A new bill moving through the California State Assembly, the Health Care Price Relief Act, or Assembly Bill 3087, would form a state-appointed commission to set prices for most healthcare services paid by commercial healthcare.
The measure has drawn the ire of state provider organizations like the California Medical Association and the California Hospital Association. But it’s also captured the attention of national organizations, like the American Society of Anesthesiologists (ASA) and the American Association of Nurse Anesthetists, because of its potentially far-reaching impact across the country if the measure proves politically palatable.
The proposed measure would do three things.
- First, it would establish an independent state-wide commission, appointed by legislators and the governor, that “may include health care professionals, academics or anyone with health care policy experience,” according to the Sacramento Business Journal. However, the bill prohibits committee members from actively serving in their industry roles “while serving on the commission or on the staff of the commission.”
- Second, that group would use Medicare rates as a base to establish a cap for how much providers can charge for services covered by commercial health plans, including employer-sponsored and individual marketplace plans. Medicare and Medicaid rates would not be affected.
- Finally, the commission would set a “global cap for total healthcare expenditures based on gross state product.”
According to the Los Angeles Times, labor unions and consumer groups favor the bill which they say will help contain skyrocketing healthcare costs for patients. But provider groups see the measure as a threat to California healthcare.
Dr. Theodore M. Mazer, a San Diego ear, nose and throat specialist who is president of the California Medical Association, told the Los Angeles Times that the bill is a “poorly conceived, unprecedented threat to patient access to health care.” And Dietmar Grellmann, a senior vice president with the California Hospital Association, said lawmakers are just “tinker[ing] around the edges” of the cost issue unless they also address Medi-Cal and Medicaid.
“You’ve got this wobbly table that is going to continue to wobble,” Grellman said. “It’s not a comprehensive solution. The comprehensive solution probably needs to include Congress.”
The ASA also added their comments to the mix in a letter to Jim Wood, chair of the California Assembly Health Committee, suggesting that the new law would “endanger patient access to health care and severely diminish California’s ability to train, educate, and retain an adequate physician workforce.”
Another major sticking point for the ASA is using Medicare as a base amount for setting prices. They called this idea “alarming given Medicare is an inappropriate benchmark for many healthcare professions.”
To that point, James Grant, M.D., M.B.A., FASA, president of the ASA, wrote in his weekly newsletter that what would be “bad for most specialties would be devastating to anesthesiology.” He pointed to what’s known as the 33 Percent Rule. Basically, while Medicare’s payment rate is about 80 percent of commercial fee schedules for most specialties, for anesthesia, it’s only 33 percent.
As Grant explains it, the discrepancy first began back in 1992 when Medicare’s payment rates changed from “usual, customary and reasonable” (UCR) to the RBRVS (Resource-Based Relative Value Scale), which is still used today. During that conversion, there was a 29 percent reduction in the Medicare conversion factor overall, but a severe calculating error comparing anesthesia work values to other physician specialties resulted in an even more drastic reduction for anesthesiologists, Grant writes.
Fixing the 33 Percent Rule serves as a high priority in the ASA’s advocacy efforts. Were this new California legislation to pass, that would make the ASA’s work even harder.
AB 3087 is currently awaiting action by the Assembly Health Committee.
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