New California rule aims to limit health care cost increases to 3% annually

SACRAMENTO, Calif.-- Doctors, hospitals and health insurance companies in California will be limited to annual price increases of 3% starting in 2029 under a new rule state regulators approved Wednesday in the latest attempt to corral the ever-increasing costs of medical care in the United States.The money Californians spent on health care went up about 5.4% each year for the past two decades.

Democrats who control California's government say that's too much, especially since most people's income increased just 3% each year over that same time period.The 3% cap, approved Wednesday by the Health Care Affordability Board, would be phased in over five years, starting with 3.5% in 2025.Board members said the cap likely won't be enforced until the end of the decade.A new state agency, the Office of Health Care Affordability, will gather data to enforce the rule.

Providers who don't comply could face fines.“We want to be aggressive,” board chair Dr.Mark Ghaly said, while acknowledging that the cap “really translates into a major challenge" for the health care industry.The vote is just the start of the process.

Regulators will later decide how the cost target will be applied across the state’s various health care sectors.And enforcement will be progressive, with several chances for providers to avoid fines.California's health care industry has supported the idea of a statewide cost target but argued a 3% cap is too low and will be nearly impossible to meet.

In December, the Center for Medicare and Medicaid Services said the cost to practice medicine in the United States would increase 4.6% this year alone.The board based the target on the average annual change in median household income in California between 2002 and 2022, which was 3%.Dr.

Tanya W.Spirtos, president of the California Medical Association that represents doctors, wrote a letter to the board noting that number is “artificially low” because it includes the years of the Great Recession, when i...