Putting a Premium on Health Care

Gov. George Deukmejian’s Administration is making good on his commitment of Jan. 9 to draft legislation “which addresses the health care needs of the uninsured.” His staff is now circulating a draft plan that holds real promise, although it may fall short of his own goal of universal coverage.

Drafted by the Health and Welfare Agency, the plan has yet to be endorsed by Deukmejian, but it clearly will expedite the work of a task force that he and the Legislature created last year to develop a health plan by March.

Three fundamental problems still require careful study: funding, mandates and cost containment.

Still short on details, the new plan appears to rely on a mixture of premiums, to be paid by both workers and employers, tax incentives and subsidies, with an expanded Medi-Cal program as backup. Reliance on Medi-Cal could be a problem; the system is already over-used and under-funded. The report suggests a 15% increase in reimbursement rates paid to doctors, but that would not begin to correct the underpayments that have kept doctors and dentists from providing services and have driven hospitals out of Medi-Cal.

In place of a mandate for universal insurance for all workers, the draft gives employers who don’t provide insurance the option of paying health-care expenses of their workers and their dependents directly. That may be as good a way as any to implement universal coverage for the work force.

Cost containment features of the plan do not yet appear fully developed. This is a sensitive issue with doctors and hospitals, who generally resist constraints on their discretion, but employers and insurance companies are right in making cost controls an essential element of any plan. Fortunately for the task force, there is a growing body of research demonstrating effective ways to control costs. But medical inflation figures show how little has been accomplished.

Under the draft, all health-insurance payments beyond those covering basic benefits would be taxable and health-insurance premiums would no longer be fully deductible as a business expense. Alain Enthoven, a leading health-care economist at the Stanford Graduate School of Business, has long proposed this latter reform to discourage excessive coverage that can drive up medical costs.

The cost of the plan is not calculated as yet. The range of premiums dramatizes the disparities in coverage implicit in the plan, with monthly costs ranging from $85 for Medi-Cal coverage to $128 for private fee-for-service coverage. Premium subsidies for low-income employees and tax credits for their employers would add to the cost to the state. There probably would be an overall saving, however, as broader insurance coverage resulted in better prevention and primary health care, reducing the high costs associated with postponement of treatment.

As now written, the draft appears to fall short in two ways. It does not cover all 5 million uninsured Californians, leaving as many as 1 million exposed. And its provisions seem least effective for those most in need, imposing costs that the working poor may find impossible to pay and limiting benefits in ways that may still leave the health-care system with uncompensated care.

But there is time to work those problems out, and the task force has talent enough for the job.