Analysis: Calif. mulls gov't. health plan

By OLGA PIERCE, UPI Health Business Correspondent

WASHINGTON, Sept. 1 (UPI) -- Both houses of the California state legislature have passed a sweeping health coverage bill that would virtually eliminate private insurance in the state and replace it with a single, state-operated plan.

Voting on the bill ran along party lines, and it is unlikely its Democratic supporters will be able to override an all-but-certain veto from Republican Gov. Arnold Schwarzenegger.


The bill also lacks answers to key logistical questions of funding and implementation, but it has renewed a debate -- all but dead at the federal level -- about whether health insurance should be public or private.

"For the first time, the legislature has approved a reform that would provide every Californian with the health coverage we need, while securing our right to choose our doctors simply and control costs," State Senator Sheila Kuehl, the bill's sponsor, said earlier this week, after the final version of the bill was passed.


Under the proposal, the state would essentially establish its own insurance system, similar to the one in Canada, which would pay providers for services to all state residents. The plan would be headed by an insurance commissioner elected for an eight-year term.

In addition to giving all Californians access to health insurance, the benefits offered by the plan would be very comprehensive, even compared to most private plans. Members would have coverage for primary care, hospitalization, dental, vision, chiropractic, mental health services and prescription drugs. Long-term care, however, would not be covered.

Proponents of the bill say that for the first time, everyone in the state would have good insurance coverage, without gaps because of moving or changing jobs. In addition, they say it will reduce costs because of increased access to preventive care, eliminating uncompensated care and drastically reducing the administrative costs of negotiating the many different private plans that now exist.

In particular, they say, the percentage of healthcare costs because of paperwork would be reduced from 30 percent to 5 percent and the ability of the state to negotiate bulk prices for prescription drugs would save an additional $2 billion.

In several important ways, the plan laid out in the California bill differs significantly from a coverage plan currently being implemented in Massachusetts.


Unlike the California plan with its single state-run program, the Massachusetts plan takes a much more piecemeal approach. Employer coverage is left intact, and government safety-net programs for low-income families are expanded. Remaining uninsured citizens will be assisted in finding individual insurance through a clearinghouse and, if needed, subsidies. To glue the system together, employers are required to offer insurance, and all individuals must have some form of coverage.

The California plan is "a very different approach from those that would require us by law to buy the insurance industry's products without changing the conditions that result in double digit increases in our premiums -- and decreases in our coverage -- every year," Kuehl said.

However, while the plan is commendable for tackling the healthcare system's problems head-on, it lacks important details, Marian Mulkey, a senior program officer at the California Healthcare Foundation, told United Press International.

"It's not clear how (the plan) would be funded," she said. "It hasn't confronted one of the most difficult parts of expanding coverage -- who will pay."

In addition, it would not be easy to create an entirely new infrastructure to replace the private companies who would presumably no longer operate in the state, she said.


"The challenges are enormous."

The debate surrounding the bill has, on the other hand, enlivened the healthcare debate in the state, Mulkey said. "Every proposal that comes along that has solid sponsorship and confronts the fundamental problems of the healthcare system is a good thing."

That is a far cry from the current healthcare reform conversation at the federal level, which has tended to center around the incremental, economic-based reforms preferred by the Bush Administration.

And while the foundation does not lobby for specific policies, the Massachusetts plan could represent a good compromise between breadth of coverage and ease of implementation, she said, instead of Bush's policies which focus too narrowly on giving consumers incentives to shop more for healthcare.

Others are more critical.

"The healthcare system is the second largest industry in the state, and generates $200 billion a year in overall revenue," Wanda Jones, healthcare futurist and president of the New Century Healthcare Institute, told UPI. "I see putting that in the hands of the state as tantamount to blowing your brains out."

The state does not have a good track record of managing Medi-Cal, its safety net program for the poor, or much else, Jones said, and there is no reason to believe it would do better with the new state-run health insurance program.


In addition, once insurers left California they would not want to come back, and on their way out they would likely sue the state for confiscation of assets, Jones said.

To finance the plan, the state would have to impose a payroll tax of as much as 12 percent, she said, which means that individuals with high incomes would have to pay many times more what they currently pay for insurance. Low-income individuals, who go without insurance now to make ends meet, could be forced to pay into the healthcare fund as well.

"It's very expensive to live here, and a lot of people live at the edge anyway," Jones said. "Maybe they would rather spend that money for food.

And all this occurs against the backdrop of the state's multi-billion dollar budget deficit, she added.

Jones and other critics of the bill also say the bill's lack of details combined with its timing makes it appear like more of a politically-motivated attempt to influence the upcoming gubernatorial elections.

Supporters of the bill say that whatever happens this year, the debate over universal healthcare is not over.

There are plans to reintroduce the legislation next year along with more details about how it would be financed, and by that time Schwarzenegger may have been replaced as governor by a more supportive Democrat.


Grassroots-level organizing also continues, Emily Gold, a Kuehl spokeswoman, told UPI.

"We've made tremendous gains over that last few years and we'll continue working," she said. "The current system is clearly unsustainable, it's only a matter of time."

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