Governor Schwarzenegger’s Universal Healthcare Proposal Under the Gun
by Isabelle T. Walker • Photographs by Paul Wellman
Depending on your fondness for matters of health care policy, either fasten your seatbelt or bring on the strong, hot coffee: The political wrangling over Governor Schwarzenegger’s plan to establish universal healthcare in California is beginning.
The People’s Governor, as Schwarzenegger has taken to calling himself, joined the struggle to fix the state’s healthcare system on January 8 when he proposed via satellite teleconference (because of his broken leg) an intricate plan to ensure all Californians had at minimum a benefit package for catastrophic care. Since then, insurance executives, politicians, doctors’ groups, unions, and consumer and business advocates have been lauding this bold vision while preparing to move it in the direction of their own best interests. The California State Senate’s Health Committee began holding hearings on the issue last week. So far, critics of the plan are saying that plan might cause premiums to rise dramatically. The governor’s analysts suggest the opposite.
Healthcare reform is on the lips of almost every credible politician in America today. Newly announced presidential candidates John Edwards and Barack Obama have both proposed plans. President Bush is pushing tax deductions to encourage people to buy insurance on the individual market. In June, Michael Moore will fan populist anger with the release of Sicko, a sure-to-be-damning documentary on the healthcare industry. The general public is so fed up with 10 and 12 percent annual premium increases and roughly one million additional uninsured Americans every year that even natural enemies like H. Lee Scott Jr. (CEO of Wal-Mart) and Andy Stern (president of Service Employees International Union, or SEIU) have joined forces for change.
Here in California, in addition to the governor, Assembly Speaker Fabian Núñez, Senate President pro tem Don Perata, and Democratic Senator Sheila Kuehl all have plans of their own. Perhaps reform will coalesce from some combination of them all?
Schwarzenegger’s proposal has scores of interlocking parts that, taken together, may seem a bit dizzying. Considered individually, however, they aren’t so cryptic. The plan aims to make health insurance mandatory for all residents, just like car insurance. A state purchasing pool would be created to help subsidize, on a sliding scale, individual and family benefit packages for people making between 100 and 250 percent of the federal poverty level, which sets the upper income limit to qualify for help at $24,500 for an individual or $41,500 for a family of three.
For the first time, childless adults living at or below the poverty level would be eligible for Medi-Cal. And children in families making as much as 300 percent of the poverty level would be eligible for Healthy Families. These expansions, plus a boost in Medi-Cal reimbursement rates, would pull in a substantial amount of money from the federal government, because these programs are jointly funded: Washington must match dollar for dollar whatever California spends on these programs. Simply increasing eligibility and rates would add desperately needed dollars to the state’s healthcare coffers. Plus, the governor’s advisers say, the expansions would effectively cover all the uninsured children in the state, including undocumented ones.
Everybody will have to either buy it or — if poor enough — sign up for it. Insurance companies will have to sell to all comers (a concept, called guaranteed issue, to which they take exception), while spending no more than 15 percent of every premium dollar on administrative costs. Employers of 10 or more would get a choice — either insure their workers or pay 4 percent of their payroll into a state fund for subsidizing the purchase of pool plans. Doctors and hospitals would have to cough up 2 and 4 percent of their gross income, respectively, to equalize the pain. But that shouldn’t be too hard, the governor’s people say, because both entities will have so many more paying patients.
But healthcare providers and leaders in Santa Barbara know too little about the proposal’s finer points to predict its impact on the area. A ripple of quiet concern is undulating through the community. Michele Mickiewicz, deputy director of the Santa Barbara County Department of Public Health, is particularly interested in whether the governor’s plan will take half of the $12 million currently dedicated to county health programs from state vehicle license fees and sales taxes, as proposed. Also known as “realignment funds,” this money pays for core public programs, Mickiewicz said, including communicable disease and prevention programs.
Sansum Clinic CEO Kurt Ransohoff has his own reservations. “How could anybody be against providing more health coverage for the citizens of California?” he asked. “At the same time, the plan asks doctors to set up [and pay for] an electronic prescribing system by 2010, which is an ambitious undertaking. Meanwhile, he’d [Schwarzenegger] take 2 percent off their gross income.”
At ground level: Bob Cunningham, a principal partner at the landscape architecture firm Arcadia Studio on East Cota Street, has 15 full-time employees to whom he provides an array of health plans from which to choose. Given a choice between paying 4 percent of his payroll or continuing to provide insurance to his workers directly (which is hands-down the more costly alternative), he hesitated. “We’d have to check to see how that would affect us financially,” he said. “But I don’t see our policy changing. We have good people working here, and we want to keep them healthy.”
Steve Cushman, president of the Santa Barbara Chamber of Commerce, said businesses with upward of nine full-time workers are a minority in Santa Barbara and that, as far he as was aware, most of them provided health insurance already. It’s the larger agricultural companies and fast food chains that will scream, he said.
Cottage Health System (CHS) spokesperson Janet O’Neill said that hospital representatives were looking forward to participating in the debate, but that it was still too early to comment. She did say that the 4 percent “dividend” on their revenues would amount to about $16 million, based on last year’s numbers. And caring for the uninsured adults and children at their three facilities cost the hospital roughly $10 million last year, she said.
Because California spends the least among all 50 states and the District of Columbia on each Medi-Cal enrollee, Schwarzenegger’s plan to boost Medi-Cal reimbursement rates would ease some of the financial strain doctors participating in this program go through. But there will still be plenty of anger at having to fork over 2 percent of their gross income. “It’s going to make the doctors want to push back,” said Santa Barbara lung specialist Robert Wright of the proposed 2 percent fee. “We’re being cut every year by insurance companies, and frankly, I’m getting tired of it. I don’t see the politicians taking a cut off their salary.”
It’s the individual mandate, the piece that makes health insurance a must-buy commodity for all residents without imposing any controls on cost, that has consumer activists anxious. Even Massachusetts, whose universal health coverage law also contains an individual mandate, makes an exception when affordable plans aren’t available in a resident’s region. Anthony Wright of Health Access California wonders how the working poor, whose bosses opt for the 4 percent alternative, will fare. “It’s one thing to say that you’ll be getting no help from the government and no help from your employer, but quite another to say, ‘Okay, you now have to go and buy [insurance] on the open market,’” he explained.
Wright says those making more than 250 percent of poverty but not enough to afford a comprehensive plan will have no choice but to buy the minimum required by law — a high-deductible, catastrophic coverage plan. These high-deductible health plans (HDHPs), sometimes known as consumer-directed health plans, have comparatively low premiums and sometimes offer the opportunity to open a Health Savings Account. But they require spending down deductibles that run between $1,000 and $5,000 before tapping the benefit. The California Department of Insurance called them “A Dangerous Prescription” in a 2006 report because they force consumers to play doctor. Inevitably, the report says, individuals will make errors in judgment and forgo needed care.
For single, young, healthy people like Ken Versand, who makes an average of $100,000 a year as an architect, the governor’s health insurance mandate would be a cinch. He already has a high-deductible plan, which is accessible whether he’s in his native Northern California or in Santa Barbara working on a job, as he was when I met him outside the state Employment Development Department. But not so for an uninsured part-time receptionist in her mid thirties, who asked for anonymity. Under the governor’s plan, she might qualify for the state purchasing pool, depending on her hours. But if she didn’t, a high-deductible plan could be her only option.
Yet many people think high-deductible plans are a positive alternative. Julia Huffman, an insurance agent with Santa Barbara’s Friedlander and Associates, has been educating her clients on the misunderstood benefits of HDHPs for the past two years. “Some of the people who choose them are people who wouldn’t have insurance at all,” she said, adding that they cap users’ out-of-pocket expenses at a certain amount, depending on the plan. Some HDHPs even offer free preventive care before the deductible is reached. Huffman said the hardest part of her job is telling clients they’ve been denied insurance because of their health.
It will take some doing for all the interest groups to come together around a plan. In the meantime, many are building coalitions — like the one that formed two weeks ago between Kaiser Permanente, Catholic Health Care West, Health Net, SEIU, and the California Medical Association (CMA). Last week, a coalition of consumer groups — including Consumers Union, Health Access, AARP, the National Council of La Raza, and SEIU — created a campaign called “It’s Our Healthcare.” The campaign Web site — itsourhealthcare.org — urges Californians to seize this opportunity for comprehensive healthcare changes, advising consumers to “tell your legislator and the governor that Californians want real reform now.”