Health care professionals review Richman reform plan.

Health care professionals are split over a health care reform package authored by Assembly members Keith Richman (R-Northridge) and Joe Nation (D-Santa Rosa), which would require each Californian to carry health insurance, set up individual purchasing pools and requires government subsidization to insure some Californians.

The state legislature will consider two very different health care proposals this year, and while it seems unlikely that either will survive in its current form, serious reform of the state's health care system may be inevitable.

Richman and Nation's reform proposal comes after voters rejected a proposition in November that would have required employers to provide health care for its employees. Since its defeat, legislators have been writing differing proposals that attempt to solve the health care crisis.

State Senator Sheila Kuehl (D-Santa Monica) is also reintroducing the idea of setting up a state-run, single-payer health care system. Kuehl claims the system would start lowering the cost of health care immediately.

Kuehl's proposal is unlikely to make its way through the legislature, and stands even less of a chance with Gov. Schwarzenegger, who has said he might Support an individual mandate like Richman is proposing.

Richman's proposal would set up semipublic purchasing pools based on geographic areas, so that residents who don't qualify for existing public plans like MediCal could afford insurance. Richman's proposal would further direct the state to subsidize coverage for those Californians who couldn't afford to buy into a pool and had no other access to coverage.

Jan Emerson, spokesperson for the California Hospital Association, said the group is meeting regularly with Richman and coauthor Assemblyman Joe Nation to learn more about the package.

"Conceptually we're supportive of it, but the devil is in the details, and until the details are worked out we can't really take a strong position," said Emerson. "We've long been supportive of universal health care coverage."

Emerson said the CHA still has questions about how the subsidized health plans will be funded, what a standard benefits package will include. Emerson said she expects the proposal to take form as the legislative session moves forward.

Carole Gallien, co-chair of VICA's health care committee, said members support several of the ideas in Richman and Nation's proposal. Representatives from Kuehl's and Richman's offices will be at the next committee meeting to further explain both reform plans.

Employer partnership

"We like the idea of purchasing pools with affordable packages, and there's a voluntary employer partnership in that program," said Gallien. "We like the idea that there would be health care offered by state and local governments."

The voluntary employer partnership in Richman's proposal would provide help for businesses with 50 or fewer employees participating in the program. It would offer essential benefits coverage for low-income employees, providing federal and state subsidies through MediCal and Healthy Families.

Steven Lindsay, legislative lobbyist for the California Association of Health Underwriters, said that plan is resting on the false premise that a government can successfully run a health plan.

"If you look at the state's history in developing those programs, one is Healthy Families, another is HIPC, they routinely cost more than what you can buy in the outside marketplace," Lindsay said. "There are a number of reasons for that. One is, being a government agency, everything has to be done through public hearings, and they're slow to adapt to the marketplace."

Lindsay said concerns about funding for government subsidies. If it comes in the form of taxes on health insurance companies, Lindsay said, those companies are only going to be forced to raise their prices. He said that he also doubts the state will be able to negotiate lower rates for personal pools with insurance companies, especially if the state is raising taxes at the same time.

Eliminating 'middlemen'

Richman and Nation claim that by eliminating "middlemen", which Lindsay reads as insurance underwriters like himself, employers and individuals will be able to negotiate better rates with health insurers. Lindsay said there's no evidence to suggest that is the case.

"The idea of pooling used to be that everybody thought if you had more enrollees, you'd get better rates," Lindsay said. "But CalPERS is the biggest pool in the nation, and they don't get better rates."

Sheila Kuehl introduced her single-payer health insurance bill in late February. The system would be funded by a series of taxes, including: an employer payroll tax equal to 8.2 percent of salaries, an employee payroll tax of 3.8 percent of salary, a 3.5 percent tax on unearned income, a 12 percent tax on the net business income of self-employed people and an additional one percent tax on all income of more than $200,000.

Nationwide, health care spending in 2004 was $1.8 trillion, a 7.5 percent increase from 2003. Spending growth is slowing a bit, but it's still expected to come in at 7.3 percent per year. In California, hospitals that are unable to keep up with growing costs are closing their doors, and increases and premium costs are often passed onto employees.

Kuehl says that the plan would save the state money immediately by allowing it to purchase prescription drugs and medical equipment in bulk and eliminating many administrative costs.

Employers that currently provide health insurance would save 16 percent, according to Kuehl's office, and families would save about $340 dollars in annual premiums. Families making between $200,000 and $250,000 would pay $7,040 more annually.

Critics say that setting up a single-payer system would force the state to ration care, and Lindsay said that he has not seen a financial model that can provide the kind of savings Kuehl is promising.

"We don't think the American public is ready to have the government in charge. Every single nation that has government health care rations care, that's why they pay half as much," said Lindsay. "(Kuehl) claims the plan will save $8 billion, but what we know about health care is that it's an insatiable appetite. People use just as much as you pay for."

Cost savings are the primary goal of each proposal, despite whatever chances either has of making it through the legislature. Richman and Nation's plan would now allow MediCal to use any drug other than a generic version unless a drug has been demonstrated to lead to better outcomes than existing generic drugs.