California healthcare spending shows slower growth than national average amid rising costs

The San Francisco County government meeting on July 4, 2025, focused on critical discussions surrounding healthcare costs and trends in the region. Key points included the rising expenses associated with hospital care, the impact of labor costs, and the efficiency of California's healthcare spending compared to national averages.

A significant topic was the shift in healthcare spending over the past decades. In 1980, hospitals accounted for nearly 43% of healthcare expenditures, but by 2009, their share had decreased as other sectors, including administrative costs and pharmaceuticals, grew. The presentation highlighted that hospitals are now treating sicker patients, which increases resource use and costs.

Labor costs emerged as a major driver of healthcare expenses. The meeting noted that wages and salaries in the healthcare sector have risen significantly, largely due to a shortage of skilled labor. The average salary for hospital workers in California exceeds $85,000, which includes both salaries and benefits. This increase in labor costs is compounded by the high cost of living in Northern California, where regions like San Francisco and Santa Clara rank among the highest in the nation for wage indices.

The discussion also addressed California's healthcare spending efficiency. Despite rising costs, California spends about 90% of the national average on healthcare, with a slower growth rate of 5.9% over the past decade compared to the national average of 6.7%. This efficiency is attributed to innovative practices in healthcare delivery and managed care systems that focus on outcomes and shared risk.

Another critical point raised was the issue of cost shifting. The meeting revealed that Medicare and Medi-Cal funding inadequately compensates hospitals, forcing them to shift costs to private payers. This dynamic is expected to worsen if payment structures do not improve.

In conclusion, the meeting underscored the complexities of healthcare costs in San Francisco County, emphasizing the need for ongoing discussions about labor costs, funding adequacy, and the efficiency of healthcare delivery systems. The insights shared during the meeting will inform future policy considerations aimed at addressing these pressing issues.