California or bust

Ezra Klein claims he was fighting lions barehanded, and so couldn't post his take on the Schwarzenegger universal healthcare proposal until this morning. His summary of the plan, which would mandate individuals buy health insurance and employers provide it (or else face a 4 percent "fee") is a good one to begin with.

The 10-page proposal itself is at the California governor's Stay Healthy California site. (Does that sound like 'Cal-ee-forn-eea' to you, or is it just me?)

A google news search this morning turns up almost 700 news articles on Schwarzenegger's universal healthcare proposal via individual mandates and employers, and a few of them shed some light on what's been a mystery for me:

Why are the insurance companies against this plan? It sure seems to benefit them, mandating coverage that may or may not be good enough to really be called coverage. After all, there's insurance and then there's insurance — some of of us face the Arctic covered with a -30 degree F sleeping bag while others have a holey sheet.

Reuters reported yesterday that Wellpoint shares dropped nearly 3 percent on Tuesday, "on worries a proposal by California's governor to boost health insurance coverage could eat into industry margins."

Wellpoint, which insures about 34 million Americans, would have to change its business model under Schwarzenegger's plan, because it's currently the Wall Street health insurance leader in spending the least on medical care — having the lowest "medical-loss ratio" in California.

Schwarzenegger's plan would require companies to spend at least 85 percent of every dollar in premiums on healthcare. The Reuters story notes that there's still plenty of time to correct this: the plan "must pass muster with the California legislature and lobbying interests."

Wellpoint Financial Officer David Colby told Reuters that the plan wasn’t necessarily all bad for Wellpoint.

"The fact of the matter is we are looking at putting a lot more dollars into the health-care system ... significant dollars into the system will provide significant opportunity for us," Colby said

Well, yeah. $12 billion dollars more.

And there's another mystery. Why have so few of the stories, none on TV, mentioned state Senator Sheila Kuehl's (D-Santa Monica) Senate Bill 840, which Schwarzenegger vetoed just last autumn? It was a single-payer plan that wasn't going to cost $12 billion more, but rather cover everyone with the same dollars now spent on healthcare.

Larry Mitchell of the Chico Enterprise Record quotes Georgie Summers of Chico and the Butte County Healthcare Coalition, a single-payer advocacy group, with an answer. Schwarzenegger took millions of dollars in campaign contributions from the insurance industry.

Kuehl reintroduces SB840 this year.

The LA Times yesterday ran a piece from Kuehl about healthcare reform in California. In "A second, third and fourth opinion on healthcare" she describes four healthcare proposals now before the legislature, including Schwarzenegger's. All but SB840, she writes, fall far short of providing comprehensive coverage and affordability. Schwarzenegger's plan "can at best provide high-cost, low-benefit plans for many Californians; it limits what employers pay but not what individuals must pay or what insurance companies can charge."

Kuehl also notes that Schwarzenegger's plan also adopts the worst possible option, Bush's individual health savings accounts.

The LA Times Lisa Girion, who wrote that great piece on the California insurers denying coverage to entire professions — like firefighters — and folks who take some of the most popular drugs — like Celebrex — covered Schwarzenegger's plan in yesterday's Times. "Plan to ensure health coverage could raise costs" led with the fact that the plan would end those practices of denying coverage. She quoted Cindy Ehnes, director of the Department of Managed Health Care, which oversees health plans, who said the proposal would "eliminate that long-standing barrier to access to individual coverage, which is if you need it, you can't get it."

Girion wrote that Blue Shield of California (one of the companies that currently excludes entire categories of workers) supports universal coverage according to Girion, and praised the plan; Kaiser was also largely favorable. A Wellpoint spokesperson said that the individual mandates would be tough to enforce, saying that a quarter of California drivers don't have the mandated auto coverage.

"'The bottom line is that healthy, uninsured individuals are not likely to respond to a government mandate.' In addition, she said, in New Jersey, where everyone is guaranteed access to health coverage, premiums for individual insurance are three times higher than in California.

Times letter writers weighed in, mostly cogently. Ronald Wolff says insurance shouldn't be part of healthcare. "The purpose of insurance is to prevent rare and unforeseeable events from causing catastrophic financial losses. Healthcare doesn't fit the definition — everyone needs it."

Michael Dressel writes, "It is amazing how there is a wrong solution to every problem. This particular solution is a blend of the worst features of socialism and capitalism. It comes down to forcing us by law to buy an inferior product without impeding the profiteering that makes it such, and is incompatible with the concept of insurance as a way to share risk."

Victoria Colliver of the San Francisco Chronicle quoted Art Pulaski, executive secretary-treasurer of the California Labor Federation, who called the proposal "a boon to insurance companies, but a bust for most workers."

"This plan requires all Californians to buy health insurance with no guarantee that it will be affordable or that coverage will be adequate," he said in a statement. "We are concerned that the plan creates an incentive for employers who currently provide health care to drop coverage and instead pay only a minimal tax."

Culver notes that Schwarzenegger's plan relies on the feds to pick up almost half its estimated costs — $5.5 billion out of the $12. That's because California would raise the rates that doctors and hospitals are reimbursed through California's Medicaid program, MediCal, and because more people will qualify for MediCal. Right now MediCal pays providers only 40 percent to 50 percent of Medicare levels. Schwarzenegger would raise that to 80 to 100 percent.

She gets a great quote from businessman Sammy Seo that provides insight into the business community's view. He told her that at worst Schwarzenegger's plan would be the same as what now exists. "And if we didn't have to deal with insurance, paperwork and hassle of administering this ... I'd be open to it.""

Deborah Burger, president of the California Nurses Association, writes "Healthcare packages all inferior, except for one" for the Ventura County Star today. The one, of course, is Kuehl's single-payer proposal. The others "continue to rely on a wasteful insurance industry whose focus is on making money by denying care to those who need it the most and other market-based mechanisms that created the current mess."

She then lists 10 points in favor of single-payer, beginning with
1. Everybody in, nobody out
2. Portability
3. Uniform benefits
4. Prevention
5. Choice of physician

Burger told the PRNewswire that the sum of this proposal may be "little more than a fresh coat of paint on a collapsing house."

She thinks it likely that "many Californians will end up with cut-rate plans that discourage people from using their health coverage, have huge out-of-pocket costs, and expose them to financial ruin in the event of a serious illness or accident."

She also told PRNewswire that Schwarzenegger's plan doesn't address price gouging by the pharmaceutical companies.

Lastly, Jonathan Cohn has an analysis of the Schwarzenegger plan at National Review. He describes it a bold and authentic, and says that its most radical element is regulating those medical-loss ratios.

"Not surprisingly, the insurers that provide the best, most cost-effective care have traditionally been the ones with the highest loss ratios, since they're putting the most money into patient care. But thanks to the dysfunctions of the health-care market, those same companies often end up at a competitive disadvantage, because they are the ones that attract sicker beneficiaries--on whom it's more difficult to make money....

"That feature goes a long way toward explaining why Bruce Bodaken, president of Blue Shield of California, has come out in favor of the program: Blue Shield, a non-profit that is generally well-regarded, and which has a high medical-loss ratio, would likely benefit if its competitors had to play by the same rules."

Cohn notes that one immediate effect of universal healthcare would be identifying all kinds of conditions that people had put off seeing a doctor about because they couldn't. All that preventive care all at once could burden the system.

He reports that "California liberals" don't think the employer requirements add up: either cover employees or pay a 4 percent fee. Actually, wasn't that the CEO of Safeway who first pointed that out? Is he some kind of famous California liberal, hanging out with Barbara Streisand?

Cohn also notes that because special interests are going to get a shot at this and its various elements, it's probably actually as difficult to pass as it would be to pass a single-payer proposal. Just as special interests defeated the Clinton health plan, which had quite a bit in common with Schwarzeneger's plan, they might very well tank this one.

Cohn concludes that Schwarzenegger's plan nevertheless moves the ball forward, simply because he's a Republican who has "put his imprimatur on the same policy principles--heavy regulation of insurers, mandates on employers, and higher taxes to pay for subsidies--that many Democrats propose to use in their health-care proposals. That will make these notions, and the idea of universal health care generally, a great deal more difficult to demonize."