02
APR
2015

Drivers of Health Expenditure Growth in California

cover-healtexpCalifornia’s state government, employers and families are concerned about the affordability of healthcare in California. The Affordable Care Act is likely to have opposing effects on healthcare expenditures. On the one hand, the number uninsured in California is expected to decrease from 6.0 million to 2.6 million between 2011 and 2016, leading to increased expenditures (CalSIM, 2014; Hadley et al., 2008). On the other hand, payment and delivery innovations within the Affordable Care Act and private market have the potential to reduce expenditures (McClellan, 2014), but there is a concern that provider consolidation may lead to higher prices (Health Care Cost Institute, 2014; Baker et al, 2014; Robinson, 2011; Berenson et al., 2010). In this report, we forecast health expenditures in California from 2013–2022 using the Berkeley Forum Healthcare Expenditure Forecasting Model discussed in A New Vision for California’s Healthcare System: Integrated Care with Aligned Financial Incentives (Scheffler et al., 2013).

Then, we disaggregate spending by service type and source of payment. Next, we identify the key factors driving health expenditure growth and discuss each factor’s contribution. Finally, we estimate the progress toward the Berkeley Forum Vision of increasing risk-based payments and integrated care. Our principal data sources include the Centers for Medicare & Medicaid Services’ (CMS) Office of the Actuary’s National Health Expenditure Account historical and forecasted estimates (CMS, 2014a, 2014b, 2011).

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