A discussion the size of Hoover dam

Friday, February 23, 2007

* Costs, price controls, high deductibles, public program reforms discussed
* Also: Update on Deficit Reduction Act & Documentation Requirements

New on the Health Access WeBlog: Disembodied Heads of BlueShield, Viva Las Vegas

On a parallel track from the health debate raging in the legislature, the Little Hoover Commission continued its examination of state’s health landscape on Thursday, calling academics and advocates to talk about health proposals on the table. Since last year, the Little Hoover Commission, which is charged with examining ways to make state government more efficient, began looking at different aspects of the health care system late last year.

The Little Hoover Commission materials are linked here:

The Health Access blog features an update reporting on a previous hearing, linked here:

The three-hour conversation on Thursday was slightly different than the other commision hearings in that it reviewed health reform through a wide lens – not just limied to public programs, even though its focus is state government.

Panelists on Thursday included:
* Peter Harbage, senior program associate for the Health Policy Program for the New America Foundation.
* Gerald F. Kominski, Associate Director of the UCLA Center for Health Policy Research
* Glenn Melnick, Professor and Blue Cross of California Chair in Health Care Finance; School of Policy Planning and Development at the University of Southern California
* Anthony Wright, Executive Director of Health Access California

After each presenter provided an overall statement, there was a wide ranging question and answer session with the Commissioners. There were many topics of discussion and interest. Below is just a smattering of the conversation:

On the “hidden tax”:

One of the elements discussed was Gov. Arnold Schwarzenegger’s pitch about the $1,186 “hidden tax.” The New America Foundation’s recent report by Peter Harbage, “A Premium Price,” is widely cited by Gov. Arnold Schwarzenegger’s administration, when arguing that a “hidden tax’’ of $1,186 is paid by insured Californians to make up for uncompensated care.

When questioned about the savings, Harbage reiterated his case that the report put forward a “conservative” estimate. Some of the panelists agreed that doctors and hospitals would be better paid under the Governor’s plan because more people would be insured and Medi-Cal payments would be higher. But Professor Melnick stated, “I’m a little less optimistic that we’re going to see doctors and hospitals charge lower prices. They very quickly can figure out ways of spending that money without passing on the discount,’’ to insurance companies, which may or may not pass savings on to consumers. Professor Kominski agreed, but said that it would be up to insurers to negotiate the lower payment rates.

Additionally, with more people insured, there would be additional use of services, said Melnick. While that would cost money up front, those services used would likely be preventive services, which would save much more money in the long run, stated Wright and other panelists. But Wright also challenged the notion that the uninsured are to blame, or that they simply get free care, pointing out they often are charged more than anybody else for medical services, and often face medical debt and bankruptcy.

On price controls and transparency:

The discussion included all active proposals, including SB840(Kuehl), the universal, single-payer proposal which Gov. Schwarzenegger vetoed last year. Quoting a Lewin Group report, Kominski said that initial costs would increase by $25 billion for medical services, but that efficiencies would save the state $33 billion. Those efficiencies include the use of price controls, reduced fraud, bulk purchasing and $20 billion less spent on private insurance company administration and profit. Like SB840, Kominski said Medicare – another single-payer program — has done a good job keeping down costs through price controls.

The commissioners discussed both price controls and transparency, allowing consumers a better idea of how much things cost. “It doesn’t occur to people to ask price,’’ said Marilyn Brewer, a former Orange County Republican legislator. “None of this will work if there’s not cost containment. Maybe we need universal pricing and universal cost.’’ Kominski stated that in spite of its success with Medicare, price controls have not been a serious debate for more than two decades “and somewhat out of favor.’’

Commissioner Mitch Mitchell also commented, “no individual is going to negotiate a price. Discussions about transparency and price shopping are absurd,’’ he said. Harbage argued that transparency of prices has its uses in certain instances, such as with prescription drugs.

On benefits and high-deductible plans:

Such consumer-driven/high-deductible health plans rely on consumers to “shop around’’ for the best price for care. But the commissioners and panelists discussed that pricing out medical services is impossible because it is not public, and it varies from place to place and from person to person.

Mitchell asked what the minimum basic benefit package should be – and what did panelists think of the $5,000 deductible minimum plan the governor proposed, for those who would not qualify for subsidized coverage. Kominski laid it out. Such a plan would cost a family about $200 a month — $5,000 a year. On top of that, the families would still have to pay $5,000 deductible. That’s $10,000 before they even see a dime of coverage. “If these policies were so desirable, why don’t we all have them?’’ he asked.

Anthony Wright said such policies caused families to have to “pay to be uninsured,” paying premiums but still facing worse health outcomes and the possibility of medical debt and financial ruin. The other danger of high-deductible plans, he said, is cost-conscious consumers would have to decide which procedures were “necessary’’ and which were not. Half the time, they guessed wrong and forgo preventive treatments that end up making them sicker and costing more money to treat. Some may not also have the cash necessary to pay up front for doctor’s visits.

Mitchell asked why it would not be sufficient to have a high-deductible plan that also covered preventive services. While some high-deductible plans do allow for preventive services, they’re limited, said Wright. And if a consumer has a chronic disease, such as diabetes, asthma, heart disease, which require regular doctors visits and medications, such a plan would not work for them. Chronic diseases are also the largest cost drivers in health care, and to exclude such coverage would just make matters worse, experts said.

On affordability for consumers:

Commissioner Eloise Anderson, however, questioned why some consumers with the means couldn’t just save their money for routine visits, rather than be told by government to buy a certain kind of health policy.

Kominski stated that even routine procedures — such as one he had in 1982 when he was 28 years old, which ended up costing him $28,000 at that time — are so expensive, and thus it is unfeasible for most to feasibly save enough for a major medical care. But he also critiqued the individual mandate proposal: the cutoff defining consumers “with means” and those “without means” in the governor’s proposal is 250% of poverty — about $52,000 for a family of four. Such a requirement to purchase high-deductible plans, and save money in a health savings account, would unfairly burden those middle-income families, who would be barred from subsidies. For those on the edge, they’d essentially be paying about 20 percent of their income for healthcare.

Melnick said subsidies were an essential part of any system. He shared an analysis, showing that on average, people end up spending about $450,000 in their lifetimes on health care. Without subsidies, that would mean more than half of the lifetime income for a $10-an-hour workers (who would earn $800,000 over 40 years). A more reasonable spending obligation would be the current average of about 8.2 to 8.5 percent for families at around 300% of poverty, said Kominski, citing an Urban Institute study.

On public programs:

Commissioner Mitchell criticized Medi-Cal’s enrollment mechanisms, which often makes it difficult for low-income to become enrolled. “Medi-Cal is a barrier to progress, set up to be a disincentive for people to get in,” he said. “When you talk about the uninsured and Medi-Cal, why hasn’t the state made progress?”

The reason, said Peter Harbage, who worked as a health official in the Gray Davis administration, is because Medi-Cal is “overworked and underfunded.” Many of the challenges could be fixed if the system simply had more money. Wright added that the fact that 6.7 million of the sickest and poorest Californians can actually rely on the program means that Medi-Cal is a success “in spite of itself,” especially providing such coverage “at a lower cost than the private sector and a lower cost than any other Medicaid program in the nation.” He said much remains to be done to streamline and ensure government doesn’t make it more difficult for people to enroll and stay on coverage.

Mitchell said Medi-Cal was an area that warranted attention because it could create a positive domino effect, “Health care can be lifted up by lifting Medi-Cal.”

On employer contributions:

Panelists roundly agreed that the employer requirement in Gov. Schwarzenegger plan — 4 percent of payroll — was too low. Because most firms that provide insurance already spending between 8 to 12 percent of payroll on healthcare, they would still end up subsidizing those that do less, and creating similar fairness and cross-subsidy issues as in the current system. Kominski recommended a graduated tax for small businesses, with tax breaks for start-up companies.

On immigrants:

Kominski said he thought the Senate Republican plan to bill the federal government $2.2 billion for state expensives on undocumented immigrants was an interesting notion. “Good luck collecting on that. You can send a way the bill, but i’d like to see [Center on Medicare and Medicaid Services’] reacion to the bill,” he said. He said providing services to the undocumented was a good policy decision, given that the undocumented contribute more in taxes than they use in services, according to an Urban Institute study.

On single-payer

Near the end of the hearing, Commission Chairman Michael Alpert asked “why not national health care?” and described the components of the “essence of a single-payer system.” Panelists talked about the prospects for national reform, but also suggested the opportunity to take action at the state level.

The commission also took one public comment, along similar lines. The California Nurses Association, as on Tuesday at the Assembly Health Committee hearing, reiterated its strong support for a universal, comprehensive single-payer system, as proposed in SB840(Kuehl), to fix our healthcare crisis.

The California Nurses Association also said it was dismayed that the Governor and the New America Foundation blamed the health care cost and access crisis on the “uninsured.” They stated that the blame should be placed with the insurance companies, with their rationing of care and their waste of 30% of premiums in administration and profit. They stated that all the health proposals that provide more money to the insurance companies–“the real source of the problem”–are thus flawed. They also warned that “a bad deal is worse than no deal”, and reliance on market forces might lead the state down the same path at the failed energy deregulation debacle.

For more information on this process and these issues, contact Hanh Kim Quach, policy coordinator, Health Access California, at 916-497-0923 or hquach@health-access.org.


On February 22, 2007 The Department of Health Services (DHS) convened a public hearing in Sacramento to solicit feedback on the state’s latest revision of their implementation instructions to the counties on the new requirements for Medi-Cal eligibility.

The new policy, narrowly passed last year by Congress as part of the federal Deficit Reduction Act, requires citizens to submit proof of citizenship and identity when applying for Medi-Cal or in order to remain eligible for that program. Both advocates and DHS stress these new proof requirements do not apply to non-citizens. In addition, certain other groups do not have to submit proofs (for example, anyone receiving Supplemental Security Income (SSI), Medicare, or children receiving foster care payments.)

However, much of the content of the comments at the hearing related to how to make these new rules clearer for new applicants and beneficiaries, the counties, and advocates who assist them. Because of the complexity of the new rules, DHS was not willing to commit to an implementation date or the release date of the instructional letter.

The Good News

The state has worked to build in as much flexibility as possible into the new policy, which they argue is as much as federal law and interpretation permit. For example, the state has run a computer data match of Medi-Cal beneficiaries’ information against the California ’s register of birth records. DHS was able to locate birth certificates for slightly more than half of the 3.3 million records in the test. This means that those beneficiaries would remain eligible for Medi-Cal without interruption. The fact that DHS was able to electronically locate such a significant percentage of birth records would also save the state and the counties both time and money in administering this new law.

The Bad News

Advocates continued to point out language in the instructions and outreach materials that were unclear, misleading, or just plain wrong. Many advocates expressed concern that this very confusing law has recently received media coverage that contained incorrect information that everyone had to submit proofs (however, these new rules do not apply to non-citizen legal immigrants.) Advocates also expressed concern about the potential that counties would apply inconsistent interpretation of the new rules and offer different levels of assistance to Medi-Cal applicants and beneficiaries, resulting in different outcomes for people living various parts of the state. Advocates urged DHS to conduct extensive training, provide multiple language outreach materials, and track county-specific data to ensure correct application of the law.

While not a focus of this meeting, there is continued discussion about ways to potential have Congress revisit the original law. Advocates and others contend that even with the state’s attempts to mitigate its impact, there will be signficant number of Californians who will lose access to health coverage, as well as significant cost to federal, state, and local government and providers, because of this onerous law.

For more information in DRA proceedings or other administrative activities, contact Elizabeth Abbott, Health Access, at 916.497.0923 x 201 or eabbott@health-access.org.

Health Access California promotes quality, affordable health care for all Californians.
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