The healthcare industry plays a major role in California’s fight to reduce healthcare costs


SACRAMENTO – Gavin Newsome drew attention to the California health care industry when he was a governor candidate, pledging in 2018 to fight insurance companies, doctors and hospitals that are causing many Californians to face huge medical bills and soaring insurance premiums.

He promised to lead the California sole payer movement, a high-stakes liberal dream that will eliminate private health insurance and cut health care costs. The harsh rhetoric continued after his election, when Newsom told insurers to “do their damn job” to improve treatment for mental illness or faced fines, and promised to cut rapidly growing healthcare industry revenues.

“We need to get serious about cutting health care costs,” the first Democrat said in January 2020, unveiling his proposal to create Health Care Accessibility Department it would do the unthinkable in a profit-based system: set a cap on health care costs and require doctors and hospitals to work for less money. “We mean business.”

The industry leaders were shocked. But instead of mobilizing full protection to suppress Newsom’s efforts to regulate them, they used their political clout and close ties with the governor to develop a friendlier alternative that doctors, hospitals and insurance companies could live with.

When Newsom ends up bill for the office, he took an idea that healthcare executives had come up with and made it his own: instead of caps on prices or cut revenues, he would let industry spending grow, but with constraints.

Political strife killed the law this year, but it is expected to resume in January and trigger one of the blockbusters next year.

“They are afraid of what might happen to them and are trying to defend their interests because they are being threatened,” said David Panush, a seasoned Sacramento health policy consultant, of the players in the health care industry. They know that “there is blood in the water and sharks are approaching.”

If Newsom’s plan to curb health care costs succeeds, it could provide him with some political cover during next year’s re-election campaign, which will bring him a major health victory, even if he dodges progressive demands such as a single-payer system.

But it could also bolster the power of an industry that continues to wield tremendous influence – negotiating behind the scenes to protect its huge profits and secure incentives and side deals in exchange for its support.

“Every time we try to do something to cut health care costs, there is tremendous resistance,” said Assemblyman Jim Wood (Democrat of Santa Rosa), head of the Assembly’s health committee who works closely with the Newsom administration on this. question. offer

Powerful industry players only fought back more strongly as lawmakers tried to tackle them, Wood said. “Any person or anything that violates the status quo is met with tremendous resistance and tremendous resources to deal with it,” he said.

When Newsom took office in 2019, he knew public opinion was turning against the healthcare industry. On average, health care costs were about $ 11,600 per person this year, on federal data, up from $ 4,600 in 1999. In California, hospital bill a large share of the costs – almost a third, and 20% of the health care dollars goes to doctors.

California Consumers Demand Action: 82% of state residents believe it is “extremely” or “very” important for the governor and legislature to make healthcare more accessible, according to data 2021 survey from the California Health Foundation.

Most of Newsom’s harsh statements about industry spending came early in his presidency. “We are going to set specific cost targets for all sectors that need to be achieved, and we are going to assess penalties if they do not meet these targets,” Newsom said in January 2020. “If it doesn’t wake up the group members. system, I don’t know what will happen. “

Newsom’s wake-up call came in the wake of a tense legislative debate over bills that would allow the state set prices for health care and created single payer system… These measures received an unexpected boost, but were ultimately rejected due to opposition from the healthcare giants.

Then the COVID-19 crisis hit, prompting him to be removed from office, and the wake-up call was met with a press of the retry button. The governor and his healthcare industry allies take refuge closer… Just as he needed them to be the nation’s front line of defense, they needed him to keep hospitals from overcrowding, provide protective gear, and promote vaccinations.

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

Carmela Coyle, head of the California Hospital Association, stood next to Newsom at the center of state emergencies in the early days of the COVID crisis, and Paul Markovich, CEO of Blue Shield of California, received lucrative government contract for vaccination without competition vaccinate Newsom.


The industry’s cozy relationship with Newsom was revealed to the public in late 2020, when he was photographed dining at a luxury restaurant. French laundry at a restaurant with Dustin Corcoran and Janus Norman, CEO and chief lobbyist, respectively, of the California Medical Association’s Doctors’ Lobby.

“It’s impossible to get out of this COVID crisis when the healthcare industry has been given so much power without collateral influence,” said Carmen Balber, executive director of Consumer Watchdog’s consumer advocacy group.

Newsom did not respond to questions about industry impact, but spokesman Alex Stack said his proposal to regulate health care costs “is a priority for this administration and we hope to continue working on this issue to address this issue.”

Doctors and Blue Shield have provided Newsom with millions of dollars to support his political career over the years, including a $ 20 million donation in September 2020 from Blue Shield to his homelessness initiatives

The recall efforts undertaken earlier this year have only strengthened Newsom’s relationship with health officials. Industry groups have written checks for California Democratic Partywho fought to keep Newsom in power. According to state campaign finance reports, he received $ 1 million each from the Blue Shield and the hospital lobby and $ 875,000 from the doctors’ lobby.

While Newsom has pledged to tackle the industry, he hasn’t taken any aggressive action, and health officials and lobbyists continue to exert their influence in shaping the debate over the Health Accessibility Office.

This could put Newsom in a quandary as he runs for re-election – first in the June 2022 primary and then in the November general election – because he will face intense political opposition pressure from Liberal Democrats who want him to kept his campaign promise and made a unified decision. payer.

Health experts and policymakers say Newsom can help relieve these pressures by enacting strict legislation following a sharp increase in health care costs.

“This problem is not going anywhere – it needs to be addressed,” admitted Corcoran. The pursuit of cost control “should be inconvenient for everyone, but not so terrible.”

But it won’t be easy. After influential industry leaders joined forces with organized labor and consumer advocates to propose a plan to the governor, they stifled negotiations with demands, split the coalition, and thwarted efforts this year.

Coyle from the hospital association left coalition Initially, out of fears that hospitals were the primary target, he approached the Newsom administration independently. She also asks Newsom to relax stringent earthquake safety standards for hospitals.

Corcoran wants to exempt “small” medical practices, which he defines as practices with up to 100 doctors, from regulation, arguing that restrictive government control over spending could drive them out of business, leading to increased industry consolidation and higher prices.

“The goals were constantly changing,” said Yasmin Peled, a lobbyist for the Health Access California advocacy group that was involved in the negotiations. “Requests were constantly changing.”

Before negotiations collapsed completely, Newsom embraced Coyle’s idea that the government should control growth, not impose revenue cuts. And this should not only apply to hospitals, but all health sectors, including doctors and insurance companies. (According to Wood’s statement, the pharmaceutical industry will not be subject to cost control provisions due to restrictions in federal law.)

With the front lines drawn, industry groups are poised for a major battle next year as Newsom and state Democratic lawmakers strengthen their laws. “Their primary purpose will be to protect their interests,” said Mark Peterson, professor of public policy, political science and law at the University of California, Los Angeles.

“There is no doubt that this industry has strength. The real question is what they do about it, ”Peterson said. “They’re getting important wins.”

Kaiser Health News is the national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation and is not affiliated with Kaiser Permanente.

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