The Alan Katz Health Care Reform Blog

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Archive for May, 2007

The Hidden Tax: How Much is It? Does it Matter?

Posted by Alan on May 30, 2007

Governor Arnold Schwarzenegger did a masterful job when introducing his health care reform package in moving the debate from health insurance lingo to terms “regular” folks could understand. One example concerns the term “cost shifting” which describes what happens when the uninsured receive medical care for which they cannot pay: the cost of those services are shifted to those who can pay — those with insurance. The term may be descriptive, but as political coinage, it carries little weight.

In introducing his health care reform plan Governor Schwarzenegger described the same phenomena as a “hidden tax.” Everyone understands a tax. No one likes them. And hidden taxes sounds vaguely sinister.  Most significantly, it allows the Republican Governor to position himself as a tax cutter at the same time he calls for imposing some very tax-like “fees” on businesses, hospitals and doctors.

But how real is this hidden tax on which the Governor depends so heavily? According to a recent column by the Sacramento Bee’s Dan Walters, the Governor relied on a study conducted by the New America Foundation which claims premiums in California are 10 percent higher than they would be if everyone is insured. This is real money: approximately $1,200 per year for a typical family. What this means is that the fees the Governor would oppose can be viewed merely as a means of recapturing some of this hidden tax for the noble purpose of subsidizing premiums for low- and mid-income Californians and lowering overall premiums for everyone.

However, a new study by researchers at Stanford University’s Hoover Institution takes serious issue with the methodology used by he New America Foundation. According to Walters, the folks at Stanford peg the Hidden Tax at less than 2.8 percent of premiums. Let’s assume 2.5% and it works out to about $300 per year for that typical family.

Academics can — and given the politics of the issue, will — debate the size of the Hidden Tax for months to come.  And those in the business community who oppose the fees the Governor would impose on them will use the controversy to position those fees as unfair. That’s politics as usual.

Yet all of this strikes me as a distraction. While a better understanding of the financial impact of California’s current health care system is important, it’s not the only justification to push for changes. The need for action is better justified because it’s the right thing to do.

Anthony Wright has a similar take on this in a May 29th posting on the Health Access California blog. And Senator Barack Obama captured the essence of the need for reform in introducing his own health care reform proposal on May 29th. “We are not a country that rewards hard work and perseverance with bankruptcies and foreclosures,” he said. “We are not a country that allows major challenges to go unsolved and unaddressed while our people suffer needlessly. In the richest nation on Earth, it is simply not right that the skyrocketing profits of the drug and insurance industries are paid for by the skyrocketing premiums that come from the pockets of the American people. This is not who we are. And this is not who we have to be.”

Leaving aside the rhetoric over profits, Obama captures the justification for reform.  Whether the Hidden Tax is two percent or 10 percent is less important than that we as a state and a country can do better to protect the health and financial security of our people.

That’s why the health care debate is so important. And that’s why it’s so important we get it right. Lawmakers need to take the time to thoroughly understand the consequences of their actions and to find a balanced, responsible approach to meaningful reform. Eliminating the Hidden Tax is a part of the puzzle, but only a part.  Creating a health care system which is accessible, affordable and fair should be our goal. It’s closer to who we are and who we can be.


Posted in Arnold Schwarzenegger, California Health Care Reform, Health Care Reform, Healthcare Reform | Tagged: , , | 3 Comments »

Senator Barack Obama’s Health Care Reform Plan

Posted by Alan on May 29, 2007

Illinois Senator Barack Obama revealed his plans for achieving universal health care coverage today in Iowa. Text of Senator Obama’s Health Care Reform Speech. In the context of the Democratic presidential primary it’s a centrist approach which reveals much about his political philosophy and approach to policy making.

Senator Obama has previously pledged to sign a bill assuring universal health insurance coverage for all Americans. His preferred approach is an interesting mix of public and private offerings.  Senator Obama’s plan would enable all Americans to buy into a government run purchasing pool offering coverage similar to that provided to federal employees. Senator Obama calls for subsidies to help low and middle income families afford this coverage, although his speech didn’t provide details as to the amount of the subsidy or who would qualify.

Coverage through the pool would be provided on an individual basis, meaning it would remain in force even if the insured changed jobs. To pay for the subsidies, Senator Obama would let President George W. Bush’s tax cuts for the wealthiest Americans expire. He’d also levy a tax on “all but the smallest employers” who fail to provide eligible coverage to their workers.

Interestingly, unlike former North Carolina Senator John Edwards, Senator Obama does not seem to require individuals to purchase coverage. If his voluntary approach doesn’t succeed, he’s prepared to revisit the plan until 100 percent of the population is insured.

Unlike many Democratic proposals, Senator Obama explicitly called for assuring choice in the marketplace, “If you want more choices, you will also have the option of purchasing a number of affordable private plans that have similar benefits and standards for quality and efficiency.”

Central to Senator Obama’s health care reform plan are five initiatives aimed at constraining health care costs:

1.  Shifting some expenses for catastrophic health care expenses to the federal government.

2. Requiring all plans to cover “evidence-based, preventive care services” and the promotion of healthier lifestyles.

3. Reduce the $100 billion a year he estimates is wasted on poor quality care by requiring hospitals and providers to “collect, track, and publicly report measures of health care quality.”

4. Reducing waste and inefficiency through adoption of electronic medical records and other technologies.

5. Reforming the pharmaceutical and health insurance industries.  These reforms include stopping drug company practices which drive generic drugs out of the market and, interestingly, taking on insurance industry consolidation.  Noting there were over 400 health plan mergers in the past 10 years, Senator Obama pledged to investigate and prosecute the monopolization of the insurance industry. And where we do find places where insurance companies aren’t competitive, we will make them pay a reasonable share of their profits on the patients they should be caring for in the first place.”

Taken together, Senator Obama claims his cost cutting measures are expected to reduce average health insurance premiums by $2,500.

There’s a lot of details still needed to fully flesh out the Senator Obama health care reform plan. But today’s speech goes a long way to adding substance to the broad rhetoric of the past. Significantly, Senator Obama rejects the single payer system solution promoted by the liberal wing of the Democratic party and many unions. While he doesn’t explicitly criticize this approach, he does throw an implicit elbow there way when he promises that his approach means, “If you need to see a doctor, you will not have to wait in long lines for one. If you want more choices, you will also have the option of purchasing a number of affordable private plans that have similar benefits and standards for quality and efficiency.”

While rejecting a single payer approach will cost him some votes in the Democratic primaries, it positions him well for the general election if he gains his party’s nomination.  And by focusing the bulk of his speech on the need for cost containment, Obama demonstrates a sophistication on the health care reform issue often lacking in the political debate. Further evidence of his nuanced approach is a recognition that even insurance and drug companies deserve a seat at the table, even if “they don’t get to buy every chair.” All of this is evidence of a realism too often missing from the debate.

There’s much to be concerned about in his approach. One example: government run purchasing pools rarely perform as promised and usually create an unlevel playing field in the market. Another: Requiring carriers to sell coverage to all applicants, regardless of pre-existing medical conditions, without a mandate for individuals to buy coverage is a recipe for disaster. Just ask folks in New York and New Jersey.

But I doubt if Senator Obama expects his plan to be enacted as is. While promising to sign a universal coverage bill by the end of his first term, Obama has long taken a reasonable approach to reform: stay focused on the goal, but to be “agnostic in terms of how to achieve those values.” And that’s the way politics should work.

Posted in Health Care Reform, Healthcare Reform, Politics, Presidential Election | Tagged: , , | 5 Comments »

California Health Care Reform in 2007? Maybe Not.

Posted by Alan on May 23, 2007

The calendar is beginning to work against significant health care reform in California this year. Although the legislative leadership, organized labor and the Governor Arnold Schwarzenegger all would like to resolve the issue this year, folks I’ve talked to in Sacramento are beginning to wonder if it’s possible.

While other issues have been resolved, and the Governor has reportedly said health care reform is the next “big” issue he wants to address. But there’s going to be a lot of distractions getting in the way.

The first is the deadline for legislation to pass its house of origin is in early June. If a bill introduced in, for example, the Assembly, isn’t approved by that body, it’s dead. This means legislators will need to vote on literally hundreds of bills in a very short time, a time consuming task.

Then there’s the need to pass a budget. According to the constitution, this is to be done by July 1st, but with a challenging financial landscape and significant differences between what the Governor and the Legislative Leadership wants to spend, this deadline will be tough to meet.

There’s also the matter of reapportionment. The Legislature wants to tweak term limits, but the Governor has said he won’t support the needed initiative (already set for the February 2008 ballot) unless there’s changes in how California’s legislative distrcits are drawn. This is not a simple issue — and legislator’s careers are at stake. It’s going to take considerable work to get this done.

Finally, there’s the matter of the summer recess, which goes from July 20-something to August 20-something. The Legislature is in session for about a month after this recess and then adjouns for the years.

All of this will make it difficult for the Governor and Legislative Leaders to devote much time to health care reform. Granted, their staffs can work on the issue while their bosses are busy on other things, but we’re talking about an extremely complicated issue which impacts over 15 percent of the state’s economy. One would hope the principals would want to devote some quality time to it.

Taken together, this makes it unlikely health care reform will pass this year. Unless … and there’s something about the Governor’s penchant for the grand gesture that makes me think there’s a fair chance of this happening … the Governor calls a special session to deal with health care and, if it’s still not settled, reapportionment.  This would be a dramatic way for Governor Schwarzenegger to demonstrate his seriousness about attacking the issue. Special sessions are rare in California. But don’t count one out if the calendar’s distractions sidetrack a health care reform bill in 2007.

Posted in Arnold Schwarzenegger, California Health Care Reform, Health Care Reform, Healthcare Reform, Politics | Tagged: , | Comments Off on California Health Care Reform in 2007? Maybe Not.

Promises Made. Promises Kept?

Posted by Alan on May 19, 2007

Every health care reform plans being considered in Sacramento is basically a promise. Several proposals, for example, call for expanding existing public health care coverage programs and creating premium subsidies to help low income Californians ineligible for public programs to better afford private coverage.

Making promises is easy. Keeping them is a lot harder. Sometimes because conditions change after the commitment is made, sometimes even the best and most sincere of efforts fail.  Sometimes it’s all about execution, or more precisely, a lack of execution.

Unfortunately, when it comes to delivering on health care coverage promises, the state’s track record is less than reassuring. Consider: according to UCLA’s authoritative California Health Interview Survey, over 630,000 Californians were eligible for, but failed to enroll, in state programs like MediCal and Healthy Families in 2005.  This represents approximately 13 percent of the 4.9 million uninsured identified in this CHIS study (other CHIS studies estimate there are 6.5 million uninsured Californians). For these these 630,000 people, the promise has not been kept.  

You’d think health care reform proposals by the Governor and legislative leaders would address this sad reality. Yet, as far as I’m aware, only CAHU’s Healthy Solutions  plan addresses this issue.

Healthy Solutions calls on the state to increase participation in Healthy Families and MediCal to at least 85 percent before expanding them. CAHU’s position is not “anti-expansion.” It’s pro-keeping promises, as evidenced by the suggestions it offers to increase participation by those currently eligible for the programs.

Healthy Solutions calls on the state to take a business-like approach to current outreach efforts. This means reviewing existing outreach efforts and requiring them to prove their effectiveness. And it calls on the state to consider new approaches to outreach, including:

  • Identifying and enrolling eligible participants when they access the health care system at community clinics, emergency rooms and the like;
  • Identifying and enrolling eligible participants when they enroll for school, whether K-12, community colleges or adult education programs;
  • Simplifying the enrollment process by modifying qualification requirements to tie into other programs aimed at helping low income families, such as Section 8 Housing and food stamps;
  • Commencing inter-agency discussions aimed at combining and simplifying enrollment processes for these programs; and
  • Increasing participation by the working poor by enabling employers and health plans to create a single point of entry to private and public health care coverage programs.

Health care reform is one of the most important promises the state will make to its people in the coming months. It’s similar to Bruce Springsteen’s line in The River: “Is a dream a lie if it don’t come true, or is it something worse?” Enacting legislation with hollow promises is worse than a lie. Promises matter. And so does delivering on them. 

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Schwarzenegger Health Care Reform Redlines Lower Income Californians

Posted by Alan on May 18, 2007

Several health care reform proposals call for subsidizing insurance premiums for those earning too much to qualify for state programs, but not enough to afford typical premiums. Governor Arnold Schwarzenegger’s health care plan and CAHU’s Healthy Solutions plan are two examples of initiatives taking this approach.

There’s a significant difference between these two plans concerning how these subsidies can be used. Under the Governor’s proposal, those receiving subsidies can only use them to purchase coverage offered through a state-run purchasing pool called an “Exchange.” Under the CAHU reform plan, subsidies can be used in the open market. The distinction is significant.

By redlining subsidized Californians into a state purchasing pool the Governor’s plan limits their choice. The only real beneficiary is the agency running the pool: they’re guaranteed a clientele whether they “earn” it or not.

The CAHU proposal calls for subsidizing health insurance premiums for those earning 400% of the Federal Poverty Level or less. And it gives them the same freedom and choice as their neighbors not earning subsidies.

Imagine a legislator introducing a bill limiting Californians receiving food stamps to use them in a state run grocery store. The outcry from the left and right — and from the Governor’s office — would be loud and swift. What’s the difference here? Maybe the subsidies should be called “health stamps” to make things more clear.

Just because someone needs help paying their premiums doesn’t mean they should be denied the same rights, choices and access to innovation available to everyone else. The Administration’s current course of segregating subsidized individuals into a state run purchasing pool is neither fair nor needed. Redlining is redlining. The state should root out such behavior, not promoting it.  The time has come for the Governor’s team to rethink this part of their health care reform plan.

Posted in Arnold Schwarzenegger, California Health Care Reform, Health Care Reform, Healthcare Reform | Tagged: , , , , | Comments Off on Schwarzenegger Health Care Reform Redlines Lower Income Californians

The Key to Long Term Health Care Reform: Control Costs

Posted by Alan on May 11, 2007

In March I wrote a post about how controlling health care costs is the key to meaningful health care reform. Seems to me it’s a topic worth revisiting as no one seems to be addressing it.

The facts are simple. When someone needs medical care there’s only four sources to pay for it:

  1. Taxes;
  2. Premiums;
  3. Out-of-Pocket (the patient’s pocket, to be precise); or
  4. Charity (someone else’s pocket, usually the hospital’s or doctor’s).

That’s it — if someone can think of other sources, please let me know. So you can twist the health care coverage system into any shape you like and it doesn’t change the reality that medical costs are increasing faster than general inflation or wage growth. And it’s going to continue to do so as the population gets older, technology changes more quickly, and consumers demands and values evolve. This last point is often overlooked.

It used to be when you a family member drank too much, they were shunted off to the bedroom when company came. The lucky ones got introduced to AA. Now it’s recognized, accurately, as a medical problem and people expect the medical establishment to step in. Similarly, drug problems used to be handled by the criminal justice system. Now it’s a medical problem. These shifts, and others like them, aren’t wrong. They’re a smarter way to deal with serious problems. And they add to the cost of health care.

What all this means is that, unless the current health care reform debate changes soon, when California passes a health care reform package it will fail to address the underlying problem. It won’t quite be “sound and fury, signifying nothing,” but we will be back debating the issue again — sooner than later. That’s because no one is tacking the root cause of the challenge facing our society: how to prevent ever increasing health care consumption — and the cost of that care — from taking over the economy.

Ironically, Senator Sheila Kuehl’s SB 840 has the best chance of raising the issue. By establishing a single payer for care it could lead to a discussion of what happens when the state doesn’t have the money for all the care that’s required. Of course, the bill’s supporters don’t dwell on that question because they know if the debate focuses on rationing they lose.

But Oregon managed to have an honest debate about rationing. Dozens of town hall meetings were held to establish what services would be covered and what wouldn’t. From what I understand, it was a healthy discussion (you’ll pardon the pun) and the resulting public policy has been widely accepted.

I don’t mean to suggest rationing is the only way to control health care costs. I am suggesting that Oregon had political leaders willing to raise tough questions about health care costs. Until California’s leaders show similar courage, we’re going to be spending a lot of time, effort and resources on secondary issues. Those secondary issues (for example, how health care coverage is sold, who pays for it and whether people have to buy it) are important. But by themselves they can’t overcome the challenge we face. And that means we’ll be mired in a health care reform debate again all too soon.

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Schwarzenegger’s Health Care Reform Dilemmas

Posted by Alan on May 9, 2007

Governor Arnold Schwarzenegger’s health care reform team may have backed themselves into a corner — one which could make passing comprehensive changes problematic.

Governor Schwarzenegger’s health care reform plan is a comprehensive package which would achieve universal coverage. This stands in contrast to proposals put forward by legislative leaders of both parties in both houses. The Governor has made clear he partial measures are unacceptable.

This creates two dilemmas for Governor. One is a morass, the other occupies space between a rock and a hard place.

The Morass: comprehensive reform has to somehow reach those companies which self-insure. These companies, usually large with many employees, assume much of the risk of their worker’s health care costs. An insurer takes over claims payment only if they reach a very large level ($100,000 per person or $1,000,000 for the entire company, for example). The problem for the Governor is that self-insured plans are generally exempt from state regulation under a federal law known as ERISA. Consequently a huge portion of the state’s population will find itself exempt from the Governor’s reform requirements. And as even the Administration’s team admits, without full participation the package begins to unravel. Most every comprehensive state proposal finds itself bogged down in the morass of ERISA exemptions.

But the Governor has a further problem: he also has backed himself into the proverbial rocky, hard place corner. You can’t require individuals and employers to obtain health care coverage if that coverage is unaffordable to them. Which is why the Governor’s plan rightly calls for premium subsidies to help low income individuals pay for the coverage his plan requires them to buy. And subsidies cost money.  Which is why Governor Schwarzenegger’s proposal includes new fees to be imposed on hospitals, doctors, employers and others. The Administration’s calling these revenue enhancements “fees” is critical. Under California law, raising taxes requires a two-thirds vote of the legislature. Fees require only a majority. To achieve a two-thirds majority some Republicans will have to vote for a bill. A simple majority can pass with only Democratic votes. Since Republicans in both chambers of the legislature have flatly ruled out voting for new taxes the funding in the Governor’s plans are called “fees.”

This definitional finesse may work within the Capital, but in the real world, if it quacks, walks and talks like a tax, it’s probably a tax. Which means as soon as the Governor and Democrats might pass “fee-based” health care reform, the law suits begin. And they’ll likely win.

This is all a long way of saying, the Governor’s health care reform plan requires subsidies which in turn requires new revenue. The Rock: If the Governor raises the revenue through taxes, Republican legislators defeat the reform package. The Hard Place: If he raises the revenue through fees which act like taxes the courts strike down the package.

This doesn’t mean comprehensive health care reform is dead in Sacramento. It simply points out that it won’t be easy. I agree comprehensive reform makes sense. CAHU’s Healthy Solutions plan does this is a realistic way. Yes, it suggests new taxes, but they’re appropriate and reasonable. Because it focuses on individuals, not employers, it avoids the ERISA exemption morass. And by calling a tax a tax, it allows for full debate on the trade offs involved in making sure every Californian has access to basic health care coverage. This may not completely avoid the Rock and Hard Place, but it allows attention to be given to the real issues, not the semantics.

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Big Business Coalition Backs Universal Coverage

Posted by Alan on May 7, 2007

So the big news today is the latest coalition to call for universal health care coverage. This time it’s 36 companies, most of them very large: Safeway, PepsiCo, General Mills, Pacific Gas and Electric Co., Wm. Wrigley Jr. Co., The Kroger Co., Bumble Bee Seafoods, 
Aetna, Blue Shield of California, Cigna HealthCare, Eli Lilly and Co. and PacifiCare.

Spearheading the Coalition to Advance Healthcare Reform is Governor Arnold Schwarzenegger’s friend and adviser, Steve Burd, chairman of the Safeway grocery chain. When you consider that there’s likely to be a strike at major grocers in the next several weeks over, among other issues, health insurance, it’s not surprising Mr. Burd would be an activist on this issue. What may surprise some is that the coalition supports requiring everyone to be insured and providing subsidies to those needing help to purchase coverage.

But this shouldn’t be surprising. The Coalition to Advance Healthcare Reform represents major employers who already offer workers coverage. They are the ones who pay what the Governor calls the “hidden tax” imposed by the uninsured. When those without coverage need care their costs are shifted to those with insurance which results in higher premiums. Put simply, today’s system imposes unfair costs on corporations doing the right thing by providing insurance to their workers.

There are (at least) two significant things to think about when considering this new coalition. The first is the pressure it will put on Republicans in Congress and state legislatures to get on board with more sweeping reforms than they are currently supporting (An LA Times article quotes Scott Hauge, director of Small Business California as saying  Mr. Burd is on record as believing Governor Schwarzenegger’s call for a four percent tax on businesses not offering workers health insurance is “too low.”)  The Coalition to Advance Healthcare Reform is a business oriented group. They are the natural and vocal constituents of the GOP. When they speak, candidates and officeholders listen.

The second consideration is that the coalition has a huge gap in it’s message: it doesn’t explain how to pay for the premium subsidies it proposes for low income individuals. This does make it easier to form a coalition, but it leaves them in an awkward position. Eventually someone will ask how they expect to pay for their proposals. If some members of the coalition were to suggest taxing other members of the coalition, well let’s just say the coalition meetings could get a little interesting.

To me, the meaning behind all this is: 1) the push for meaningful health care reform is real and gaining momentum; 2) the political drumbeat is growing louder across the political spectrum; 3) the support of groups like this strengthens Governor Schwarzenegger’s hand; and 4) the tough decisions are still ahead of us.

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California Health Care Reform Timing

Posted by Alan on May 4, 2007

For a long time I’ve been saying California lawmakers won’t produce health care reform until 2008 (for example, take a look at my predictions for 2007).  This is based on my view that, when it comes to major policy issues like health care reform, the legislative process is a two-step dance.

Step One: Legislators and others are truly interested in learning as much about the issues as possible. This is especially true when term limits results in many legislators having no long term perspective on the issue. During this phase, everyone tries to be nice to everyone else. Partisan pot shots are held to a minimum. Hearings are informative and private meetings tend to focus more on policy than politics. There’s a sincere desire to gather information. I’m not naive enough to think it’s all nice and friendly. I’m simply saying this part of the dance is relatively more open minded.

In Step Two the music changes in both key and tempo. Partisanship moves to the forefront and the swords come out. Lawmakers’ positions are both more detailed and hardened. The idea is not just to get a bill passed, but to make sure it includes what “we” want — whoever that “we” might be. And if the provisions or the timing of passage works against the “other” side, all the better. Again, it’s not 100% thrown elbows and low blows, but it is more rancorous and moderates seeking compromise have a more difficult time keeping their footing.

How much time is spent in either of these steps varies based on leadership styles of the major players and from issue-to-issue. My take has been, and remains, that with 15% of the state’s economy at stake, the current leadership will strive to get things right.  Consequently, I predicted the “learning” phase would last through 2007 with the “duking it out” portion of the program kicking in (literally) in 2008.

Now I’m beginning to wonder. Word comes from an “informed source” in Sacramento that Labor has a strong interest in getting health care reform settled sooner than later. Their concern is that if the debate isn’t resolved in 2007, an initiative addressing health care reform initiative may be placed on the 2008 ballot. Yet Labor will have its plate full that year with other ballot measures, legislative elections and something about electing a new president. Labor would like to avoid having to wage a major battle on health care reform — both in the legislature or on the ballot — in 2008, according to this source. So they’ll be pushing hard for a resolution in 2007.

Governor Arnold Schwarzenegger may also desire a quick resolution to health care reform. He’s doing a phenomenal job of inserting him into the GOP presidential nomination process, not only by raising critical issues, but by moving the California primary up to February. His environmental positions have already landed him on the cover of Newsweek and into the pages of Wired. If Governor Schwarzenegger and a Democratic-controlled Legislature can deliver on health care reform, he’ll have gone a long way to defining the GOP political battleground. And making more magazine covers.

Will these agendas be enough to wrap up the first step of the legislative draft before Fall? Maybe. I don’t think we’re there yet, but my certainty is wavering. The music hasn’t shifted tempo yet, but the conductor is looking over his shoulder. And looking very nervous. 

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Presentation: CAHU’s Healthy Solutions

Posted by Alan on May 3, 2007

This speech was presented to the Central California Association of Health at their May 3, 2007 meeting in Fresno. It offers a brief summary of the health care reform proposals put forward by:
– Governor Arnold Schwarzenegger
– The Senate Republicans
– Senate President Pro Tempore Don Perata
– Assembly Speaker Fabian Nunez

The bulk of the speech, however, is a detailed description of the policy behind CAHU’s Healthy Solutions health care reform proposal and its access, financing and cost containment provisions.
CAHU’s Healthy Solutions – CCAHU – May 3, 2007

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