Physicians oppose California price-fixing bill

Andis Robeznieks , Senior News Writer
Bradford Anderson, MD, Jasmeet Bains, MD, and Chang Na, MD explain their opposition to California's AB 3087.

The AMA is part of a unified front that includes doctors, hospitals, nurse anesthetists, dentists and other health care providers that opposes a health care price-fixing bill being considered by the California legislature.

Assembly Bill 3087 would create the California Health Care Cost, Quality and Equity Commission, an eleven-person appointed panel to set rates for all health services covered by commercial health insurance plans, using Medicare rates as a benchmark. The bill also caps prices paid by uninsured patients to the set rates as well as allows plans established under the Employee Retirement Income Security Act to use these rates.

“The AMA shares your Committee’s concern over health care costs and is working on many fronts to improve access to affordable, quality health care,” AMA Executive Vice President and CEO James L. Madara, MD, wrote in an April 24 letter to Jim Wood, chair of the State Assembly Health Committee. “However, we do not believe the price-fixing proposals in AB 3087 will further this goal.”

Dr. Madara noted that the bill does not address the underlying causes of rising health costs such as long-term care, lack of access to preventive care, chronic disease, prescription drugs, subpar mental-health parity enforcement, administrative and regulatory burdens, cost transparency, medical liability, marketplace competition, patient health insurance literacy and other, even more complicated issues.

Citing data from the U.S. Bureau of Labor Statistics, Dr. Madara noted that physician payments are not a major driver of increasing health care costs and have risen only 1.2 percent per year between 2006 and 2016.

He also explained how Medicare physician payment rates are established using the resource-based relative value scale, but are then adjusted via conversion processes and federal legislative requirements such as budget neutrality.

“Unfortunately, the use of Medicare as a benchmark is unsustainable,” Dr. Madara wrote. “After everything is complete, including the artificial adjustments, the resulting payment rates are not generally reflective of market rates for physician services.

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AB 3087 was the top item on the agenda when more than 500 physicians met with legislators in the state capitol on April 18.

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

Supporters have compared the proposed rate-setting mechanism to the all-payer system in place in Maryland. But the president and CEO of the California Hospital Association, Carmela Coyle, led the trade group representing Maryland’s hospitals from 2008 to 2017, and she sharply disagrees with that notion.

“They claim their proposal is based on a similar system that operates in Maryland,” Coyle wrote in a column published in The Sacramento Bee. “As the former head of the Maryland Hospital Association, I know that nothing could be further from the truth.”

Maryland hospitals receive the same amount regardless of who is paying for the service, but the state recognized that different types of hospitals in different settings have different costs, Coyle wrote. She added that AB 3087 wouldn’t address how Medi-Cal, the state Medicaid system, pays hospitals only 68 cents for every dollar of care they provide.

Almost 43 percent of Californians, or 17.5 million people, are covered by private insurance, according to a legislative staff analysis of the bill. Medi-Cal has about 14 million beneficiaries or about one-third of the state’s population. And Medicare covers 6 million Californians, with 3.4 million having traditional fee-for-service Medicare and 2.5 million enrolled in Medicare Advantage plans. The uninsured rated is 7.1 percent or about 3 million people. About 1.8 million people in that group are “not eligible for coverage plans due to immigration status,” the analysis says.

The bill will limit patient choice and hurt access to care by motivating physicians in the state to retire early and it would create an unattractive environment for recruiting new ones, the CMA says. AB 3087 would exacerbate primary care physician shortages that exist in six of nine state regions and 23 of 58 counties, the CMA adds.

Opponents also say the measure would move the state backward to an “antiquated volume-over-value model” and stifle the innovation that California is known for.

“The AMA watches closely the policy innovations that come out of California and the thoughtful and tough debates that happen among California policymakers and other stakeholders on health care,” Dr. Madara wrote. “While we may not always agree with the proposals or solutions that are considered in California, the AMA recognizes California as a leader that rarely takes the easy way out on policy deliberations. Unfortunately, AB 3087 would be taking the easy way out on one of the most important of health care debates.”

The AMA asks for the legislation to be withdrawn and that lawmakers work with physicians to come up with meaningful solutions to health care costs. The bill was approved 11–4 by the Health Committee on April 24, and is now before the Appropriations Committee.