2008 Year in Review

Tuesday, December 30, 2008

* Comprehensive Health Reform Stalls at Beginning of the Year
* Ugly Budget Cuts Health Care; Makes Budget Situation Worse in Future Years
* Major Bills Die In Legislature and on Governor’s Desk

New on the Health Access WeBlog: Obama’s Holiday House Meetings; Festivus’ Airing of Grievances; The Limited Options in a Recession; Congressional Musical Chairs; Searching for a Simpler System; The Impact of the Economy on Health Coverage; The CBO Report on Health Reform; A Fond Farewell to Hanh Quach; Congratulations, Secretary Solis?; The Governor’s Veto Threat; A Majority-Vote Budget Package?

In the fight for quality, affordable health coverage for all Californians, the year 2008 was a year of setbacks and steps back–not just opportunities lost, but decisions that will cause many Californians’ coverage to be lost.

It started with the end of the proclaimed “Year of Health Reform,” as a much-watched, much-negotiated comprehensive health reform stalled in January. The year was marked by the failure of many more bills, big and small, ambitious and specific, blocked by legislative action or a Governor’s veto pen.

Ultimately, the year was dominated, from beginning to end, with the grim budget news. On January 10th, Gov. Arnold Schwarzenegger released an austere budget that imposed 10 percent cuts across the board, making cuts to health and other vital services. Those reductions in health would have swelled the number of uninsured significantly. Even as severe cuts were made in the latest budget in history (and perhaps the ugliest), the problem at the end of the year is even worse, and negotiations continue for additional cuts.

Despite the troubled economic and budget times that continue, there is hope for health care with new leadership, especially a new President and Congress at the federal level, as well as in the state legislature.


After a year of debate and discussion, a comprehensive health reform measure, ABx1 1, stalled in the first month of 2008. Negotiated between Governor Arnold Schwarzenegger and Assembly Speaker Fabian Nunez. ABx1 1, failed to pass the Senate Health Committee, chaired by Senator Sheila Kuehl. The bill would have extended health coverage to around 4 million more Californians–more than 70 percent of California’s uninsured—through expanded public programs, a state-negotiated purchasing pool, and employer-based coverage. The bill would have also provided additional assistance and security to millions more who struggle to get and keep coverage.

Several factors led to its demise, from specific policy differences, to a delayed and then rushed negotiation process, to petty personality politics. The rapidly deteriorating fiscal picture did not help. “We are faced with some very particular realities today,’’ said Senate President Pro Tempore Don Perata at the time. “Just because we should, doesn’t mean we can.’’


California began the year with a $14.5 billion budget deficit, which swelled to $17.2 billion and lead to the longest budget stalemate ever – a budget signed 85 days late.

Health advocates vigorously fought proposals by Gov. Schwarzenegger to drastically reduce health services, which would have left a million more Californians uninsured, and millions more with less access to benefits and providers. Cuts that were proposed yet prevented included:
* Directly denying low-income parents who work Medi-Cal coverage (resulting in 440,000 uninsured over three years)
* Eliminating various benefits for 2.5 million adults on Medi-Cal, such as podiatry, eye doctors, dental and other vital services.

Health Access has a full list of health budget cuts contemplated here. Major health cuts were made in the final budget, passed in September. (A list of the final cuts can be found here.) The budget made health cuts which directly impact the care and coverage of hundreds of thousands of Californians, and the health system on which we all rely:
* Cutting already lowest-in-the-nation Medi-Cal reimbursement rates for doctors and hospitals by another 10%. (This cut has been largely prevented, to date, due to a court order.)
* Shrinking Medi-Cal enrollment by imposing quarterly status reports for children (resulting in over 300,000 dropping coverage over three years).
* Increasing Healthy Families premiums by nearly 70% in some cases (resulting in the loss of coverage for more than 60,000 children).
* Cutting a range of services to seniors.

Because of the unique California rule that requires a 2/3 legislative vote for the budget and taxes, the Republican minority in the legislature was able to hold the budget process hostage, ultimately delaying it to be the latest budget in state history. While Republican lawmakers stated their sympathy with providers who could not afford to care for patients on low reimbursements and had urged against reducing rates, they could not be convinced to increase revenues to avoid further cuts. Ultimately, the final budget did not raise any permanent revenues and relied on approximately $10 billion in cuts.

Even worse, it included elements, like a corporate tax giveaway and an unfunded “rainy day” fund, that siphon money away from health, education, and other vital services in future years—making the pressure for devastating cuts even more acute.

Finally, the budget – as signed – anticipated a $1 to $2 billion deficit at the close of the year. As the global economy crumbled, that number ballooned exponentially, leading to continued negotiations about further cuts (and discussion about the need for revenues.)

In related developments over the year, the Managed Risk Medical Insurance Board (MRMIB) twice considered capping enrollment in the Healthy Families, and placing children on a “waiting list” for coverage. Both times, last minute funding efforts, at the federal and state level, provided bridge funding into 2009, but the threat continues.


With major comprehensive reform stalled, and a grim budget situation, advocates regrouped and attempted to move forward with a reform package focused on consumer protections in the private market – where little, if any, state money would be needed to advance. This package focused on industry oversight was intended to help consumers feel more secure about their health coverage, improve the quality of health care, and give consumers more options for coverage.

Unfortunately, most of these bills died in the Legislature, both due to the opposition of powerful interests, to petty personality politics.

Health Access’ has a comprehensive bill list here of bills that made it to the governor’s desk, were signed or vetoed. Here is a list of all the bills that health advocates tracked this year. Following is a listing of what health advocates attempted to advance this year, and the final outcome.

REFORMING THE INSURANCE MARKET/INSURER OVERSIGHT: Consumers report growing insecurity about the health coverage they buy and feel they are paying more and getting less.

* STANDARDIZING INSURANCE POLICIES: SB 1522 (Steinberg) would sort health insurance policies into five coverage categories, ranging from “comprehensive’’ to “catastrophic.’’ Organization of plans into these categories would enable consumers to better track premium, benefits and cost-sharing, and assist consumers in making apples-to-apples comparisons between plans. Would weed out “junk’’ insurance by developing minimum benefit standards.
Outcome: Failed on the Assembly floor by one vote.

* LIMITING RESCISSIONS: In recent years, news media accounts and court documents have revealed how insurance companies retroactively cancel insurance policies once an enrollee begins an expensive course of treatment. This practice leaves consumers on the hook for thousands of dollars in health care and life saving treatments, for which they believed they had coverage.
* OUTLAW INCENTIVES TO RESCIND: AB 1150 (Lieu) would outlaw the industry practice of paying bonuses to insurance company employees when they rescind policies, for setting targets for rescinded policies and/or setting financial goals based on savings on health care claims.
Outcome: Signed into law.
* COVER FAMILY MEMBERS, DUTY OF HONESTY FOR BROKERS: AB2569 (DeLeon) would require insurers to continue to cover family members if one family member rescinded and would also impose duty of honesty and accuracy on brokers who assist individuals in buying coverage.
Outcome: Signed into law.
* STATE APPROVAL FOR CANCELLATIONS: AB 1945 (De La Torre) Would establish an independent DMHC/DOI review process if an insurer wants to rescind coverage, and raises the standard in existing law so that coverage can only be rescinded if a consumer willfully misrepresents his health history.
Outcome: Vetoed
* EIGHTEEN-MONTH CUTOFF TO RESCIND: AB 2549 (Hayashi) would impose an 18-month limit in which insurers are allowed to rescind health policies for fraud once consumers’ applications are accepted.
Outcome: Held in Senate Appropriations committee.

* INSURING THE UNINSUREABLES/IMPROVING THE “HIGH-RISK POOL”: AB 2 (Dymally) would reform the Managed Risk Medical Insurance Program, which provides coverage for “un-insureables” who have “pre-existing conditions.’’ It would make the high risk pool more affordable and available and eliminate the annual $75,000 annual cap on benefits.
Outcome: Vetoed

* USE OF INSURER PENALTIES: SB 1379 (Ducheny) would use some of the fines levied on insurers for improper rescissions to subsidize MRMIP and repay loans for physicians working in underserved areas
Outcome: Signed into law.

* FOSTERING A PUBLIC INSURER OPTION: SB 973 (Simitian) would create a statewide public insurer, connecting existing regional, county-based health care plans, to compete with private health care plans and provide consumers more affordable coverage choices.
Outcome: Vetoed .

* COVERING ADULT CHILDREN: One bill that will help some Californians, SB 1168 (Runner), would allow adult dependent children, who are covered under their parents’ health plan, to stay on that coverage even if the child takes a medically necessary leave of absence from school.
Outcome: Signed into law

* REGULATING RATES: AB1554 (Jones) would regulate insurance rates.
Outcome: Held in Senate Health Committee


* TRANSPARENCY: AB 2967 (Lieber) would require public reporting of cost and quality by doctors, hospitals HMOs and others in the health care industry.
Outcome: Significant amendments were forced into the bill. Held in Senate Appropriations Committee.

* NEVER EVENTS: AB 2146 (Feuer) Bans hospitals from billing patients or insurers when they have made an avoidable mistake, such as operating on the wrong person, prescribing the wrong drugs, or leaving foreign objects inside a surgery patient.
Outcome: Held in Senate Appropriations Committee

* PREVENTION: AB 1472 (Leno) Would establish the California Healthy Places Act, and require state agencies to work together assess and reduce health disparities in underserved communities.
Outcome: Held in Senate Appropriations Committee.


* UNIVERSAL CHILDREN’S COVERAGE: AB1 (Laird/Dymally) and SB32 (Steinberg) would expand children’s coverage, including the Healthy Families program, to all children in families up to 300% of poverty ($49,800 for a family of 3).
Outcome: Did advance this year.

* MEDICARE-FOR-ALL SYSTEM: SB840 (Kuehl) would establish a single-payer health care system in California that would enable all residents to have health coverage.
Outcome: Vetoed


* MANDATED BENEFITS: A number of lawmakers this year also attempted to guarantee better insurance benefit packages by mandating coverage, such as maternity coverage (AB 1962 – De La Torre), mental health parity (AB 1887 – Beall) and the offer of durable medical equipment (SB 1198 – Kuehl).
Outcome: Vetoed.

* HOSPITAL OVERSIGHT: A few bills attempted to shed more light on hospital transactions.
* AB 2400 (Price) required public notice before closing a hospital.
Outcome: Signed into law.
* AB 2741 (Torrico) would require for-profit hospitals to undergo health impact analyses to gauge the transaction’s effects on the community’s public interest.
Outcome: Did not pass Senate Appropriations
* SB 1351 (Corbett) would require attorney general oversight into transactions involving district hospitals.
Outcome: Vetoed
* AB 2697 (Huffman) would have required so-called “boutique hospitals’’ to asses their impact on a community’s health system annually, specifically whether they siphon doctors, workers, providers from hospitals caring for less affluent populations.
Outcome: Signed.

* EMERGENCY DEPARTMENT BILLS: AB 1203 (Salas) would prevent emergency departments – which do not have a contract with a patient’s insurance company — from directly billing the patient for treatment provided after a patient has been stabilized. Requires the hospital to seek payment directly from insurers.
Outcome: Signed

* EMERGENCY PHYSICIAN BILLS: SB 981 (Perata) Would prevent emergency physicians – who do not have a contract with a patient’s insurance company — from directly billing the patient, requiring providers to seek reimbursement directly from insurers.
Outcome: Vetoed

* DENTAL CREDIT CARDS: SB 1633 (Kuehl): Would have prohibited dentists’ offices from offering high-interest loans to patients while they are under the influence of anesthesia. Would also prohibit dental offices from charging lines of credit before services have been rendered.
Outcome: Vetoed


Health consumer advocates can take solace in that a few good bills were signed, and that bad bills were stopped, such as those to promote Health Savings Accounts (HSAs). While cuts were made, several other severe cuts were prevented—even if they still remain in discussion.

California’s fiscal situation promises to make for a difficult year, but advocates are primed to continue the fight for the revenues to provide sustainable funding to pay for the state’s basic needs in health and other key services.

These setbacks and steps back does not mean that Health Access or health consumer advocates give up, but that we redouble our efforts—to prevent budget cuts and raise the revenues needed to sustain key health programs, to work for state-level consumer protections and reforms and to continue the push for comprehensive health reform, and to take advantage of the new opportunities at the federal level.

The election of President-elect Barack Obama provides significant hope for health reform at the federal level. He made health reform a top priority in his campaign, spending over $100 million on TV advertising on the issue in the last month alone. His appointments, including Senator Tom Daschle as Secretary-designate of Health and Human Services, indicate his seriousness. And the immediate Congressional agenda includes everything from SCHIP reauthorization to economic stimulus that includes investment in health information technology and aid to states through Medicaid matching funds.

Health Access will continue to keep advocates statewide abreast of efforts in Sacramento, Washington, and beyond in the next year.

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