More on the LAO…

The LAO analysis found that assuming a starting baseline cost for health coverage (of $250 per month per person), the health reform proposal pencils out for at least five years. (In comparison, the Massachusetts proposal only balanced in their original projections for the first two years.)

That’s five years to see if the cost control provisions actually work–including the prevention and public health efforts, the impact of transparency efforts, the negotiating power of the purchasing pool, and even the impact of reducing the “hidden tax” of the uninsured. The cost containment elements aren’t “booked” as savings (like the presidential candidates do in their plans), because there is a recognition that they will take time to have an impact. Five years would give us that time, as well as to put forth and implement additional proposals to control and reduce costs.

As is its job, the LAO appropriately identified the areas where there is “risk” that the costs may be higher than anticipated: these include that the cost of care or coverage is more than expected, or rises more than expected; if we find that there are more uninsured than estimated; and if there’s a major cut in federal funds (although the LAO acknowledges that of those booked in the proposa, “most federal funds are accessible under existing rules.”)

So then what happens if there is a shortfall projected? There’s “trigger on” and “trigger off” provisions, so the Deparment of Finance can warn that there’s a problem. If the Legislature does not act–by raising additional revenues, scaling back the program, controlling costs, finding new federal funds, or taking other actions–then the reforms are largely repealed, and we go back to the status quo. The LAO acknowledges this, although indicates that there would be “pressure on the General Fund” given the Legislature’s likely interest in keeping the reforms in place. But that will be a decision by the Legislature to make.

(In my mind, that’s better than the status quo, where health costs go up, the number of uninsured go up, and the Legislature can just let that happen, without a hearing, never mind an action.)

It’s too bad that the LAO took into account some negative assumptions, and didn’t take into account several positive assumptions, even acknowledging that the plan “contains several provisions that could help reduce health care costs over time.”

The report begins to hint at the right context: that any reform will have questions as you look into the future:

“Any plan to reform the state’s health care system, by the nature of its complexity, will involve financial risk over the long term. Many of the risks discussed above would be shared by any health reform plans that attempt to maintain the current system of employer-provided coverage while expanding public programs to cover the uninsured.”

What the LAO left unsaid was the clear financial risk of the status quo.

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