California’s Office of Health Care Affordability Board Approves 3% Health Care Spending Target

Measure Aims to Make Quality Health Care More Affordable for Californians

The California Department of Health Care Access and Information (HCAI) has announced that the Office of Health Care Affordability’s Board has approved a statewide healthcare spending target of 3 percent in a press release on Friday. The spending target, aimed at making quality health care more affordable, will be phased in over time.

Initially starting at 3.5 percent for 2025 and 2026, the target will gradually decrease to 3.2 percent for 2027 and 2028 before ultimately reaching 3 percent for 2029 and beyond.

Governor Newsom emphasized the importance of the measure, stating, “Making quality health care affordable is a top priority for our administration. This action is a crucial first step forward in our efforts to reign in outrageous health care costs and make health care more affordable.”

HCAI Director Elizabeth Landsberg highlighted the impact on consumers, saying, “High health care costs are forcing many Californians to skip needed medical care and go into debt. As California’s spending target phases in, we expect to see consumer premiums, deductibles, and copays become more affordable.”

Dr. Mark Ghaly, Secretary of the California Health and Human Services Agency and chair of the Health Care Affordability Board, emphasized the measure’s importance in promoting affordability and equity in health care access.

High healthcare costs affect access and equity, with more than half of Californians reporting skipping care in the past year due to cost, according to the California Health Care Foundation. Additionally, more than one in three Californians reported having medical debt in 2023.

The spending target is based on the average growth rate of median household income from 2002-2022, signaling that healthcare spending should not grow faster than the incomes of California families.

The target will apply to healthcare entities, including health plans, provider organizations, and hospitals. Progressive enforcement approaches will be taken against entities that exceed the spending growth target, including technical assistance, public explanations, performance improvement plans, and financial penalties.

The Office of Health Care Affordability, created by Governor Newsom in 2022, aims to drive toward a lower-cost, high-value system. The spending growth targets are paired with approaches to promote system performance, including increasing primary care and behavioral health spending and adopting alternative payment models that reward quality.

The spending target is part of broader efforts to address affordability, expand access, and improve the quality of health care in California. These efforts include expanding Medi-Cal for income-eligible undocumented immigrants and addressing social drivers of health through programs like California Advancing and Innovating Medi-Cal (CalAIM).