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New Report: California Trades Spending on Vital Community Conditions that Keep People Healthy for Propping Up a Sick Care System

Report finds health care spending grew 146 percent in the past decade—wasting billions in the process on overpriced services and unnecessary care—while spending on community conditions grew by just 39 percent.

As California spending on health care skyrockets, state spending on programs and services that keep people healthy and prevent illness has grown far slower, according to a new report by the Lown Institute and Well Being Trust.

The report, California’s health care paradox: Too much health care spending may lead to poor community health, shows that from 2007 to 2018, state budget spending on health care (including Medi-Cal, health care for state employees and retirees, and health care for the incarcerated) grew by 146 percent, while spending on community conditions increased by just 39 percent, on average. California now spends just $0.68 on social services, public health, and environmental protection for each $1.00 spent on health care—down from $1.22 in 2007.

“Doing everything we can to address issues of access to health care is critical; however, we know this is not enough to solve the overall issues facing our nation’s health. There are vital community conditions—from a good paying job to a safe neighborhood to access to healthy foods—that truly determine how healthy someone can be,” said Benjamin F. Miller, Chief Strategy Officer for Well Being Trust. “What we know now is if we are not careful, Californians will unwittingly trade paying for these vital conditions for subsidizing the health care system.”

As California’s investment in community conditions declines, millions of Californians continue to suffer from chronic health care problems, high infant mortality rates, and lower life expectancy, brought on by toxic air and water pollutants, poverty, food deserts, lack of affordable housing, and low levels of formal education.

“California is spending billions of dollars on overpriced and unnecessary care, money it should be spending to keep communities healthy from the start,” said Shannon Brownlee, Senior Vice President of the Lown Institute.

To rebalance spending towards community conditions, the report provides a series of recommendations:

  • California should redouble its investments in community conditions. Currently, initiatives like the California Accountable Communities for Health Initiative (CACHI) and the Whole Person Care (WPC) pilot program help improve community health through coordination of health care and social services. However, these programs exist only in a handful of communities and have limited state support. The state should take a larger role in improving community conditions by uniting all stakeholders that benefit from investments in community conditions to invest together in larger-scale projects to improve health.
  • An essential part of reducing health care waste will be tackling overpriced services and products. State policymakers should create a state-run pharmacy benefit manager (PBM) to offer negotiated prices to all Californians.
  • Hospital charges are also often highly inflated, especially when large hospital systems control market share and can dictate prices—state policymakers should enforce anti-trust laws for monopolistic hospital systems.
  • State policymakers should could consider converting the state’s hospital payments to a fixed total revenue system (called “global budgeting”). For example, in Maryland, this approach produced $400 million in Medicare savings over five years. In California, global budgeting could translate to $2.7 billion over 5 years.
  • A large amount of waste in health care comes in the form of tests and procedures that offer more harm than benefit, known as “low-value care.” Reducing low-value services could save California at least $1.5 billion a year.

About the Lown Institute: Founded by world-renowned cardiologist and humanitarian Bernard Lown, the Lown Institute is a nonpartisan think tank dedicated to transforming America’s high-cost, low-value health system. The institute conducts research, generates bold ideas, and creates a vision for a just and caring system of health that works for all.