San Francisco Marin Medical Society Blog

Danger Ahead

By Katherine Boroski

Since passage of the Affordable Care Act (ACA), California has made great strides in expanding access to health care and bringing the state’s uninsured rate to an all-time low of 7.1 percent. Now, some lawmakers in Sacramento are turning their backs on the gains made under the ACA and pushing a reckless proposal to put a new government bureaucracy in charge of health care.

The bill—AB 3087, authored by Ash Kalra (D-San Jose)—would create a commission of unelected political appointees empowered to arbitrarily cap rates for all health care services in all clinics, hospitals and physician practices in California. By unilaterally setting the price for all medical services, the bill would essentially eliminate the commercial health care market in California.

“No state in America has ever attempted such an unproven policy of inflexible, government-managed price caps across every health care service,” said California Medical Association (CMA) President Theodore M. Mazer, M.D. “It threatens to reverse the historic gains for health coverage and access made in California since the passage of the ACA.”

AB 3087 Moves California in the Wrong Direction

This poorly conceived legislation would do nothing to ensure that patient out-of-pocket costs are decreased, nor does it solve the fundamental problems of the health care payment system.

“Simply setting physician rates without addressing the rising cost of providing care will do nothing to address health care spending,” said San Francisco pediatrician Shannon Udovic-Constant, M.D., vice chair of the CMA Board of Trustees. “AB 3087 would drive a lot of physicians out of our state, and it doesn’t address the underlying reasons around rising health care costs.”

This dangerous rate setting proposal would also move California away from value-based care and universal access, backwards to an antiquated fee-for-service model that discourages contracting and stifles innovation. Instead of addressing the underlying issues, this bill would force hospitals to close, push health care providers into early retirement and cause a “brain drain” of talented medical students and residents fleeing California for more ideal working conditions.

Medicare Should Not Be a Benchmark for Costs

AB 3087 requires the commission to cap prices for commercial payments for all services to Medicare rates, which is a fundamentally flawed approach that does not address coverage and benefits or the costs to provide care. Medicare was created to reimburse medical services for an age-specific population based on federal budgetary and regulatory constraints. Medicare rates do not keep up with inflation or the cost of running a practice. Adjusted for inflation in practice costs, Medicare physician pay has declined 19 percent from 2001 to 2017, or by 1.3 percent per year on average. Medicare rates are not intended to represent the fair market value of health care services. Rather, they fluctuate based on variables unrelated to the services provided, such as the federal budget.

AB 3087 Does Not Address Medi-Cal Rates

Medi-Cal is the largest Medicaid program in the nation, with 13.5 million people—about one-third of the state’s population—enrolled in the program. And yet, California still pays among the lowest reimbursement rates of all 50 states, creating a serious access issue for patients.

California’s Medi-Cal rates don’t come close to covering the cost of providing care—meaning that physicians lose money for every Medi-Cal patient they serve. Due to low Medi-Cal rates, physicians must make up revenue through their commercial contracts to keep their doors open. Because the AB 3087 proposal does nothing to address California’s sub-standard Medi-Cal rates, hospitals and health care providers would continue to be underpaid by these governmental programs, putting them in an untenable situation.

“I expect even lower physician participation in Medi-Cal because it’s financially unsustainable already, and it will be even more so if something like this passes,” said Christina Wang, a University of California, San Francisco medical student who came to CMA’s 24th Annual Legislative Advocacy Conference in April to educate lawmakers about this irresponsible legislation.

AB 3087 Would Drive California’s Physicians Out

AB 3087 also ignores the recommendations from the University of California, San Francisco’s report—commissioned by the Assembly—on how to achieve universal access to health care, which includes implementing a comprehensive strategy to overcome the physician workforce shortage in the state by removing barriers that prevent physicians and other clinicians from specializing in primary care and practicing in underserved areas.

Currently, six of nine California regions are facing a primary care provider shortage, and 23 of California’s 58 counties fall below the minimum required primary care physician-to-population ratio. The state needs 8,243 additional primary care physicians by 2030—a 32 percent increase.

“AB 3087 would cause an exodus of practicing physicians, which would exacerbate our physician shortage and make California unattractive to new physician recruits,” said Dr. Mazer. “When I look at the economics of my own practice, it’s enough to tell me that I could not survive that environment and continue to see Medi-Cal patients. And probably at this stage of my career, it would drive me out of practice earlier that I might otherwise.”

The bill also operates on the false premise that the cost of professional services—in other words, what physicians and hospitals charge for their services—is what’s behind the increase in health care spending in California.

Data shows, however, that the price of prescription drugs and increases in health care utilization are what’s driving health care spending growth. Professional services had relatively low impact on spending growth. In fact, nationally, California had lower than average annual growth in per capita spending on physician and clinical services over the past 20 years. The primary driver of spending on doctor visits is increased utilization, not price.

“Physicians want real solutions to these problems too,” said Valencia Walker, M.D., chair of the CMA Council on Legislation. “We remain focused on real solutions that would protect the access and coverage gains made under the ACA, further value-based care, ensure patients can access health care in a timely and affordable manner, and tackle California’s health care workforce shortage.”

California Physicians: Time to Take Action

Physicians are urged to visit to ask their legislators to stop this dangerous bill.

Sidebar: California physicians overwhelmingly oppose price fixing bill

A recent survey of 398 California physicians conducted by CMA found:

·         92 percent opposed AB 3087 (6 percent undecided, 2 percent in support).

·         58 percent believed AB 3087 would force them to leave California and practice elsewhere.

·         39 percent believed AB 3087 would force them into early retirement.

·         Only 5 percent believed AB 3087 would have little to no effect on their medical practice.

·         Of the 79 percent of respondents who currently serve Medi-Cal patients, 64 percent believed AB 3087 would force them to decrease the number of Medi-Cal patients they serve.

Katherine Boroski is Senior Director of Communications for the California Medical Association.

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