He pledged to lead
"We've got to get serious about reducing health care costs," the first-term Democrat said in
to establish an
Industry leaders were rattled. But rather than mobilize a full-throttle defense to sink Newsom's effort to regulate them, they have used their political clout and close ties with the governor to devise a friendlier alternative that doctors, hospitals and insurance companies could live with.
When Newsom ultimately drafted legislation for the office, he took an idea health care executives had pitched and made it his own: Instead of capping prices or cutting revenues, he would allow industry spending to grow - but with limits.
Political infighting killed the legislation this year, but it is expected to come back in January and spark one of next year's blockbuster health care battles.
"They're fearful of what might happen to them, and they're trying to protect their interests because they're threatened,"
If Newsom's plan to rein in health care spending succeeds, it could provide him some political cover as he campaigns for reelection next year, giving him a major health care win even as he sidesteps progressive demands such as creating a single-payer system.
But it could also cement the power of an industry that continues to wield immense influence - negotiating behind the scenes to protect its massive revenues and secure exemptions and side deals in exchange for its support.
"Every time we try to do something to reduce health care costs, it meets with huge opposition," said state Assembly member
Industry power players have only pushed back harder as lawmakers have tried to take them on, Wood said. "Anybody or anything that disrupts the status quo is met with huge resistance and huge resources to fight it," he said.
When Newsom took office in 2019, he knew public sentiment was turning against the health care industry. On average, health care costs were around
Much of Newsom's tough talk on industry spending came early in his term. "We're going to create specific cost targets for all sectors to achieve, and we are going to assess penalties if they don't achieve those targets," Newsom said in
Newsom's wake-up call came on the heels of tense legislative debates on bills that would have empowered the state to set health care prices and created a single-payer system. The measures gained surprising momentum but ultimately buckled under opposition from health care giants.
Then the covid-19 crisis hit and propelled the recall effort to oust him from office - and the wake-up call was met with a slap of the snooze button. The governor and his health industry allies nestled closer. Just as he needed them to be the state's front line of defense, they needed him to keep hospitals from overflowing, to secure protective gear and to push vaccinations.
Health care titans became regular fixtures in Newsom's orbit. His calendars, obtained by KHN, show that doctors, hospitals and health insurance leaders have routinely received access to the governor.
The coziness of the industry's relationship with Newsom burst into public view in late 2020 when he was photographed dining at the ritzy French Laundry restaurant with
"There is no possible way we could have come out of this covid crisis where the health care industry was given so much power without influence coming along with that," said
Newsom did not respond to questions about the industry's influence, but spokesperson
The recall effort earlier this year only solidified Newsom's relationship with health care executives. Industry groups wrote checks to the
Though Newsom vowed to go after the industry, he hasn't aggressively taken it on, and health care executives and lobbyists continue to wield their influence as they shape the debate over the
That could put Newsom in a political bind as he runs for reelection - first in the
Health and political experts say Newsom can help alleviate that pressure by adopting a strict law going after spiraling health care spending.
"This issue isn't going away - it does need to be addressed," acknowledged Corcoran. The push to control costs "should be uncomfortable for everybody, but not horribly so."
But it won't be easy. After powerful industry leaders joined forces with organized labor and consumer advocates to propose a plan to the governor, they jammed negotiations with their demands, splintering the coalition and killing the effort this year.
Coyle, with the hospital association, had left the coalition early out of concern that hospitals were the primary target, and approached the Newsom administration independently. She is also asking Newsom to relax stringent earthquake safety standards for hospitals.
Corcoran wants to exempt "small" doctor practices - which he defines as practices with up to 100 doctors - from regulation, arguing that restrictive government cost controls could put them out of business, leading to increased industry consolidation and higher prices.
"The goal posts were constantly shifting," said
Before negotiations completely broke down, Newsom embraced the idea floated by Coyle: The state should control growth, not impose revenue cuts. And it should not focus only on hospitals, but apply to all health care sectors, including doctors and insurers. (The pharmaceutical industry would not be subject to the cost control provisions of the measure because of restrictions in federal law, according to Wood's office.)
With battle lines drawn, industry groups are poised for a major fight next year as Newsom and state Democratic lawmakers muscle through legislation. Their primary goal will be to protect their interests, said
"There's no question this industry has power. The real question is what they do with it," Peterson said. "They're getting wins, and important ones."
This story was produced by KHN, which publishes California Healthline, an editorially independent service of the