SACRAMENT >> Gavin Newsom to put California the healthcare industry when he ran for governor, promising in 2018 to go after the insurance companies, doctors and hospitals that leave many Californians struggling with huge medical bills and rising insurance premiums.

He is committed to lead California single-payer movement, a high-stakes liberal dream that would eliminate private health insurance and reduce the amount of compensation for providers. The harsh rhetoric continued after his election, when Newsom told insurers to “do their damn job” to improve mental health treatment or face fines, and he vowed to cut the booming earnings of the health care industry.

“We need to take seriously reducing health care costs,” the first-term Democrat said in January 2020 as he unveiled his proposal

to establish a Office of Health Care Affordability it would do the unthinkable in a profit-fueled system: set caps on health spending and force doctors and hospitals to work for less money. “We are serious.”

Industry leaders have been shaken. But rather than mobilizing full-blown defense to frustrate Newsom’s efforts to regulate them, they used their political influence and close ties to the governor to craft a friendlier alternative with which doctors, hospitals, and corporations. insurance could live.

When Newsom finally drafted legislation for the office, he took an idea that health executives had come up with and made it his own: instead of capping prices or cutting income, he would allow spending for the office. industry to increase – but with limits.

Internal political struggles have killed the legislation this year, but it is expected to return in January and spark one of next year’s successful healthcare battles.

“They are afraid of what could happen to them, and they try to protect their interests because they are threatened”, David Panush, a veteran Sacramento health policy consultant, said about players in the health care industry. They know “there is blood in the water and the sharks are coming”.

If Newsom’s plan to curb healthcare spending is successful, it could provide him with political cover as he campaigns for re-election next year, giving him a major healthcare victory even if he sidesteps the demands. progressives such as the creation of a single-payer system.

But it could also cement the power of an industry that continues to wield immense influence – negotiating behind the scenes to protect its massive revenues and secure exemptions and side deals in return for its support.

“Every time we try to do something to reduce the costs of health care, it is met with huge opposition,” said a member of the National Assembly. Jim Wood (D-Holy rose), head of the Assembly Health Committee, who is working closely with the Newsom administration on this proposal.

Powerful industry players have only backed down harder as lawmakers tried to confront them, Wood said. “Anyone or anything that disrupts the status quo is facing enormous resistance and enormous resources to combat it,” he said.

When Newsom took office in 2019, he knew public sentiment was turning against the healthcare industry. On average, health care costs were around $ 11,600 per person that year, against $ 4,600 in 1999, according to federal data. In California, hospitals account for the largest share of spending, almost a third, while 20% of health care dollars go to doctors.

California consumers are demanding action, with 82% of state residents saying it’s “extremely” or “very” important to the governor and legislature to make health care more affordable, according to a 2021 poll by the California Healthcare Foundation.

Much of Newsom’s harsh talk about industry spending took place early in his tenure. “We will create specific cost targets for all sectors to be achieved, and we will assess penalties if they do not meet those targets,” Newsom said in January 2020. “If that hasn’t woken up the members of the system, I don’t know what will.”

Newsom’s wake-up call follows tense legislative debates over bills that would have empowered the state to set prices for health care and create a single-payer system. The measures gained surprising momentum, but eventually gave way to opposition from the healthcare giants.

Then the covid-19 crisis struck and propelled the recall effort to oust him from office – and the wake-up call was greeted with a slap on the snooze button. The governor and his allies in the health care industry huddled closer. Just as he needed them to be the state’s first line of defense, they needed him to keep hospitals from overflowing, to secure protective gear, and to push vaccinations.

The Health Titans have become a regular part of Newsom’s orbit. His calendars, obtained by KHN, show that doctors, hospitals and health insurance executives have regularly had access to the governor.

Carmela Coyle, head of the California Hospital Association, stood alongside Newsom at the state’s emergency operations center at the onset of the covid crisis, and Paul Markovich, CEO of California Blue Shield, was awarded a lucrative non-competitive state vaccination contract to implement Newsom’s vaccination effort.

The comfort of the industry’s relationship with Newsom erupted to the public in late 2020 when he was pictured dining at the chic French Laundry restaurant with Dustin Corcoran and Janus Normand, respectively CEO and main lobbyist of the lobby of state doctors, the California Medical Association.

“There is no possible way for us to get out of this covid crisis where the healthcare industry has been given so much power with no ensuing influence,” said Carmen balber, executive director of the Consumer Watchdog advocacy group.

Newsom did not answer questions about the industry’s influence, but the spokesperson Alex Pile said his proposal to regulate health care spending “is a priority for this administration, and we look forward to continuing to work on this issue to make it happen.”

doctors and Blue shield gave Newsom millions of dollars to support his political career for many years, including a $ 20 million donate September 2020 of Blue shield for its initiatives for the homeless.

The recall effort earlier this year only solidified Newsom’s relationship with healthcare executives. Industrial groups have written checks to California Democratic Party, who fought to keep Newsom in power. he received $ 1 million each of Blue shield and the hospital hall and $ 875,000 from the physician lobby, according to state campaign finance records.

Although Newsom has vowed to take on the industry, it has not taken it in an aggressive manner, and healthcare executives and lobbyists continue to wield their influence as they shape the debate on Office of Health Care Affordability.

This could put Newsom in a political stalemate as he runs for reelection – first in the June 2022 primary, then the November general election – because it will face intense opposing political pressure from the Liberals Democrats who want him to keep his campaign promise and adopt the single payer.

Political and health experts say Newsom can help ease this pressure by passing tough law to tackle the spiraling health spending.

“This problem is not going to go away – it must be resolved,” Corcoran admitted. The pressure to control costs “should be uncomfortable for everyone, but not horribly.”

But it won’t be easy. After powerful industry leaders joined forces with union and consumer advocates to come up with a plan to the governor, they blocked negotiations with their demands, shattering the coalition and killing the effort this year.

Coyle, along with the Hospital Association, had left the coalition early for fear that hospitals would be the primary target and approached the Newsom administration independently. She is also asking Newsom to relax strict earthquake safety standards for hospitals.

Corcoran wants to exempt “small” medical practices – which it defines as practices with up to 100 physicians – from the regulations, arguing that restrictive government cost controls could bankrupt them, leading to further industry consolidation and higher prices.

“The goal posts were constantly moving,” said Yasmine Peled, a lobbyist for the advocacy group Health Access California, who participated in the negotiations. “The demands were constantly changing.”

Before negotiations broke down completely, Newsom embraced Coyle’s idea that the state should control growth, not impose income cuts. And it shouldn’t just focus on hospitals, but apply to all sectors of health, including doctors and insurers. (The pharmaceutical industry would not be subject to the measure’s cost control provisions due to restrictions in federal law, according to Wood’s office.)

With the battle lines drawn, industry groups are poised for a major fight next year as Newsom and the state’s Democratic lawmakers bolster each other through legislation. Their main goal will be to protect their interests, said Mark Peterson, professor of public policy, political science and law at UCLA.

“There’s no question this industry has power. The real question is what it does with it,” Peterson said. “They get big wins and big wins.”

This story was produced by KHN, which publishes California Healthline, an independent editorial service of the California Healthcare Foundation.

Angela Hart: [email protected], @ahartreports. Samantha Young: [email protected], @youngsamantha