The average California family will be forced to spend a third of its annual income for health insurance by 2022 if costs continue to spiral upward at current rates, according to recent reports by industry groups.
Obesity, prescription drugs, unnecessary tests and expensive new technology are driving up health care costs in California, according to a report issued<NO1><NO> this month by the California Association of Health Plans.
Obesity alone adds $12.8 billion to the state's $230 billion annual health care bill. More than 60 percent of Californians are overweight or obese, and obesity is expected to double by 2030, increasing its share of health care costs by 15.7percent.
The state's total health care bill has tripled since 1991, with cost increases exceeding inflation and expected to keep growing due to multiple factors, including the rollout of the federal Affordable Care Act in 2014 and the increasingly overweight public. (The state's population has nearly doubled since 1991.)
Area doctors say much of the spiraling cost is due to the way health care services are paid for, echoing a study earlier this year by <NO1><NO>the Berkeley Forum for Improving California's Healthcare Delivery System.
That report, by <NO1><NO>a blue-ribbon group that included Blue Shield of California, Kaiser Permanente and Sutter Health in collaboration with the UC Berkeley School of Public Health, called for sweeping change in the economic model for California health care.
The current model, known as fee-for-service, is not the right medicine for Californians, who are already spending $23 a day on health, said Dr. Stephen Steady, a gastroenterologist who is president of the Sonoma County Medical Association.
Fee-for-service bases patient payments on the number of tests and treatments performed rather than overall efficiency or the medical outcome. That encourages a "duplication of services that may not be needed," Steady said.
When each independent health care provider is ordering the tests and imaging needed to treat patients — and billing for his or her services — the costs "just start adding up," Steady said.
And that fragmented care, he said, underlies the California Association of Health Plans report, which said that as much as 30 percent of nation's health expenditures — $810 billion in 2011 — goes to unnecessary tests, treatments, drugs and hospitalizations.
"The incentives are not aligned in an effort to control costs," Steady said.
By dramatically cutting back on the fee-for-service model, California could trim $110billion from health care from the estimated $4.4 trillion expenditures between now and 2022, according to the Berkeley Forum report.
That would cut costs an average of $802 per household per year over that period, and $1,422 per household in 2022, the report said.
"It is time for fundamental change. It is time for action," the report said, calling its plan "a transformational, bottoms-up approach to creating a more affordable, cost-effective healthcare system."
Instead of fee-for-service, which accounts for 78 percent of the state's health care expenses today, the report calls for more integrated systems, similar to Kaiser's, that draw primary care physicians, specialists, hospitals and even nursing homes into a collaborative effort to provide patient care.
The provider groups would operate under a "risk-adjusted global budget" for each patient, a wonkish term for setting a target cost based on a person's diagnosis.
This bundled care system provides penalties for exceeding the cost targets and rewards for staying within them, Steady said.