California Health Care Reform

HEALTH CARE REFORM IN CALIFORNIA, ALTHOUGH URGENTLY NEEDED, IS ONLY A SHORT TERM “FIX” FOR A NATIONAL PROBLEM

By Edward D. Spurgeon, Board Member, National Senior Citizens Law Center; Executive Director, Borchard Foundation Center on Law and Aging; and Distinguished Visiting Professor and Holder of the Gordon D. Schaber Chair in Health Law and Policy, Pacific McGeorge School of Law

Soaring health care costs and almost 47 million uninsured (6.5 million in California alone) are economic and moral imperatives for national health care reform. By any reasonable measures -- access, cost ,and overall health status -- the system is broken and must be fixed. Despite the world’s best trained health professionals; excellent hospitals and rehabilitative care centers; state of the art medical equipment, technologies, and pharmacology; and well-funded medical research and development, the United States has lacked the political will necessary to forge a comprehensive solution that assures every American access to affordable basic preventative, acute, and long-term health care. Reform legislation should and can be enacted in California this year, and action by the country’s most populous state should also advance the nation toward a longer term national solution.

Since the last failed national comprehensive health care reform effort of the early 1990s, Congress has taken only limited and incremental steps to improve existing federal programs like Medicare and Medicaid (called Medi-Cal in California), through the 1997 creation of the State Children’s Health Insurance Program (SCHIP), the addition to Medicare of a prescription drug benefit and expansion of managed competition in 2003, and various cost cutting measures in the Deficit Reduction Act of 2005. What has prevented Congress, and the President, from proposing and enacting truly comprehensive reform? There are many contributing causes, among them our country’s longstanding deeply rooted belief in the free market system, distrust of government regulation and aversion to tax increases, worry about government inefficiency and waste, and the active opposition of deep-pocketed, self-interested groups such as health insurers and for-profit medical providers.

Federal inaction, the widespread human and economic impacts of the health care crisis, and growing public awareness and resulting political pressure, have led some states, most notably Massachusetts, to enact reform legislation. Others, California most prominently, are actively considering statewide health care reform. Governor Schwarzenegger’s 2007 health care plan proposal, like Massachusetts's successful 2006 legislative reform effort, comes in the wake of earlier failed efforts. Massachusetts made three prior unsuccessful attempts while earlier California attempts to mandate that employers provide employees with health insurance failed and last year’s single-payer plan passed the legislature but was vetoed by the governor.

The Massachusetts plan now in effect and the California plan proposed by Governor Schwarzenegger mandate that all state residents have prescribed minimum health insurance coverage with partial or total premium subsidies for low income residents. Both plans are otherwise a patchwork of existing and expanded public and private insurance. California, like Massachusetts in 2006, has a Republican governor and Democratic state legislature. Given the similarities in the political climate in Massachusetts and California, and the commonalities in the plans, California’s experts, stakeholders and legislators should carefully study the Massachusetts plan and early implementation efforts. However, in considering whether or not the Massachusetts mandated insurance plan will work here, we must remember that Massachusetts is much smaller (around 6.4 million people), has a relatively low percentage of uninsured residents (10% vs. 19% in California and 16% nationally), and has a lower percentage of residents (28% vs. 45% in California) living below 300% of the federal poverty level. Furthermore, when its plan was enacted, Massachusetts had 68% of residents already covered by employer health insurance and an ample uncompensated care fund.

Were it is not for political realities, Californians would be better served if the state adopted a single-payer plan similar to that vetoed by Governor Schwarzenegger last year rather than the mandated insurance proposal now on the table. The experience of England, Germany, Canada, and other countries with government controlled and financed health care has demonstrated that their citizens have access to at least basic preventative, emergency, and acute care, with overall health outcomes and status at least comparable to ours, at significantly lower cost. Although these countries make more tradeoffs than the U.S. does in terms of benefits offered and wait-times for procedures, our tradeoffs include a lot of health care for some and none for others.


California’s health care crisis needs immediate attention, and the Governor’s proposal offers a politically realistic starting point for fashioning a feasible plan that will improve California’s current deplorable situation. Longer term, however, the country needs an overarching national health care policy rather than a patchwork of state plans that cover only that state’s residents, add further complexity, and act as a significant incentive or disincentive for individuals and businesses to move into or out of a state. Only by utilizing nationwide resources and funding mechanisms can health care providers across the country hope to meet the medical needs of all Americans. Much of our health care system is already national. Federal standards, federal programs (e.g. Medicare, Medicaid, Veterans Health, and the Federal Employees Health Benefit Program) and federal funds already predominate. Large health insurers, managed care plans, and large medical providers now operate in many states.

The Bush administration and the prior Republican controlled Congress have consistently favored tax incentives and market driven policies when addressing health care access and cost issues. Most recently, in his State of the Union message, the President proposed that a single taxpayer with employer or individual health insurance coverage be given up to a $7,500 standard deduction ($15,000 for joint filers) to help them subsidize health insurance premium costs. Employees covered by employer health plans could no longer exclude employer paid premiums from their taxable income. Although likely to benefit the insurance industry, this approach would not significantly reduce the number of uninsured or health care costs. Even the Bush Administration concedes its proposal would only result in coverage for only a few million of the almost 47 million uninsured. Also tax deductions rather than refundable tax credits are of little or no benefit to the lower income uninsured. As a practical matter, the now Democratically controlled Congress has declared the Bush proposal dead on arrival.

Nationally, health care policy goals are to provide the millions of uninsured with access to quality care while containing overall cost growth. These are difficult, but not impossible, challenges. Plans enacted or being considered by the states contain approaches and ideas well worth serious consideration in Washington. As a starting point, we could allow uninsureds between ages 56 and 65 access to Medicare, expand Medicaid coverage for low income children and adults, and permit individuals and families without employer-sponsored group insurance to buy into the Federal Employees Health Benefits Program.

Political pressure for health care reform is increasing, with business and labor groups, as well as individuals now demanding change. Certainly the topic will be part of the 2008 presidential candidate debates. Already, John Edwards has outlined his vision for universal health care coverage through a mandated insurance plan with many similarities to the Massachusetts and California plans. Senator Hilary Clinton addressed the Rochester Health Care Forum on what she thinks is wrong with the system and how we make it right, and candidate Senator Barack Obama says affordable, accessible, high-quality health care is a priority. Although Republican presidential candidates John McCain and Rudolph Giuliani have not laid out their positions, then-Governor Mitt Romney played a major role in passage in 2006 of the Massachusetts plan. One can only hope that the state initiatives and upcoming presidential debates will ultimately lead to badly overdue comprehensive national heath care reform.