Healthcare industry holds power in California’s high-stakes battle to cut healthcare costs
SACRAMENTO – Gavin Newsom warned the California healthcare industry when running for governor, vowing 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 pledged to lead California’s single-payer movement, a high-stakes liberal dream that would eliminate private health insurance and reduce the amount of provider pay. The harsh rhetoric continued after his election, when Newsom told insurers to “do their damn job” to improve mental health treatments or face fines, and he vowed to cut the company’s skyrocketing revenues. health care sector.
“We need to take reducing healthcare costs seriously,” the first-term Democrat said in January 2020 as he unveiled his proposal for a healthcare affordability office that would do the unthinkable in a system fueled by profits: defining caps health spending and forces doctors and hospitals to work for less money. âWe are serious. “
Industry leaders have been shaken. But rather than mobilizing full-blast 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 slashing 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.
âThey’re afraid of what might happen to them, and they’re trying to protect their interests because they’re threatened,â David Panush, a veteran health policy consultant in Sacramento, said of industry players. health. They know that “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 health victory even as he sidesteps the rules. progressive demands 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.
âAnytime we try to do something to reduce health care costs, it meets huge opposition,â said Jim Wood (D-Santa Rosa), State Assembly Member, Chief of the Assembly Health Committee which is working closely with the Newsom administration on this issue. proposal.
Powerful industry players have only backed down harder as lawmakers tried to confront them, Wood said. âAnyone or anything that disrupts the status quo is facing enormous resistance and enormous resources to combat it,â he said.
When Newsom took office in 2019, he knew public sentiment was turning against the healthcare industry. On average, health care costs were about $ 11,600 per person that year, up from $ 4,600 in 1999, according to federal data. In California, hospitals account for the largest share of spending, nearly a third, while 20% of health care dollars go to doctors.
California consumers are demanding action, 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 California survey Health Care Foundation.
Much of Newsom’s harsh talk about industry spending took place early in his tenure. âWe’re going to create specific cost targets for all sectors to be met, and we’re going to assess penalties if they don’t meet those targets,â Newsom said in January 2020. âIf that didn’t wake up 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 from 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, chief 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 Blue Shield of California, was awarded a lucrative state vaccination contract without tender to implement Newsom’s vaccination effort.
The comforts of the industry’s relationship with Newsom erupted in public view in late 2020 when Newsom was pictured having dinner at the chic French Laundry restaurant with Dustin Corcoran and Janus Norman, CEOs and senior lobbyists for the doctors lobby, respectively. of the state, 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 advocacy group. Watchdog.
Newsom did not respond to questions about the industry’s influence, but spokesperson Alex Stack said his proposal to regulate healthcare spending “is a priority for this administration, and we look forward to continuing to work on this issue to get there “.
Doctors and Blue Shield have given Newsom millions of dollars to support his political career for many years, including a $ 20 million donation in September 2020 from Blue Shield for his homeless initiatives.
The recall effort earlier this year only solidified Newsom’s relationship with healthcare executives. Industry groups wrote checks to the California Democratic Party, which fought to keep Newsom in power. He received $ 1 million each from Blue Shield and the hospital lobby and $ 875,000 from the doctor lobby, according to state campaign fundraising records.
Although Newsom has vowed to take it out on the industry, it has not aggressively taken it, and health executives and lobbyists continue to exert their influence as they shape the debate on the Agency. of Health Care Affordability.
This could put Newsom in a political stalemate as he runs for re-election – first in the June 2022 primaries, then in the November general election – as he will face intense opposing political pressure from the Democrats. liberals who want him to keep his campaign promise and pass just one. payer.
Health experts and political experts say Newsom can help ease this pressure by passing tough law against skyrocketing healthcare 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” doctor’s offices – which it defines as practices with up to 100 doctors – from the regulations, arguing that restrictive government cost controls could bankrupt them, leading to increased consolidation of the industry and higher prices.
âThe goalposts were constantly changing,â said Yasmine Peled, a lobbyist for advocacy group Health Access California, who participated in the negotiations. âThe 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.
âThere’s no question this industry has power. The real question is, what do they do with it, âPeterson said. “They get big wins and big wins.”
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