California wants insurers to direct 15% of their spending to primary care over the next decade

A California agency charged with slowing health costs has set a lofty goal for insurers to direct 15% of their spending to primary care by 2034, part of the state’s effort to expand the primary care workforce and give more people access to preventive care services.

The board of the state Office of Health Care Affordability in October set its benchmark well above the industry’s current 7% primary care spending rate, in hopes of improving Californians’ health and reducing the need for costlier care down the road.

“It’s ambitious but achievable,” said Elizabeth Landsberg, director of the state’s Department of Health Care Access and Information, which oversees the affordability agency. “Plans and health systems need time to build the infrastructure to really change the way they’re providing care.”

But California’s target comes just six months after the affordability board set an annual cap of 3.5% for overall growth in health care spending, potentially squeezing insurers from two sides.

“How these two policies will interact is unclear and we believe it is important to not lose sight of our overall goal of reducing the growth of health care costs,” Mary Ellen Grant, a spokesperson for the California Association of Health Plans, said in a statement.

The affordability agency argues health plans are best positioned to promote more spending on preventive care services, since insurers are the ones that negotiate payment with providers. Landsberg said health plans could dangle incentives, such as offering higher reimbursement rates for primary care providers or paying for comprehensive care instead of for individual visits.

If successful, the agency says, the spending target could expand the primary care workforce through the hiring of staff and lead to better health management, disease prevention, and early diagnosis and treatment for more patients across the state.

California faces a shortage of primary care providers, which has limited people’s access to preventive care. Approximately 6 million Californians live in parts of the state where there aren’t enough doctors to meet people’s needs, according to a data analysis by KFF, a health information nonprofit that includes KFF Health News, the publisher of California Healthline.

A 2021 report by the National Academies of Sciences, Engineering, and Medicine found that while more than 35% of health care visits in the U.S. are to primary care physicians, only about 5% of health spending is on primary care. That’s compared with about 13% for some other developed nations.

“People have high regard for primary care, understand how important it is,” said Kevin Grumbach, a professor of family and community medicine at the University of California-San Francisco who helped develop the state’s primary care target. “They way overestimate how much of their tax dollars are actually going to support primary care.”

Beginning next year, the affordability agency will start collecting data on how much health plans spend annually on primary care, particularly in settings such as community-based clinics, schools, and homeless shelters. Doctors, nurses, and pharmacists are among the providers whose services can be counted toward the goal. But the agency is excluding obstetricians, who sometimes serve as primary care providers for pregnant women, to focus on those offering “coordinated, comprehensive care” for patients.

Health plans will be expected to increase primary care spending from 0.5% to 1% of their total medical expenses each year until 15% is reached in 2034.

At least six states — Colorado, Connecticut, Delaware, Oregon, Rhode Island, and Washington — have already implemented primary care targets with some success. Rhode Island, which set a 10.7% goal, more than doubled its primary care spending from 2008 to 2018, while also reducing overall health spending.

The Biden administration has launched initiatives to improve primary care, but it has not set a primary care target for Medicare.

In California, the affordability agency collects health care spending data that captures nearly 33 million of the state’s 39 million residents. The agency said it will begin to collect primary care spending data in fall 2025, but that information may not be released for two more years.

The state agency lacks enforcement authority in primary care spending, so to get health plans to hit the target, the agency is dangling financial incentives. At a primary care summit at the University of California-Davis in October, Landsberg said the agency could allow insurers to exceed the 3.5% overall growth cap if they show their spending went to boost primary care.

Efrain Talamantes, chief operating officer for AltaMed Health Services, one of the state’s largest federally qualified community health centers, said these payments could help the health center expand services by training and hiring staff.

If health plans comply, the policy should lead to more primary care providers, timelier appointments, and better health outcomes, especially for disadvantaged communities that historically haven’t had good access to care, Talamantes said.

“We should see an improvement where people are able to access their primary care the same day,” he said.

As discussions continue, the state is working on targets to increase spending on behavioral health, another underinvested service. A vote on that measure could come next summer.