Raising Women’s Voices

California Governor Plans New Push for Omnibus Health Care Reform Effort

Posted in Affordability, Health Reform Policy Proposals, Insurance companies, State Reform by raisingwomensvoices on August 19, 2008

By Fredrick L. Pilot

SACRAMENTO, Calif.–Once the state has enacted a budget for the fiscal year that began July 1, the Schwarzenegger administration will go back to the drawing board on a comprehensive overhaul of California’s health care financing system, a top administration official said Aug. 15.

Jennifer Kent, deputy legislative secretary for Gov. Arnold Schwarzenegger (R), told a panel that the administration will incorporate lessons learned after omnibus reform legislation, which Schwarzenegger co-authored with then-Assembly Speaker Fabian Núñez (D), was killed in the Senate Health Committee in late January amid concerns the state could not afford the plan.

Chief among them is an appreciation of the views of various groups holding large stakes in any proposed reforms including payers, medical providers, and consumer and labor organizations, Kent told a Sacramento panel discussion titled Where does California Healthcare Policy Go From Here?, hosted by the University of California and the California Medical Association.

“We learned a lot of lessons of what’s important to these groups,” Kent said.

“After the budget is done, we’re going to begin the brainstorming process,” Kent said.

Most legislative seats are up for election in November and a new two-year legislative session begins the following month.

Kent said while the administration developed a number of incremental “building block” reform proposals this summer, legislators have shown little interest in taking them up this year.

Status Quo Unsustainable

The status quo is unsustainable, Kent noted. Continued dissatisfaction among key stakeholder groups with the current health care finance system and rising medical costs are likely to bring the system to a crisis point in the near term, possibly leading to a dramatic collapse of some component of the system, Kent predicted.

“We’re at this tipping point where something has to break,” Kent said. “I think it’s going to be some kind of crack and then it will be, ‘OK, we’re done.'”

One possible harbinger that appears to back Kent’s prognostications is a white paper issued Aug. 14 by the Sacramento-based consumer group Health Access California. The paper concluded that Medi-Cal cuts proposed in the administration’s revised budget issued in May to tamp down ballooning deficit spending would force more uninsured and low-income Californians to seek medical care in hospital emergency departments. Those higher costs for emergency room care will be passed on to those with insurance, boosting employer-based health insurance by 22 percent in 2009 at an estimated additional cost of more than $290 per family, the paper concluded.

Peter Harbage, who authored the paper, Adverse Reaction: Proposed Health Budget Cuts Would Lead to Increased Health Insurance Premiums, co-authored a December 2006 report by the Washington-based New America Foundation (NAF) that estimated 10 percent of California health care premiums can be attributed to cost-shifting to pay for care delivered to medically uninsured residents of the state.

 The administration cited those findings to support its original health care reform proposal of January 2007 that would have required all Californians to obtain health insurance through their employers or through individual policies and by expanding access to state health insurance programs such as Medi-Cal and the Healthy Families program.

At that time, Schwarzenegger argued that eliminating what he termed a “hidden tax” for care of the medically uninsured would reduce overall health insurance costs and make coverage more affordable and accessible.

Administration Committed to Reform

Kent said Schwarzenegger remains committed to accomplishing health care reform during the remainder of his term, which ends in January 2011, based on the three fundamental principles of his 2007 proposal: cost containment, prevention, and consumer protection.

However, panelist Sara Rogers, a policy consultant to state Sen. Sheila Kuehl (D), took issue with two of the Schwarzenegger reform principles, cost containment and prevention.

Prevention is limited by peoples’ predisposition to medical conditions beyond their control and the difficulty of creating incentives to encourage individuals with low socioeconomic status to modify their lifestyles and better manage medical conditions that can become chronic and costly to treat, Rogers said.

In addition, Rogers said, cost containment incorrectly assumes a competitive market for medical services exists. It does not, Rogers explained, because market demand for medical services is inelastic since people will seek medical care at any price they can afford when they or their family members need medical treatment and medications.

‘Fragility’ in Individual Market

Kent said the administration is concerned about “fragility” in the troubled individual health insurance market, which covers about 9 percent of medically insured Californians, and would like to see payers adopt improved underwriting practices.

Managed care plans and insurers who participate in this market segment have come under intense scrutiny during the past year from regulators, legislators, and the courts over the practice of unilaterally rescinding coverage when policyholders submit costly claims, contending they hoodwinked plans and insurers by lying or omitting material information on their medical histories at the time they applied for coverage.

“We would like to see plans more aggressively police who they let in,” Kent said. “The plans have to have responsibility on the front end to do due diligence.”



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