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).

Vermont Leading the Way in Health Care Reform

The Assembly Health Committee is holding a hearing on Governor Arnold Schwarzenegger’s health care reform package tomorrow, October 31st (yes, on Halloween, go figure). I’ll be there testifying on behalf of the California Association of Health Underwriters and the California chapter of the National Association of Insurance and Financial Advisors. I’ve got my formal statement ready, but now I’m wondering. Perhaps I should just read an opinion piece from today’s San Francisco Chronicle by Spyros Andreopoulos, director emeritus of the Office of Communication and Public Affairs at Stanford University Medical Center. Mr. Andreopoulos makes the point that the focus of reform should be on constraining health care costs. Nothing new there.

However, Mr. Andreopoulos goes on to cite three causes of skyrocketing medical costs:

“– 75 percent of health-care spending is associated with chronically ill patients - those with predictable and long-standing medical problems, according to “Chronic Disease Overview,” published in Nov. 18, 2005 by the Centers for Disease Control and Prevention.

– Chronically ill patients only receive 56 percent of the clinically recommended preventive care, according to an article in the June 26, 2003, issues of the New England Journal of Medicine. Nearly two-thirds of the rise in health care spending is associated with rising rates of patients treated for largely chronic diseases.”

– Nearly 30 percent of the growth of health spending is associated with the doubling of obesity over the past 20 years - a chief contributor to chronic illness, according to an article in the Oct. 20, 2004 issues of Health Affairs.”

He then describes what’s required to address these cost drivers and points out how Vermont effectively addressed them in developing its health care reform plan. Notably, Vermont’s reforms were passed by a Democrat-controlled Legislature and signed into law by a Republican Governor. Apparently there’s more to the place than fall foliage, maple syrup and ice cream with weird names from two guys named Ben and Jerry. There’s a lot of common sense, too. Lawmakers there reached agreement on their reform package by first negotiating reforms aimed at tackling health care costs.Then it focused on how to assure access to care. Which makes sense. Requiring consumers to pay for health care coverage (whether through premiums or taxes) is a lot easier — and more fair — once they’re convinced the coverage will be affordable. Without that assurance the result will be what’s happening in California: competing plans focused on coverage being sniped at from every direction by every stakeholder.

As Mr. Andreopoulos puts it, California lawmakers “must take Vermont’s example and redefine the discussion to the issue of rising costs as the first priority. The focus must be how to cut costs and streamline the system, and what will the end product look like, and most important persuading Californians that health insurance will be affordable.” If he’s available, I’m more than happy to give up my time at tomorrow’s hearing for Mr. Andreopoulos to make his point to the Committee.

It’s About Controlling Health Care Costs: Learning from Massachusetts

Massachusetts’ health care reform experiment is nearly 18 months old now. According to an article in the San Jose Mercury News reports some fear “the initiative may buckle under money pressures in coming years.”

The good news is that the program successfully enrolled 200,000 previously uninsured people, virtually all of them in free or heavily subsidized coverage. These tended to be the state’s neediest residents. Those who were ineligible for state help and were uninsured are not flocking into the system, at least not yet.

The problem, according to Alan Sager, a professor of health policy and management at Boston University, is that “We’re covering more people, but it’s not sustainable over the long haul. The law does nothing to control costs.” And there’s the rub.

California may or may not pass comprehensive health care reform soon. The people of California may or may not pass any of several health care reform initiatives which will come to a vote in 2008 to fund these health care reforms. The problem is, that while we call these efforts health care reform, they mostly focus on health insurance reforms. Yes, they include cost containment provisions such as moving to electronic health records, promoting healthier lifestyles and wellness programs, encouraging evidence-based medicine and the like. But the reality is that the population is getting older, new technologies cost more, and consumers expect more from their medical care. In short, the underlying cost of health care is going to continue to increase regardless of what insurance reforms are put in place.

Attacking insurance company practices is good politics — and changes in market behavior are needed. Achieving universal coverage would be a real benefit to millions of Californians. It’s a goal we should move toward as soon as we can devise a workable way to get there. Health insurance reforms are needed (although some of the approaches being advocated are very ill advised). We need to recognize, however, that this approach addresses only a part of the problem, and the easiest part at that. What is most necessary is also much tougher: bringing the rate of health care costs down to something resembling overall inflation. There’s no magic solution for this. It will require tough choices and brave leadership. But as we’re learning from Massachusetts, failure to confront this challenge will undermine whatever so-called health care reform package emerges.

The Misguided Health Care Reform Surcharge

The last couple of posts have dealt with the guarantee issue requirements in the individual health insurance market, a central component of several health care reform proposals. What I’ve suggested is that guarantee issue, which simply means health insurance carriers have to accept all applicants regardless of their health risk, if done right can lead to universal coverage, but if done wrong can lead to disaster.

The line between right and wrong in this context concerns requiring consumers to be insured. If it’s required, and that requirement is effective, guarantee issue can work. In systems where consumers can wait until after a need for insurance develops you wind up with a mess. The poster children for disaster are New York and New Jersey. Consider the results of a 2005 study conducted by the America’s Health Insurance Plans (AHIP):

Average Annual Individual Health Insurance Premiums:
                                          New Jersey        New York      California
Single Coverage:                $  6,048               $ 3,743         $ 1,885
Family Coverage:                $14,403               $ 9,696         $ 3,972

New Jersey and New York have guarantee issue (and community rating) without a mandate to purchase coverage. California does not — at least, not yet. The result: a consumer in New Jersey buying coverage just for herself pays surcharge for the state’s misguided health care reform of over $4,100. If she moves to New York, the surcharge falls to approximately $1,850.

Families suffer more when health care reform goes bad. A family in New Jersey buying their own coverage pays over $10,400 more than a California family; New Yorkers pay over $5,700 more.

Think of the impact of a 350% surcharge on a family’s budget — or on a state’s economy. Promoting guarantee issue in the individual market as a key to achieving universal health care coverage is both noble and reasonable — if it’s done right. If done wrong, the state and its citizens will pay the price.