Tuesday, March 20, 2007

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.

7 Comments:

Anonymous Janet said...

Your post is so fascinating. I have heard a lot about this

5/31/2007 1:05 AM  
Anonymous Kim said...

Nice observation, thanks.

6/04/2007 3:42 AM  
Blogger Michael said...

Let’s all put on our collective thinking hats and work up a solution for California health care.

I will start out this new line of thinking (we can give it a try when AB 8 does not get sufficient support to pass) and we can “round robin” it until we have an effective solution. Sound like fun? Okay, maybe not as much fun as taking over a small Latin American country and declaring yourself El Presidente but it is worth a try.

Let it begin:

Fact: In 2007-2008 the Health and Human Services related organizations will receive $38 billion dollars from the budget.

Question: Is there a way to create and run a state hospital to enable a system whereby there is no or low cost health services?

Answer: Yes.

Discussion: In 2005 there were 355 hospitals in California with a combined bed space of 75,517 total beds and 36 million people or 0.48 beds per 1,000 population. There are several new hospitals bring constructed, expanded or replaced in California, an average price for a complete hospital with ICU, ER and 250 beds is about $200 million. Based on a 2001 budget from Natividad Medical Center a 163 bed facility with several satellite clinics, surgery center, ICU, and ER can be run for $113 million. Giving a double increase over the last six years puts the cost at $226 million.

If California took 25% of the Health and Human Services budget for the year or $9.5 billion and moved the money to a fund setup for the creation of a self funded health care system, all of California would have access to health care within a few short years. If we took this years budget as an example the following would be an optimum situation:

 Year 1 = $9.5 billion budget
o Building new California State Hospitals with 75% of the $9.5 billion budget would create 35.6 new hospitals and 8,900 new beds.
 Each hospital would take 1.5 to 2 years to complete for building.
o $2.375 billion would go to the first 8 hospitals open for staffing.
 Year 2 = $9.5 billion budget
o $7.8 billion spent on staff for 75% of the new hospitals. 26 open and running.
o $1.7 billion reserve.
 Year 3 = $9.5 billion budget
o All new construction finished with 36 new hospitals and 9,000 new beds available.
o $10.8 billion for staff and operations on all of the hospitals.
o Based on current ratios of 0.48 beds per 1,000 population it is conceivable that the new hospitals could provide free services to 18 million people in California. This means that half of the Californian population would be able to receive free health care.
 Year 4 = $13.3 billion or 35% of the 2007-2008 budget for Health and Human Services.
o Transition from traditional Health and Human Services to total system health care.
 Families earning $50,000-110,000 per year can buy into system for $150 per family per month. Projected that 2.5 million families may signup for additional revenues of $4.5 billion.
o $11 billion staff and operations on all of the hospitals.
o $2.5 billion new hospital construction cost or 10 new hospitals under fast track program for 1.5 year build-out.
o $4 billion surplus.
 Year 5 = $19 billion or 50% of the 2007-2008 budget for Health and Human Services.
o Transition from traditional Health and Human Services to total system health care.
 $150 per family per month for $50-110k families. Projected 2.5 million families for additional revenues of $4.5 billion.
o $14 billion staff and operations on all of the hospitals (46).
o $2.5 billion new hospital construction cost or 10 new hospitals under fast track program for 1.5 year build-out.
o $7 billion surplus.
 Year 6 = $19 billion or 50% of the 2007-2008 budget for Health and Human Services max amount under budget law with 2%-5% cost increase.
o Transition from traditional Health and Human Services completed, department ended.
 $150 per family per month for $50-110k families. Projected 2.5 million families for additional revenues of $4.5 billion.
o $17 billion staff and operations on all of the hospitals (56).
o $2.5 billion new hospital construction cost or 10 new hospitals under fast track program for 1.5 year build-out.
o $4 billion surplus.
 Year 7 = $19 billion
o $150 per family per month for $50-110k families. Projected 2.5 million families for additional revenues of $4.5 billion.
o $20 billion staff and operations on all of the hospitals (66).
o $2.5 billion new hospital construction cost or 10 new hospitals under fast track program for 1.5 year build-out.
o $1 billion surplus.
 Year 8 = $19 billion
o $150 per family per month for $50-110k families. Projected 2.5 million families for additional revenues of $4.5 billion.
o $23 billion staff and operations on all of the hospitals (76).
 19,000 beds
 New better ratio of beds to population and still serve 18 million population under plan.
o $.5 billion surplus with extra cash of $16.5 billion.


So, as you can see, moving to another system, like AB 8, in which the government is subsidizing a for profit corporation or a non-profit (that is not really a non-profit) is not the best system to move towards. As outlined above the system would be best suited for a corporate structure with state employees left out of the mix. After all, if the state of California is going to act socialist it might as well practice sustainable socialism.



I agree that politicians left to their own devices will over spend any amount of funding they receive and bring little in return for it. So, let us develop this idea a bit more.

Same situation as about with little governmental oversight but rather a private corporation setup just for the purpose of running the system described above. The corporation is allowed to “profit” by charging maximum of 15% admin fee on top of the budget they receive. This 15% can go down depending upon the “satisfaction” of the insured public.

How we measure this I have not developed just yet.

Example:

In year one I list that the budget is $9.5 billion and as such the fee for the private corporation would be $1.4 billion if all time points and cost were met with great results. If however they did not build, open, and run efficiently the set number of hospitals, say they only got 80% of the job done, then they would be dropped to 10% or $900 million.

In year 4, the total best they could do is $2.67 billion in profit if they did everything perfectly. If however they only hit a 50% satisfaction point then they would get 7% or about $1.2 billion.

We could play with the numbers to come up with something that gives incentive to the corporation to make the consumer happy and make the program work.


Tell me what you think and add to the business model.

Yours truly,

Michael Kassing, JD
SizeMonkey.com

9/12/2007 6:47 PM  
Anonymous Alan said...

Six months later and we're still looking to see what health care reform emerges from California. Governor Schwarzenegger's package is due to be introduced in bill form any day now. Hopefully that will allow lawmakers to focus on the policy of health care reform, not just the politics of it.

9/22/2007 11:10 PM  
Blogger Michael said...

Alan, here is how the Governor's bill hits my pocket book.

The Governor’s staff never looked at the reality of the financial situation when they wrote the latest health care document. Let me give you an example of how this bill would affect a family, mine:

I graduated law school and am waiting for my bar card, I earn about $4,000 per month as an independent contractor and support myself, my wife Asha, daughter Erika, daughter Bryce, and baby boy Ryan. I have an adjustable rate mortgage that is sitting at $1,800 per month on a house that is too small, $800 per month on $120,000 worth of student loans, $250 per month on one car (the other is paid off), $200 per month on auto insurance, $250 per month on utilities and cable, $200 per month to help with taxes at the end of the year leaving $500 for food, gas, health insurance for the children, and mad money.

The Governor’s bill would make me pay 48% of my “discretionary income” or $240 per month on redundant (the kids are covered) health insurance that I would purchase now if I could afford it.

Does the Governor think I go to sleep every night thinking how lucky I am that I don’t have health insurance? No, I go to sleep every night and think how lucky my son and daughters are to have their mother at home being a mother. I go to sleep every night and think that things will be better for my family and we have to make some sacrifices now that will lead to well adjusted children that will someday turn into well adjusted adults. I go to sleep every night and tell myself that now is not the time to get sick or injured, that can come in the future when we are covered.

This letter comes from the many Californians that are in my situation, working hard to get by. We do not have health care because we can not afford it without extreme sacrifice, in my case sending my wife, the children’s mother, back to work. The Governor’s bill does nothing to address the problem for people like me, rather it creates a larger problem; creating another tax burden for me to cover, 6% of my gross income or 48% of my net after living expenses.

I urge everyone to not support the Governor’s bill and if you do I would like you to meet the family you are going to burden with a 48% tax.

Yours truly,

Michael Kassing, JD

10/10/2007 2:01 PM  
Blogger Dallas Health said...

What are the various types of health insurance programmes that are available to me, and which is best suited to suit the needs of my family and myself? How do I choose the ideal health care plan? What are the major points that one needs to bear in mind while buying Health Care Insurance Policy? http://natural-health-care-information.blogspot.com

7/17/2008 8:29 AM  
Blogger Dallas Health said...

What are the various types of health insurance programmes that are available to me, and which is best suited to suit the needs of my family and myself? How do I choose the ideal health care plan? What are the major points that one needs to bear in mind while buying Health Care Insurance Policy? http://natural-health-care-information.blogspot.com

7/17/2008 8:30 AM  

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