Beware what the medical-industrial complex loves

Jamie Court, Judy Dugan

San Francisco Chronicle

Thursday, February 22, 2007

A strange thing happened on the way to health-care security -- the goal of universal health care morphed into the cause of mandatory health insurance purchases.

Nowhere is the change so dramatic as in California, where Democratic Senate leader Don Perata, D-Oakland, has adopted Republican Gov. Arnold Schwarzenegger's plan to require Californians to buy insurance, regardless of its cost and without premium regulation.

The "shared burden" proposals of both Schwarzenegger and Perata would require Californians who don't have health insurance through an employer or incomes low enough to qualify for government subsidies to buy it on the open market, or face punishment at tax time. Yet the yearly income cutoff for a subsidy would be $52,000 to $60,000 for a family of four, and the average annual cost of market-rate insurance for that family today is about $11,000, not counting co-pays and deductibles. Mom could take a night job, but there's no other way to squeeze almost an extra $1,000 a month from an already tight family budget.

Even the Legislature's most progressive reformers are on the bandwagon. Last year, Sen. Sheila Kuehl, D-Santa Monica, authored a bill, ultimately vetoed, to replace private health insurers with state-managed health care through a single-payer system. This year, Kuehl also is co-author of Perata's bill requiring people to buy health insurance for themselves. The mantra of "shared responsibility" is coming down to "make the people pay whatever doctors, hospitals and insurers want to charge."

Recently, doctors, insurers, hospitals and the Service Employees International Union joined arms to embrace the "shared responsibility" reforms. Of course, wouldn't automakers and auto workers want the government to force everyone to buy cars so long as it didn't regulate how much cars cost?

Employers, particularly small businesses that can't self-insure and have to buy commercial policies for their employees, will be stuck in the same unregulated market.

How do the governor and Sen. Perata propose to hold down medical costs? Both have refused to regulate health insurance premiums and instead proposed that insurance companies be required to spend a certain level of premium dollars -- in Schwarzenegger's case 85 percent -- on medical care. Unfortunately, this would become a perverse incentive for insurers to pay doctors and hospitals more in order to inflate premium dollars and keep more money for themselves. In Hollywood, the agent who takes a 15 percent cut of his clients' money isn't going to push for the thoughtful indie movie role if "Beer Gut V, The Prequel" will pay for his Lamborghini.

Ironically, the only real-world model for mandatory health insurance is failing. Massachusetts passed such a law (written by the medical-insurance industry) last year with the caveat that a state commission would certify an affordable, comprehensive policy for residents to buy. Last month, private insurers failed to offer such a policy and the appointed commission voted to reduce minimum benefits in order to reduce the price. It is asking insurers to develop a policy that does not cover prescription drugs. As a dissenting commissioner rightly noted, a heart patient needing either surgery or long-term drug treatment would thus be forced to choose surgery.

Mandatory private insurance can have only two possible outcomes, absent strict state regulation of what is appropriate for insurers, hospitals and doctors to charge.

Either prices will be prohibitive for consumers who have to buy insurance -- or benefits so severely restricted, as in Massachusetts, that patients won't get the care that they need. Or, as is already a legacy of Schwarzenegger's workers' compensation-insurance overhaul, which he recently touted as a model for his health care efforts, the state simply shoves the cost burden onto the most injured workers. Workers' compensation premiums for business may have fallen but insurers have reaped windfall profits. Injured workers now suffer delayed, denied and restricted medical care, while their compensation for permanent disabilities has been cut by an average of 50 percent.

This is exactly what should not happen in universal health reform: treating medical care as a commodity that sick people frivolously demand, leaving insurance companies and Health Maintenance Organizations (HMOs) free to cut benefits and charge whatever the market will bear.

Yet neither Schwarzenegger nor a single state legislator has been willing, so far, to champion rate regulation of the type that worked so successfully to cut auto and homeowner insurance rates, even as competition thrives in both markets. Proposed health insurance legislation modeled on the successful property-and-casualty insurance regulations of Proposition 103 is unlikely to find even one legislator willing to buck the health-insurance lobby to sponsor it. The Prop. 103 model applied to health care would require insurers to ask permission of state regulators before raising premiums and to justify their prices, including their doctors' and hospitals' charges.

If lawmakers and the governor could bring themselves to pass universal coverage that cuts private insurers and HMOs out of the system altogether, the issue of rate regulation would be moot. But the state is focused on Schwarzenegger's shared-burden model, and the question is who will get stuck with the biggest share. The doctor/insurer/HMO coalition will do what it takes to make sure that it's not them.

Jamie Court is president and Judy Dugan is research director of the Santa Monica-based Foundation for Taxpayer and Consumer Rights (www.consumerwatchdog.org).

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