Hospital corridor. (Photo: Shutterstock)
Looming Spending Cap Threatens Health-Care Availability
More than half of California’s 425 hospitals are losing money, and many rural facilities are in danger of closing
By Ted Stroll, May 31, 2024 3:25 pm
Having caused homeowner insurers to flee the state, it looks like the California Legislature is about to repeat its mistake, this time with health insurers.
California is poised to cap health care spending. A 3.5% spending cap starts next year and drops incrementally to 3% in 2029. Spending will be artificially limited by edicts from a new “Office of Health Care Affordability,” which the Legislature enacted in 2022.
Health care providers that fail to meet the spending caps may be punished with “administrative penalties in amounts initially commensurate with the failure to meet the targets, and in escalating amounts for repeated or continuing failure to meet the targets.”
This new agency is misnamed. It should be called the “Office of Impending Health Care Unavailability.”
Price controls always cause shortages. It’s only a question of when. As suppliers struggle with East German–style diktats like this one, they “may respond to such an economic situation by rationing supplies, decreasing production levels or lowering the quality of production, making the consumer pay extra for otherwise free elements of the good (features, options, etc.), and more.”
I saw this in Brazil in the 1980s. Inflation was rampant, so the government suddenly imposed price controls. In short order, goods disappeared off the shelves. I remember trying to find items at a pharmacy in Rio de Janeiro, but the shelves were largely empty.
Price regulation may sometimes be justified when the supplier is a monopoly, in which case price controls may be the lesser of two evils, or there is a grave but temporary emergency.
The California health-care market is not a monopoly. Aside from monopolies and times of war, I’m unaware of any price control that’s ever worked as lawmakers intended it to. Controls lead to scarcity and can cause higher prices than a free market would charge. We see this in California with rent control as well as with homeowner insurance. Health care will be next.
By contrast, California doesn’t try to cap gasoline prices, which is fortunate, or we’d see 1970s-style queues at gas stations. Its forbearance to do that may stem from legislators’ desire to keep gasoline prices as high as possible for environmental and other reasons, which the state facilitates through a number of policies.
Cynics might be forgiven for speculating that this spending cap is a roundabout way of creating a state-run health-care monopoly. So-called single-payer health insurance legislation always fails. So, what to do, since some legislators want a Canada-style system, even though that system is in a state of crisis and Canadians struggle to get health care?
The answer: create a regulatory agency so that legislators aren’t directly implicated if something goes wrong, and have it impose price controls on health care. Already, California faces a hospital crisis, and price controls will worsen it.
“More than half of California’s 425 hospitals are losing money, and many rural facilities are in danger of closing.” When enough hospitals go bankrupt, step in with the monopoly model. Mission accomplished.
- Looming Spending Cap Threatens Health-Care Availability - May 31, 2024
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Your article proves the point that government at any level should be regulating healthcare. If there has to be some involvement they can oversee competency and licensing.
Government should “not” be regulating. I left not out. Big mistake on my part.
Define “health care”. Go ahead, I dare you. Demanding we write a blank check for “health care” and not define its parameters is sheer folly. Go ahead, define “health care”.
“Well, you know when you get sick and you need treatment” …………… is a non-answer.
Now demand “rationing” —when, for what and for whom be part of the answer.
The term health care is as useless as the term climate change.
Set out specifics, not generalities when you are spending my money. Demand all the “health care” your little heart desires when spending your own money.
You are both correct. I also noticed the amorphousness of the goal, i.e., to regulate “health care,” which could be defined in any number of ways. The relevant statute has 684 references to “health care” and is the source for the first quotation: https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202120220SB184
For some technical reason, the sources for that quotation and the other two are missing. The first of the remaining two is from the Intelligent Economist website: https://www.intelligenteconomist.com/price-ceiling/ The second is from an AP News story that’s well worth reading: https://apnews.com/article/california-health-care-costs-target-cap-0aefad8c177ed3e0447dc4e17258be08
All you need to know is that Dr. Mark Ghaly the Ghoul is the board president of the new health care agency, Office of Health Care Affordability!
The same Dr, Mark Ghaly of CPHD that advocated to lock us down and mask us up!
The same Dr.Mark Ghaly that came up with the Public Health Announcement, “ Bite, sip, mask…”
The same Dr. Mark Ghaly who gave us the Covid color tier alert system (purple, red, orange, yellow tier)
The same Dr. Mark Ghaly who mandated the vaccines for all healthcare workers.
The same Dr. Mark Ghaly who gave us the limited stay home orders during Thanksgiving!
The same Dr. Mark Ghaly who gave us a 10:00 p.m. holiday curfew during Covid.
The same Dr. Mark Ghaly who wanted all school children to be mrna injected in order to return to in class learning!
As stated this will erode our hospital systems further. This will lead to more corporate (non-profit) consolidation and eventually their goal of a one payer system!
Private Practice will be no more! Finished.
It is never about bringing costs down for the consumer.
https://www.chhs.ca.gov/wp-content/uploads/2019/06/Dr.-Ghaly-Bio.pdf
One Fed Up Cali Girl ….. We will end up with a 2-tier health care system. The first tier will be for those that can afford better health care. The second will be for the rest of us who will have to wait in line to get an appointment. Our premiums will pay for yourself and those that can’t afford the premiums on the single payer, second rate health care. This has actually started as many people already have “concierge” service.
I think we are all ready there NofearMd. It will just get worse.
With the inception of Obamacare we all pay more for insurance to cover health issues many of us will never encounter. I as a woman of a certain age do not need coverage for pregnancy as my family is grown and raised. A one size fits all coverage adds to the expense and exacerbates the affordability issue.
When the government inserts itself into the marketplace it just makes a mess!
An example is in Australia’s socialized medicine. It was reported today that it is a 4 year wait for a covered patient to get an elected surgery which is roughly 90 percent of all surgeries, whether it be an ACL repair or a hysterectomy!