostly sidestepping insurers and instead paying providers 125 to 150 percent of the Medicare price for any service. Proponents of this idea say it eliminates the worst abuses in billing, reduces administrative costs and promotes price transparency.

The California legislation envisions a system similar to the rate-setting done for public utilities.

The proposal also borrows from Maryland, which has set prices for hospital services since the 1970s.

“We have given free rein to medical monopolies — to insurers, doctors and hospitals — to charge out-of-control prices,” said Sara Flocks, policy coordinator at the California Labor Federation, which is co-sponsoring the bill, at the Monday news conference. “It’s not that we go to the doctor too much. It’s because the price is too much.”

Kalra, the assemblyman who introduced the bill, said consumers deserve relief now because soaring medical costs are eating up workers’ wages and contributing to income inequality.

“The status quo is unacceptable and unsustainable. Californians struggling to keep up demand action rather than politics as usual,” Kalra said at the news conference.

Health care providers immediately slammed the proposal, saying it would reduce patients’ access to care and drive medical providers out of the state.

Mazer countered that the bill would cause “an exodus of practicing physicians, which would exacerbate our physician shortage and make California unattractive to new physician recruits.”

Chad Terhune, a senior correspondent at California Healthline and Kaiser Health News, discussed the latest proposal and its future prospects with A Martinez, host of the “Take Two” show on Southern California Public Radio.

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