Reinventing the Individual Health Insurance Market

The health insurance industry has been under attack for years. There are those who would like to do away with it completely. While those voices have grown louder in recent years their political success has been limited at best. For evidence, just look at the campaign for the Democratic presidential nomination: no major candidate called for a government-run, single-payer system. The two remaining contenders have both explicitly taken such an approach off the table.

Yet there is one aspect of the industry that is under intense attack: the individual market. Again, this isn’t new. In the past, however, most of the attacks have been unfocused or ill-informed. Critics tended to ignore unique aspects of the coverage targeted at individuals and families buying insurance outside of work: it’s a voluntary decision. To maintain affordable premiums carriers must weed out potential buyers who are certain to incur substantial claims.

For example, carriers will often reject an applicant who is a regular user of a particular prescription drug. This strikes many as wrong, if not immoral. Just because someone needs a certain medication is no reason to deny them insurance.

Yet, when the monthly prescription costs exceeds the monthly premium, what else can the carrier do? Insurance is about spreading risk. In a voluntary market where people can choose when to purchase coverage, it means they need to buy insurance before their known risks exceeds the premium. Otherwise, they are simply asking other consumers to subsidize them. This dynamic, known as adverse selection, is at the root of much of the problems facing the individual market.

It’s not the only cause, however. Carriers exacerbated the problem by mishandling their approach to managing adverse selection. The most obvious mistakes involved how rescissions were handled. Even the industry’s most ardent foes admit carriers need to protect themselves from fraud. If an applicant knowingly and intentionally lies about material information on an application for coverage, the carrier should have the right to revoke the coverage.

It’s identifying when the misstatements are knowingly and intentionally that creates a gray area. Carriers chose to be aggressive in applying their right to rescind coverage. Now they’re paying a huge cost for this posture in the form of large fines, law suits and horrendous publicity.

The rescission issue is the hammer being used by lawmakers, regulators and pundits interested in reshaping the individual health insurance market. That their proposals would be more likely to do more harm (in the form of higher prices and less consumer choice) than good seems almost beside the point. They want change. They want it now.

While their changes are often off target their goal may not be. Perhaps the attack on the this market segment is what’s needed to prod the industry to reform itself. Perhaps it’s the motivation needed to reinvent the individual health insurance market, to make it stronger, more valuable and more respected than in the past.

I’ll be writing about the opportunities for reinvigorating the individual market over the next several days. I hope you’ll share your ideas, too. Please post your thoughts on ways to reinvent individual health insurance products, the way they’re sold, administered and used. By the end of this dialogue we’ll at the very least have built a list of alternatives to some of the misguided proposals currently being considered in Sacramento, Washington D.C. and elsewhere. At best, someone who can actually implement the changes may be inspired by your thoughts and meaningful change will follow.

Stay tuned.  

Debating Medical Cost Controls in Massachusetts

The folks in Massachusetts are engaged in a lively debate over health care reform. Seems their widely touted reform plan, complete with Connector and individual mandate, is running into some unintended consequences. Among them, higher costs than anticipated and a lack of primary care physicians. The good news is the wide-ranging debate has moved beyond the politics and mechanics of the Massachusetts health plan to encompass controlling health care costs.

Consider the dialogue occurring on the Commonhealth blog (published by 90.9 WBUR, Boston’s NPR station), between Dr. David Himmelstein, Co-Founder of Physicians for a National Health Program, and Eric Shultz, President of Fallon Community Health Plan. Dr. Himmelstein kicked things off with a post claiming “With spiraling costs threatening to derail Massachusetts’ health reform, politicians and health policy wonks are rounding up the usual cost-control suspects. Unfortunately, the tired ideas they’re trotting out have virtually no chance of success.”

Dr. Himmelstein then runs through why computerization, prevention, disease management, and cost sharing won’t restrain medical costs. He believes the only way to reduce costs is to eliminate the “middle men” in the system — what you and I call the insurance industry – and to limit the profusion of expensive high technology facilities. Leaving aside a moment the public policy of a government-run system, Dr. Himmelstein fails to explain how eliminating insurance companies, insurance agents and purchasing pools curtails the rate of medical cost increase. Once they’re gone, they’re gone. Eliminating private bureaucracies and delivery systems simply shifts is a one-shot savings, not a long term solution — and that doesn’t include the offset created by the need to create a government bureaucracy and delivery system in its place.

Dr. Himmelstein’s call for fewer CAT scanners and other technologies might be more substantive, although his approach to controlling them is chilling. “So long as we leave health planning to the market, the expensive medical arms race will continue.” The implication being that only the government can control costs. Dr. Himmelstein fails to provide any examples where that has worked. I wonder why?

In any event, Mr. Shultz responded in a post with a warning that “Discussions about who pays — whether it’s a single-payer or otherwise — are, fundamentally, discussions about cost-shifting. But cost-shifting does little to get at the relentless underlying drivers of health care costs. And what’s driving up health insurance costs are skyrocketing medical costs, which consume roughly 87 cents of every health insurance dollar.” While allowing that Dr. Himmelstein’s identifying the need for limits on expensive high tech facilities is “well taken,” Mr. Shultz rejects the single payer approach. Citing a Rand study, he notes that ”only half of all health care dollars are spent on appropriate medical care.” 

This reality can only be addressed, according to Mr. Shultz, by first requiring that “all players within the health care system have quality and cost information, combined with innovative health insurance plans.” Mr. Shultz goes on to refute Dr. Himmelstein’s dismissal of disease management and smoking cessation programs as ineffective, instead calling for continued focus on prevention and disease management efforts “to ensure the most optimal results are achieved.”

There’s more to the Fallon post. The reality is that controlling medical care costs is a far from easy task. It requires saying “no” to patients demanding inappropriate or ineffective care, “no” to facilities and other providers seeking a market advantage by deploying the latest technologies, “no” to health plans who are less than clear on what’s covered — and what’s not — in their plan designs, and a whole lot more.

What’s significant is that the struggles facing Massachusetts’ health care reform plan is sparking a fulsome debate on what’s needed to restrain health care costs. That may be an unanticipated outcome of the reform effort, but it’s useful and welcome nonetheless.

Why Health Care Reform is So Complicated

As Senator Barack Obama puts it when talking about health care reform, “If it was easy, we’d have done it by now.” For proof of how complex things can be, take a look at Massachusetts. Insurance agent Bruce Benton passed along a New York Times article describing the challenges some patients in the state face in finding a family physician.

Massachusetts’ health care reform plan strives for universal coverage. Since being implemented last year, about 340,000 of the 600,000 uninsured in the state have gained coverage. The strain on the state’s budget was widely anticipated. Of the newly insured, 176,000 have government-subsidized coverage and another 55,000 have enrolled in Medicaid according to The Boston Globe. The strain on the state’s budget is serious. But again, these kind of cost problems were predictable and aren’t really surprising.

What was apparently overlooked was how the influx of newly insureds into the system is straining the pressure on family doctors and other primary care physicians. As a result there’s waiting lists for some non-emergency treatment that stretches for months in some communities. The Times article recounts one physician in Amherst that is now scheduling physicals for early May — of 2009.

The problem is a serious one. By coming into the system, through subsidized coverage or not, residents of Massachusetts anticipated having access to basic health care services. Yet there’s just not enough primary care physicians to go around.

The United States will need 40 percent more primary care doctors by 2020, according to the American College of Physicians, to accommodate the aging population. It’s hard to see where they’re going to come from. The reasons are many. As the Times story reports, factors include reimbursement rates by Medicaid, and the attraction of a specialist’s practice among them. What’s ironic is that Massachusetts ranks significantly above the average in the per capita number of all doctors and primary care physicians.

Which does one little good if you need a doctor and can’t get one to see you. And none of this means attempts to achieve universal coverage should stop. It just underscores how tough a challenge it will be to make any reform package work.

 

 

State Reform Issues More Incremental than Comprehensive

My personal belief is that comprehensive health care reform is more likely to come from federal action than anything the states do over the next couple of years. That’s certainly true in California where lawmakers are now focused on attacking specific problems rather than fixing the entire system. But the obstacles to state efforts are more than exhaustion, as I’ve written previously, states have limited resources and even more limited levers to exact change on systems as complex as the nation’s health care system.

Yet incremental reforms can make a difference, too, and several states have enacted or are considering interesting approaches. Aetna publishes a “Health Reform Weekly” it distributes to agents (among others) and their March 24th issue provided a roundup of state reform activity. I’ve taken the liberty of  reproducing much of it below. As you’ll see, with the exception of New Jersey — and to a lesser extent, Florida — these are hardly comprehensive efforts:

CONNECTICUT: Many of the health care measures approved by the Insurance Committee last week are focused on the high cost of health care. One of the committee-approved proposals would establish a wellness tax credit for small businesses; another would allow more flexibility to offer lower-cost health plans. Another proposal would allow municipalities to collaborate together to purchase health insurance. The House put forth the Healthy Steps Program, which permits the sale of reduced-mandate products, requires a cost-benefit analysis of mandates and establishes business tax credits for providing employees with health insurance. The Insurance Committee did not act on the “pay or play” health care tax bill, nor did it act on legislation that would dictate the provisions and terms included in the contracts between health insurers and physicians. Disposing of these proposals early in the session provides a boost to the business climate in Connecticut.

FLORIDA: Governor Charlie Crist’s “Cover Florida” plan for the uninsured passed out of its first committee last week and continues to move forward.Aetna has worked with the Governor’s office for several months on this proposal and has been successful in seeing a number of suggestions incorporated into this version. Health plan participation in the plan would be voluntary. Though Cover Florida still contains guaranteed issue language affecting participating plans, the plan would allow pre-existing condition exclusions as well as benefit limits.

GEORGIA: Action on the Georgia Medical Association’s prompt-pay proposal was postponed last week, but it may be acted on in committee this week.While it still contains language applying the prompt-pay requirements to self-insured plans, Aetna has been able to help reduce the bill’s impact by assuring health plans are not assessed penalties regarding prompt payment of claims unless they are below a 95 percent compliance standard. Also, the interest penalty has been reduced from 18 percent to 12 percent.

INDIANA: The Legislature adjourned the 2008 session on March 14. In recent weeks, an Assignment of Benefits bill died in the Senate.However, a “Silent PPO” bill made it through the process. After much negotiation, the industry supported the bill, which requires greater disclosure of information regarding the rental of PPO networks. The provider community attempted to include much more far-reaching, costly, and unnecessary items to the bill, but those were ultimately defeated.

MASSACHUSETTS: Commonwealth Choice health insurance premiums projected for this summer will average 5 percent more than last July’s rates.A state panel last week approved a contract to pay insurers about 10 percent more for each person enrolled in the subsidized insurance program starting July 1, making the lowest premiums in Commonwealth Care $39 a month to $116 a month. Insurers had asked for an increase of about 15 percent but agreed to less after weeks of negotiations. Under the contract, the state also would assume more of the financial risk if the enrollees were to use more medical care than expected. The Connector’s Executive Director John Kingsdale recently reported that more than 300,000 Massachusetts residents have enrolled who were previously uninsured. This large number suggests that the state’s official estimate of the number of uninsured (372,000) was low, so the cost of solving this bigger problem is going to be significantly more than originally thought (an estimated $869 million in FY ‘09 instead of $725 million).

NEW JERSEY: Senators Joseph Vitale and Robert Singer and Assemblymen Neil Cohen and Lou Greenwald joined David Knowlton, President of the New Jersey Health Care Quality Institute, last week in announcing a comprehensive health care reform initiative - the Vitale Plan - with the goal of achieving universal coverage in New Jersey.Phase One would feature a Kids First mandate requiring coverage of all children under 18; expansion of New Jersey Family Care to 200 percent of the federal poverty level; and small group and individual market reforms, including prior approval by the Department of Banking and Insurance for premium increases of more than 15 percent, an increase in MLR from 75 percent to 80 percent, and a requirement that insurers selling small group market products also sell in the individual market. Phase 2 would feature an individual coverage requirement, and establishment of a state-operated health insurance plan administered (ASO) by two insurance carriers. Projected costs for the first year total $28.8 million (of which $20.5 is for the children’s component), and funding is purportedly available at present in the form of surpluses totaling $180 million in the state’s Family Care and Medicaid Programs.

SOUTH DAKOTA: The Legislature adjourned its 2008 session on March 17.Recent legislative action includes passage of a transparency bill, which requires licensed hospitals to report charges for any procedure for which the hospital had at least 10 cases. The data will be reported to the South Dakota Association of Healthcare Organizations, which is required to develop a web-based system for making the information available to the public via a link from the Department of Health’s website. In addition, the law requires the dissemination of information about physicians’ charges for certain outpatient procedures.

TENNESSEE: The Tennessee Medical Association this week announced it now officially supports the “Silent PPO” legislation originally introduced by some individual providers.The bill closely follows the AMA model on this issue and contains significant restrictions on insurers’ ability to operate rental networks. Aetna is working with the industry to defeat this legislation.

State lawmakers are not going to ignore health care issues. Nor should they. But when it comes to substantial changes to the structure of health care and health care coverage in this country, the next president and the new Congress will need to take the lead.

The Oregon Health Insurance Lottery

It sounds more like something from a science fiction movie - the kind that star actors who you recognize, but can’t remember their name. It would be called “Healthy Luck” and the slogan would be something like, “Get lucky. Your health depends on it.” But it’s not science fiction, it’s the very real state of Oregon. And what they’re doing is holding a lottery where the winners get, not cash, but health insurance.

Back in the 1990s (don’t these stories always start back in the 1990s?) Oregon had one of the most progressive health care reform plans of any state. A key part of the program was the Oregon Health Plan, which covered 132,000 Oregonians in 1995. The Oregon Health Plan offered coverage to those unable to afford traditional health insurance, but not poor enough to qualify for Medicaid.

Then came the budget cuts. Oregon simply couldn’t afford to pay for the program. In 2004 they stopped taking new participants into the Oregon Health Plan. The percentage of the state’s population without insurance is now roughly equivalent to where it stood in the late 80’s, before the creation of the Oregon Health Plan.

Now, however, a few thousand slots have opened up and the state is going to fill it through a series of lotteries. According to the Associated Press, more than 80,000 of Oregon’s 600,000 uninsured have signed up for the chance to enroll in the program which provides basic health care, dental and vision services at little or no cost. It will take a few months to determine the winners.

For those winners, the Oregon lottery is more than science fiction, it’s a dream come true, a life line to the medical care they need. But the very existence of a lottery for health insurance underscores the need for a universal coverage plan that the country and its citizens can afford. That means making tough choices on how to control health care costs. And it means coming up with a workable solution to make access available to all Americans.

And a national health insurance lottery is not the answer.

California Health Care Reform and the Inevitable ERISA Challenge

Few were surprised when a Federal Court struck down San Francisco’s Health Security Ordinance on ERISA grounds. There were elements of the city’s ordinance that seemed to invite a suit and to have been drafted on shaky legal grounds. What’s interesting is whether the Health Care Security and Cost Reduction Act (Assembly Bill X1-1), passed earlier this month by the state Assembly and scheduled for a Senate Health Committee hearing on January 16th, will fare any better. University of Mississippi law professor Paul Secunda, writing in the Workplace Prof Blog and Anthony Wright in a December 27th posting on the Health Access blog think it will. Chris Reed of the Union-Tribune and Daniel Weintraub at the Sacramento Bee think it won’t.

The reality is, no one knows what a court will decide until a court decides. (Those three years at law school weren’t a total waste!)  The District Court ruling,  Golden Gate Restaurant Association v City and County of San Francisco, will be appealed to the Ninth Circuit Court of Appeals. And anything could happen there. 

What’s important to keep in mind is that previous ERISA decisions by Circuit Courts, such as that of the Fourth Circuit when it overturned a Maryland law aimed at Walmart, are not controlling in California. A decision from the Ninth Circuit will be. That’s just the way Federal Appeals Court decisions work — they’re only controlling in Federal Courts in the states comprising that circuit.

ERISA has been the bane of state and local health care reform efforts for years and is one of the reasons national health care reform is likely to be required. While the authors of ABX1-1 have taken great care to avoid running afoul of ERISA, that’s a far from easy task. Just ask the San Francisco Board of Supervisors. Better still, ask the Ninth Circuit Court of Appeals.

The Alfred E. Neuman Approach to Health Care Reform

The Los Angeles Times ran a surprising editorial in support of the health care reform package cobbled together by California Governor Arnold Schwarzenegger and Assembly Speaker Fabian Nunez. That the Times is supporting the reform package isn’t the surprise, it’s the reasoning.

The editorial, published on Wednesday and entitled simply “California’s healthcare plan” accurately noted that there is much to like in Assembly Bill X1-1, the Health Care Security and Cost Reduction Act. And they assume Governor Schwarzenegger will make “a reasonable case that there will be adequate funding [for the reform package] — and that there’s a backup plan in place should finances fall short ….”

So, there’s some good things in the bill. The Governor is bound to make a “reasonable” case it won’t bankrupt the state. That’s enough for an Alfred E. Neuman worthy endorsement by the Times: “Why not give it a chance?”

Well, gee. Let’s think.

First, the history of state health care reform is littered with the wreckage from “What, me worry? reforms. As described in one of yesterday’s post, Washington State and Tennessee had to roll back their reforms. New York and New Jersey consumers pay on average twice what Californians do for individual health insurance thanks to their reforms. In fact, there’s no example of state health care reform inspiring confidence that the challenges facing our health care system can be resolved at the state level.

Second, while there’s a lot to applaud about the compromise legislation, it may contain serious flaws, too.* The reality is the Health Care Security and Cost Reduction Act has not been thoroughly vetted. The bill that passed out of the Assembly Health Committee was far different than that put before the Assembly Appropriations Committee. And what the Appropriations Committee and the full Assembly passed was made available to them the day of the vote. There was no way this complex, 200+ page bill was thoroughly reviewed before its passage. The staffs of the Governor and the Speaker are very good. They are very well intentioned. And they are very human. The odds of the bill being ready for prime time are small.

Senate President Pro Temp Don Perata is to be commended for slowing down the reform juggernaut until the Legislative Analyst’s office can estimate the impact of ABX1-1 on the state’s rapidly worsening budget. The Senate should also use this time to thoroughly review details of the bill and fix what’s flawed.

Even Alfred E. Neuman should be worried about the impact of a defective health care reform package on California.

* Note: In the original post I outlined one such serious flaw, the lack of enforcement of the mandate for residents to have coverage. Mike Russo at CALPIRG posted a comment leeting me know I missed a provision that allows carriers to exclude coverage on existing health conditions for up to 12 months on “late enrollees.” In the interest of accuracy, and out of fear I missed something else, I deleted that discussion from this blog. As pennance for missing this major element of the bill the first time, I’m going to re-read the bill again to see what else I might have missed the first time. My thanks to Mike for the correction.
Alan - December 20th, noon.

States’ Health Care Reform Efforts Doomed to Fail?

I almost hate to bring this up. After all, everyone is so excited (not necessarily supportive, but excited) about Assembly Bill ABX1-1 (Nunez) making it through the California Assembly on Monday. For those not paying attention, ABX1-1 is the compromise health care reform legislation put forward by Speaker Fabian Nunez and Governor Arnold Schwarzenegger. It faces a very uncertain future in the State Senate, where it will be considered in early January. And it is contingent on passage of a financing measure supporters hope to qualify for the November 2008 ballot.

So I feel like the Grinch at the office holiday party, but a strong case can be made that the states are not the place for health care reform. In fact, Ezra Klein, a staff writer at the self-proclaimed liberal American Prospect, has made a strong case states tend to fail at health care reform.  The title of his piece, published in the August/September 2007 edition of the Washington Monthly, sums up his point: “Over Stated: Why the ‘laboratories of democracy’ can’t achieve universal health care.“

Mr. Klein describes providing health care for all citizens as being “one of those tasks, like national defense, that the states are simply unequipped to manage on their own.” He then sets out the several failures states have already experienced. Washington State’s “Clintonian-style” program, recent challenges faced by Hawaii, Tennessee’s fiasco called TennCare, and Oregon’s troubled attempt “to do the one thing that really needs doing: controlling costs.” He also points out why Massachusetts’ health plan is unlikely to work in other, more diverse and poorer states. Mr. Klein concludes that the “results are pretty clear: states are no good at delivering universal health care.”

Mr. Klein’s message is that the federal government should implement universal coverage and relieve the states of their impossible quests. He appears to support a government-run system, but that’s not the focus of the article.

Nor should it be the focus of Californians contemplating our own health care reform effort. We have to deal with the issues on the table and there’s substantial momentum now for a state solution. But as California moves forward, we should heed the warning from Washington, Hawaii, Tennessee and Oregon. Budget projections often miss the mark (just look at the surprised look on the faces of California lawmakers learning the state’s budget is $14 billion out-of-whack). Assumptions that make sense on paper don’t always play out the way we expect in the real world. Administrations and policy priorites change.

In other words, the road to state health care reform, paved as it is with good intentions, often leads to unpleasant results.

ABX1-1 Exemption: A Road to New York?

Earlier this month, America’s Health Insurance Plan’s (AHIP) published it’s annual Health Insurance: Overview and Economic Impact in the States. It provides a snapshot of the economic impact health insurance has on state economies along with some interesting statistics. More importantly for those involved in California’s health care reform debate, it offers a warning about the need to get reforms right.

First, some general statistics. The average individual insurance policy in the country costs the average single American $2,613 and the average American family $5,799. Californians hover within two percent of the national average — a little lower for single coverage; a little higher for family policies. Note: the AHIP numbers reported for California strike me as high. The average monthly premium I’ve seen for single individual coverage hovers around $130, substantially below AHIP’s findings. Granted, my data comes mostly from online sales where purchasers tend to skew younger than the general population, and, consequently, pay lower premiums.

When it comes to small group coverage, Californians pay about five percent less than the national average. Nationally, single coverage in this market segment is, on average, $3,732 and family coverage averages $9,768. In California the premiums average $3,552 for singles and $9,768. So, pre-health care reform, California’s premiums are pretty typical. So far, so good.

While comparison to the national average is interesting, what the report clearly indicates is that health care reform, done badly, costs consumers money. Lots of money.

 In New York, for example, where there’s a mandate to sell coverage, but no mandate to buy it, single coverage in the individual market costs $4,734 (85 percent more than in California) and families pay $12,254 (over twice as much). In New Jersey, which has also sacrificed affordability in the name of health care reform, single coverage costs $5,326 (twice as much as Californians pay) and $10,398 (77 percent more).

In California we’re considering a path to higher premiums no less dramatic than our east coast cousins. However, whereas they were explicit about the path they took, in California we’re contemplating a more indirect route to higher premiums. In New York and New Jersey, they consciously chose to create an unbalanced market dynamic, one that encourages folks to wait until they’re in need of health care before buying insurance. This is comparable to allowing drivers to buy auto insurance from the AAA as the tow-truck hauls your car away to the shop).

Assembly Bill X1-1 (Nunez) gets California to a similar result, but more subtlety. The bill includes both, a mandate to sell and a mandate to buy individual coverage. However, it also includes an exception to the buy-side of the equation which makes the mandate nearly irrelevant. ABX1-1 exempts anyone from the obligation to have coverage when the premiums and out-of-pocket costs (deductibles, etc.) exceed 6.5 percent of a family’s gross income. ABX1-1 mitigates the impact of this exemption slightly by providing subsidies to many low- and moderate-income families, but there’s clearly a segment of the population that will be covered by this provision. The question is, how large is that segment? If it’s too numerous, the result will look a lot like Gotham.

Because ABX1-1 fails to define the minimum coverage residents are expected to have, there’s no way of estimating familys’ out-of-pocket exposure. But let’s be conservative and assume $3,000 for an individual and $6,000 for a family (most discussions assume it will be closer to $5,000 and $10,000).  Using the AHIP’s study average premiums, single Californians earning less than $85,615 would be exempted. Using my $1,800 annual premium estimate sets the exemption at $70,150. Either approach amounts to a lot of single Californians.  The average AHIP average for family premium, means those in households earning $182,830 would have the option of waiting until medical care was needed before obtaining coverage.

Now, these are averages and questionable ones at that. But even so, they serve as warning flags. In crafting an affordability exemption, California lawmakers need to consider what it will do to the balance needed to achieve a healthy insurance system. One solution: limit the exemption to the cost of coverage. After all, someone taking the exemption has unlimited exposure to medical costs; with even catastrophic coverage their exposure is capped. Failure to consider the need for balance will result in what New Yorkers bear: a formidable health care reform surcharge.

New York is a nice place to visit, but I wouldn’t want to buy health insurance there. Neither would a lot of other voters. California lawmakers should take note.

California Health Care Reform: Sound and Fury Awaiting Preemption?

A lot of blood, sweat, tears and money has been spent on the health care reform debate in California. Hordes of lobbyists, armies of state staffers, thousands of citizens, several lawmakers and the Governor have all labored long and hard to create a package of reforms which can garner enough agreement to become law. The work continues and will continue for some time.

Some pundits think nothing will come from all this. The differences are too wide, the costs are too great and the parties are too polarized to find common ground. Others (and I’m among them) think that the differences are overstated, the financing will be decided by voters next November and the political impetus to accomplish something will overcome the politics of polarization. 

As I watch the presidential campaign unfold, however, I’m wondering how much it all matters. Because whatever California accomplishes on th health care reform front is likely to be pre-empted before they can have much impact.

Consider:
If the Governor and Legislative Leaders fashion a workable compromise in the next several weeks most of its provisions will likely be contingent on approval of an initiative on the November 2008 ballot to finance the reforms. As a practical matter this means few of its provisions will likely to kick in before 2010 — and some will take a year or two more to implement.

On that same ballot we’ll elect a new president. Whoever wins will have spent considerable time pledging to improve the nation’s health care system. While there are some differences among the candidates, the proposals tend to break along party lines. Democrats call for mandating health care insurance for all Americans, although none of the major candidates support a single payer system. Republicans focus more on market-based solutions that do not require mandates. (Wharton School’s site has a good summary of how health care reform is shaping up in the presidential campaign.) 

The health care reform debate in Washington will be as vociferous, complicated and passionate as it has been in California. Nothing will pass immediately, but there will be tremendous pressure to enact something before the 2010 Congressional elections. After all, with unions and big business standing side-by-side calling for change, health care reform is rapidly becoming a non-partisan issue. Calls for reform wil grow louder if several states pass markedly different reform plans (patchwork approaches to national problems aren’t favored in this country). And if several of those state efforts fall to ERISA challenges, the outcry for a national solution will be deafening.

So let’s assume the new President signs a national health care reform package before November 2010. From a practical standpoint, this means implementation of a national health care reform package would begin in 2012, give or take a few months. Since federal law trumps state law, much of what’s in place in California, Massachusetts, Vermont and elsewhere will be preempted. After all the debate and hard work, most of what was built here will be swept away.

The impact on state’s like California is almost Shakespearian  (”Out, out, brief candle! Life’s but a walking shadow, a poor player that struts and frets his hour upon the stage, and then is heard no more. It is a tale told by an idiot, full of sound and fury, signifying nothing. Macbeth Act 5, scene 5).

OK, a bit overly dramatic (but hey, the classics class up any blog). And passage of a California solution could still have great value. It would serve as a model for national reforms, add pressure for federal action, and be a safety net in the event of federal inaction.

So we’ll continue to trudge along. Debating passionately the nuances of the mandated Medical Loss Ratio provision, what affordability looks like and the fairness of mandating coverage. We all need some sound and fury in our lives. And besides, “… there’s nothing either good or bad, but thinking makes it so.” Hamlet, Act 2, scene 2).