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Last of the Old Solutions?


This week, with lots of hoopla, California sort of passed a health reform bill. In the tangled world of California politics, that means less than you might think. For a start, it passed the state Assembly as a result of a deal between the speaker Democrat Fabian Nunez and Republican Governor Arnold Schwarzenegger. But it didn’t get a single Republican vote.

Senate president Don Perata, a Democrat, has essentially said the legislation is dead on arrival in that chamber. And the thorny issue of whether the bill’s employer mandate – provide insurance or pay an alternative payroll tax – requires a 2/3 majority approval. This being California, the whole thing has to go to the voters in November.

Even assuming that this proposal becomes law, it’s not clear that what’s been approved gets California very far. If the goal is universal coverage, the pay-or-play system in which employers have to offer coverage sounds good – as well as familiar – but it doesn’t really get us there. Hawaii passed something similar in the 1970s and several other states have tried some variant and still no one’s really got close to universal coverage.

Why? The nature of American economy means that most low-wage employers can’t afford to provide decent health insurance benefits, and – surprise, surprise – their employees are the very people who can’t afford to buy the health insurance. To really make the system work – and insure those who can’t afford it – subsidies are needed. So really California, like Hawaii, is depending on employers to do the right thing and for the taxpayer to magically produce subsidies to allow the working poor to buy into the health care system. But in the end, programs for the poor are treated poorly, and those promised subsidies may not amount to much.

Which brings us to California’s other problem: it’s massive budget deficit. There may be an agreement on health care but there’s also a housing slump and no Google public offering to boost tax revenues–providing Perata with his mortality report. Deficits tend to mean cuts in programs like Medicaid for the poor.

And the California proposal doesn’t hold down the costs of care which, in theory, could benefit those normally in opposition. In fact, once the covers are really pulled back many private health plans and providers will probably benefit from this deal. They’ll get more business from those who aren’t hugely wealthy but who are well enough to have jobs where the cost of care can be covered. The health plans and some of the unions have been salivating over something similar at the national level.

But that doesn’t mean everyone, let alone everyone in the health care industry, will accept the proposal the California Assembly has approved. An odd coalition of the single-payer advocates at the California Nurses Association and the mercantilist capitalists at Wellpoint, the big for-profit insurer, look like they’re the major opposition. Stir in some small business angst (which is what happened with the similar Proposition 72 which appeared on the ballot in 2004) and the chances of this new bill getting anywhere in November are not as great as some might believe.

This is all a pity. California (and the nation) needs serious health care reform which puts everyone in a genuine single pool. Of course how that’s structured is matter for serious debate amongst policy wonks. But no one realistically can expect to get to universal coverage, and use its associated levers for cost control, by glomming more people and tax dollars onto the employer-based system that’s the root cause of all our trouble. It’s a system that lets those who often need coverage the most run up the largest bills while providing those who need coverage the least with expensive, sometimes lavish, care.

The majority of people and the vast majority of voters are still experiencing and preferring the devil they know – getting health care from their employer and having no idea what it costs – to any kind of serious change. Politicians are loathe to mess too much with that system because of its familiarity. That’s why the Century Foundation’s Maggie Mahar now agrees with me: We can’t realistically have major reform soon, and it’s also why most of the Democratic presidential candidates are trying to build off the employment-based health care system we currently have.

My guess is that all the rhetoric and premature celebrating in Sacramento this week will one day be remembered as the last of the failed efforts to try it the “old way”, changing a failing system at the margins, instead of enacting true reform. In a few years we’ll be forced into really totally restructuring health insurance. But between now and then, we’re in for a whole lot of continued pain.

Share  Posted by Matt Holt at 5:50 AM | Permalink

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