Time to Pull the Plug on the Flawed California Health Care Deal

By Donna Gerber
California Progress Report
December 17, 2007

Comprehensive healthcare reform is a dream that millions of Californians are hoping to achieve. But at some point it’s time to recognize that the steamroller to pass a bill no matter what it contains can actually make matters worse.

That is exactly what happened with the rush to energy deregulation in the 1990s, a grand “consensus” that produced a last minute, hurried bill which few had read and fewer still had considered the disastrous consequences. The result was blackouts, higher prices for consumers, near bankrupting of the state, and the plundering of our resources by Enron and other big corporations.

We should learn the lessons from the energy deregulation fiasco and not repeat our mistakes. Instead, Governor Arnold Schwarzenegger and Speaker Fabian Nunez continue to push the hurried adoption of a “compromise” health plan that will do nothing to end the routine denial of care by insurance companies or stem skyrocketing insurance premiums and other out-of-pocket costs that place Californians in jeopardy of further financial insecurity at a time of a worsening consumer debt crisis or encourage them to engage in self-rationing of care.

With the Assembly posed to vote Monday on the latest iteration of a sweeping bill, it is time to pull the plug. Let’s step back, take action instead on an immediate health crisis and come back next year to enact a better, more comprehensive health reform plan that will actually solve our healthcare morass.

Thousands of California children now face the cutoff of coverage due to the President’s veto of the children’s health program. Further, the governor is expected to propose emergency across the board budget cuts up to 10 percent as a result of the worsening budget deficit. We should all focus on guaranteeing continued coverage for children and protecting current programs rather than rushing through a bad plan that could just exacerbate the crisis for California families and the state.

In addition to serious policy problems with a flawed bill, there is also reason for concern about the process in which the Assembly is being coerced to vote on a sweeping, complex major reform on a new bill, ABX1 1, whose language was only released late Friday.

What does seem apparent is that under this bill health insurance will not be universal, it will not be affordable, it will not be of high quality, and bare bone plans with high out of pocket costs will be forced upon Californians and employers who will have no control over the price.

In short, this bill does not provide health care to patients and their families; ABX1 1 provides “covered lives” to insurers who have already broken almost every moral (and often legal) imperative in the delivery of health care. Who could predict that Health Net could believe that it’s OK to pay its employees bonuses to deny claims by rescinding policies after patients are ill? But that and more is exactly what Registered Nurses see every day while they are tending to the care of their patients.

As an illustration that the devil is in the details, this bill does not have adequate language to prevent insurers from continuing this practice. The anti-rescission language in AB X1 1 applies only to health plans (HMOs) not all insurers. Among our many concerns:

• ABX1 1 implements a punitive individual mandate of insurance that will auto enroll Californians if insurance is not purchased within 62 days. The Franchise Tax Board will use its civil power to collect the funds through wage garnishment and mortgage liens.

• Because the severability provisions have loopholes (contingent upon a finding by the Director of Finance that there are sufficient resources for the first three years of operation) and the employer mandate is solely in the ballot initiative; the result of passing the policy is an individual mandate without any requirements on employers.

• ABX1 1 does not guarantee affordable, quality healthcare for all Californians. The bill requires all Californians to buy insurance unless their employer provides it. The benefit package is bare bone benefits, high deductibles and co-pays and limits on coverage. Dental, vision, mental health, long term care and other essential care would cost extra. The bill also adopts the Bush tax-credit scheme as a fig leaf that doesn’t apply to all out of pocket and therefore isn’t enough to benefit working Californians. What is guaranteed is that everyone will be required to buy insurance; not that everyone will receive the health care they medically need.

• ABX1 1 does not control healthcare costs without further eroding necessary health care. There are no limits on cost of premiums, deductibles, co-pays, other fees, and hospital charges.

• ABX1 1 does not fairly distribute responsibility, risk and benefits among employees, employers and individuals. It is not “shared responsibility”. Healthcare costs are further shifted to workers and individuals and government; while insurance companies and employers like Wal-Mart have the lion’s share of benefits from this bill. The Employer contribution rates are so much lower than necessary for an adequate benefit that employers currently paying more will undoubtedly move to the cheaper standard undermining our current level of benefits. Large employers like Safeway who support these plans have been reducing their health costs through labor contract takeaways and strikes for the past decade. Under this bill, Wal-Mart can refuse to offer insurance to its low wage employees and have the government pay for them through the public pool, thus continuing its corporate plan to shift health care costs for its employees to the rest of the public.

• ABX1 1 does not guarantee patient choice of provider and hospital and protect the doctor-patient relationship. Nothing in these bills ensures patient choice of providers. In fact, this plan is a windfall especially for HMOs who do not have integrated provider systems. Insurers can still restrict choice of doctors and hospitals. Insurance companies can still deny needed medical care, access to new medications, referrals, and treatment.

• ABX1 1 does not improve the quality of care and patient outcomes. The emphasis on “self help” healthcare and so called “lifestyle” strategies misses the point of truly improving public health outcomes. Instead, these legislative proposals pander to the medical technology industry to require huge expenditures for technology and “performance based” financial incentives for physicians that are really nothing more than mechanisms to increase “throughput” by mechanizing decision making by professionals who would normally exercise professional judgment since each patient is different. It should be noted that the performance bonus is the same technique the insurance industry currently uses to compensate its employees to deny care and rescind coverage once patients are ill.

• ABX1 1 does not protect the Public Hospital Safety Net. In fact, these bills sets up a potential for private hospitals to cannibalize the public safety net system, by giving the private sector system higher reimbursement rates under MediCal and allowing the private hospitals to profit by the “hospital fee” while public hospitals experience no such benefit. Who can make sense of a reimbursement system that provides Cedars Sinai in LA and Stanford Medical Center in Palo Alto with tens of millions of windfall profit while their neighboring county health systems have net losses after paying the fee?

The California bill is inspired and modeled after a very similar law pushed through the Massachusetts legislature last year by then-Gov. Mitt Romney as he was preparing to use it to hype his candidacy for President.

Now, many in Massachusetts realize what a mess they have created. The Boston Globe last week noted that with the state’s failure to control rising insurance costs, a fatal flaw repeated in the California bill, premium costs could climb 14 percent next year. As a result, state officials are considering sharp increases in co-payments and other out-of-pocket costs for Massachusetts families, fewer choices for consumers, and cuts in payments to doctors and hospitals. Yet somehow that’s another lesson we seem to have missed.

We would hope that legislators will make informed decisions and avoid the rush to judgment of prior failed California legislative “reforms” such as energy deregulation and worker’s compensation (another great boon to that segment of the insurance industry).

The special session process is looking eerily familiar to the way the “conference committee” process worked for other critically important policies that were brokered behind closed doors and then brought out for quick decisions resulting in often expensive and tragic outcomes.