In defending the Governor’s proposal from criticism by consumer, labor, and community organizations, the Governor’s health team makes the case that the Schwarzenegger proposal is similar to Hillary Clinton’s health plan as a presidential candidate. Let’s leave aside whether that should immunize any reform plan from critique. While some media stories (like here and here) have picked this up this trope, it is significantly misguided.
One could make the case that it is impossible to compare, given that we are having very different conversations in California, where we have been discussing health reform for the past five years, and the national debate which is just getting started. There’s also a very different level of detail between the legislative proposals in California like AB8 and what the Governor released a few weeks ago, and the very broad position papers of presidential candidates.
On the policy concepts, there are some similarities, but that’s to be expected in any serious health plan: A peanut butter sandwich and a BLT are pretty different, and it’s easy to see why some people would like one and not the other even though, at the end of the day, they both are pieces of bread with a filling in the middle.
Health reform is complicated, but it isn’t rocket science. There’s only three ways that people get coverage:
1) through enrolling in public programs,
2) through getting employer-provided benefits, and by
3) buying it on the individual market.
At a conceptual level, there are only so many ways to improve access and affordability in these three arenas: expanding, funding, and streamlining public programs; setting a minimum employer contribution, and offering employers a statewide purchasing pool to buy into; and better regulating insurers in the individual market to provide better access to those with “pre-existing conditions” and providing subsidies or tax breaks. So there are similarities, but let’s not forget the key differences:
Group coverage vs. individual market: Consumer groups generally believe that we get the best value for consumers through group coverage which can bargain for the best price, and allow individuals to share the risk and cost of health care–whether by public programs, employer-based benefits, or even a single-payer system, which would provide everyone with coverage into what would be essentially one big public program. The Democratic plans (and the state legislature’s AB8) all focus on expanding group coverage, through employers or public programs, including having a public insurance option, through Medicare or the Federal Employees Health Benefits Program. Their proposals do seek to fix the individual market (preventing insurers from denying people for pre-existing conditions, for example), but they also look to shrink it.
The Schwarzenegger plan would expand the individual market, the least efficient, most expensive way to provide coverage. To its credit, it would also expand public program coverage as well, but not group coverage through employers. And the central focus is the individual mandate, to require up to one million Californians, without assistance, to buy coverage on the individual market—where they have the least market power.
High deductibles/HSAs vs. comprehensive coverage: What is “coverage?” The Democratic plans set standards for what they mean by coverage, invoking Medicare or the Federal Employees Health Benefits Plan. In other words, fairly comprehensive coverage, that covers not just catastrophic care, but the preventative and disease management that will go a long way to reducing costs in the long run. AB8, the Legislative leaders’ plan, sets a standard that in their purchasing pool, maximum out-of-pocket exposure should be limited to $1500 for a premium of no more than 5% of wages.
In contrast, the Governor’s plan in January defined minimum coverage as a $5,000 deductible policy with $10,000 out-of-pocket maximum. Such policies won’t be a benefit for the majority of Californians that have less than $10,000 in liquid assets. The new language does not define a minimum, but allows the Governor’s Secretary of Health to define it, with cost-sharing more or less than what was originally proposed. The Governor’s plan also has significant provisions to encourage so-called Health Savings Accounts, which only can be used with high-deductible policies. President Bush promotes high deductibles and HSAs as a way for consumers to financially participate in their own care. Consumer groups see them as simply a way to have more cost and risk shifted to the consumer. It’s perhaps the defining debate in health policy, and the Governor’s plan is very different from the Democrats here.
Affordability for consumers: On the central issue of individual responsibility in these health plans, there’s no comparison. Most health plans ask for responsibility from individuals, either through the tax system, or, as in the case of AB8, when you have been offered affordable group coverage. So while all plans include “individual responsibility,” there are significant differences. We have three options:
1) The Clinton proposal does have an “individual mandate,” but also includes a guarantee, that all Americans won’t have to pay more then a certain percentage of their income for health care.
2) The Romney proposal in Massachusetts is explicitly conditional on both the availability and affordability of health coverage. It also seeks to subsidize people through public programs, but only up to 300% of the federal poverty level. Especially since state funds were limited, the Massachusetts proposal decided instead to explicitly condition the mandate on affordability, and for those who aren’t subsidized, there’s exemption mechanisms.
3) The Schwarzenegger proposal for an individual mandate has no condition, limit, or exception. He would provide public coverage or subsidized coverage to some, but for those who are not eligible, there is no consideration of affordability.
On the key issue of affordability, Schwarzenegger isn’t close to Clinton but is to the right of Romney, not acknowledging any condition whatsoever to the requirement. Again, in Massachusetts, they determined that it was better to give some people the choice to be uninsured than to be required to buy an unaffordable product.
Calling for compromise: This is not to say that the Governor’s plan is without merit. On the contrary, Governor Schwarzenegger gets signficiant credit, especially in comparison with some in his party in the state legislature and the presidential campaign trail, who don’t even acknowledge health care as a major issue. They seem to say “take two HSAs and call me in the morning” or “let them eat clinics.”
As highlighted above, there are major differences between his proposal and those by Democrats, both here in California and nationally. However, these are the exactly the debates we are should be having. These are resolvable differences, where there is already some common ground. But only if the Governor is willing to compromise.
But it doesn’t help the discussion to pretend the differences don’t exist, because they matter, a lot, to California consumers in their everyday lives.