Governor Schwarzenegger’s Universal Healthcare Proposal Under
the Gun

by Isabelle T. Walker • Photographs by Paul Wellman

Schwarzenegger.jpgDepending 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

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

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

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  — — 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.”


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