California’s 3% Health Care Spending Target Prompts Angst, Anxiety
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May 10, 2024
California recently became the latest state to implement a limit on health care spending growth, with a new state agency targeting an increase of no greater than 3% by 2029. Commercial payers have largely backed the spending targets, but providers have argued that the targets aren’t reachable and Medicaid stakeholders — including the state’s largest managed care organization — are concerned that the target may curtail access for beneficiaries and harm the solvency of safety net providers.
The spending target was set by the board of the Office of Health Care Affordability (OHCA), which was established in 2022. The board’s membership was appointed by Gov. Gavin Newsom, a Democrat. The board set target spending growth rates of 3.5% in 2025 and 2026, 3.2% in 2027 and 2028, and 3.0% in 2029. OHCA will require payers regulated by the state and providers alike to meet the designated spending targets. Organizations that don't meet the spending targets will be subject to a state-overseen corrective action plan and possibly fines.
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