Governor’s Health Insurance Plan Is Flawed, Critics Claim : Medical coverage: The proposal would overburden Medi-Cal and drain taxpayers, they say.

The Deukmejian Administration’s dramatic proposal to require employer-paid health insurance for every California worker relies too heavily on the already overburdened Medi-Cal program and would unfairly exclude about 1 million people, critics of the draft plan said Thursday.

And while no one is sure yet what the ambitious program would cost, representatives of the business community and medical industry insist that the plan cannot work without a major infusion of taxpayers’ dollars not now being spent on health care.

Gov. George Deukmejian, whose Health and Welfare Agency prepared the draft proposal, told reporters Thursday that he expects to submit the plan to the Legislature within 30 days.

“We want to find out whether or not, as it is presently constituted, there are some flaws in it that we have not perceived up to this point,” Deukmejian said. “It is not in its final form.”

As it is now crafted, the proposal in one respect is strikingly simple: It would require every California business to provide a minimum package of health insurance to every worker. But the plan also includes a complex set of subsidies and contingencies that has many experts baffled.

One difficulty in evaluating the Administration proposal is that it is unlike anything else being tried in the United States today.

Hawaii has long required every business in the state to provide insurance for its workers, but that plan does not cover dependents.

Massachusetts is phasing in a plan to require companies to offer insurance to their workers or else pay a payroll tax that would go into a fund to care for those who lack coverage. The Massachusetts plan has encountered financial problems forcing the state to postpone planned payments to hospitals.

Oregon also is phasing in a restructuring of its public health program and plans to require employers to provide insurance. But the mandate on companies will not take effect if the state voluntarily meets certain goals for insuring those now lacking coverage.

During the next month, the California proposal is to be hammered into shape by the Administration and a task force appointed by Deukmejian that includes state lawmakers and representatives of business, labor, consumers, doctors, hospitals and insurance companies.

Spokesmen for most of those interests said Thursday they were pleased that Deukmejian, criticized in the past for lacking boldness, had come forth with a proposal, even if only in draft form. But most of them also found something in the plan they said was unfair or could doom it to failure.

Among the criticisms:

- The proposal depends too much on Medi-Cal, the state-run health care system for the poor. Low-wage workers and employees of businesses with little taxable income would be allowed, and in some cases required, to join Medi-Cal. As many as 2 million of the 4 million people currently uninsured who would be covered by the program might be put into the Medi-Cal system.

In addition, the proposal includes an ominous incentive for private health care providers to keep costs down: if medical cost increases still are greater than the general inflation rate in three years, every Californian would become eligible for Medi-Cal. But the Medi-Cal program is already in crisis because doctors and hospitals that treat patients served by the program receive from the state only about 65% of the fees they would charge private patients. As a result, fewer and fewer providers will serve poor patients, and the poor are finding it ever harder to obtain adequate care.

Although the proposal calls for a 15% increase in the state’s payments to Medi-Cal providers, industry officials said Thursday that the boost would be insufficient to cover the gap between their costs and what they are paid by the state.

“We seriously question any plan which would build upon Medi-Cal,” said Dr. William G. Plested, president of the California Medical Assn. “Clearly, working people and their families who would be subjected to the Medi-Cal buy-in would be shortchanged.”

Hospital officials said they fear that companies now insuring their employees in private plans, which pay full rates, would shift their workers to Medi-Cal. The result could be a huge drop in hospital profits.

“I am surprised and disappointed at some of the provisions in this document,” said Duane Dauner, president of the California Assn. of Hospitals and Health Systems. “I think it moves us backward rather than forward.”

- Although the plan would cover 80% of those currently without insurance, it omits about 1 million people, including the homeless, retired, some disabled people and students.

“This is vintage Deukmejian, to leave out the people who need help the most,” said Michael Weinstein, president of California 2000, a Los Angeles group that advocates a state-run universal health insurance program. “It is an effort to preempt the movement taking place in the Legislature and throughout the state to take care of this problem. I hope people are not deceived by this.”

- Even with subsidies provided in the proposal, most lower-income people still would not be able to afford the insurance. A family of four with a monthly income of $2,000 before taxes would have to pay at least $86 a month for the coverage. A family earning $2,200 would not be eligible for a subsidy and would have to pay $184 to obtain the insurance.

Lois Salisbury, chairwoman of Health Access, a statewide labor and consumer group that supports a more expansive health care program, said studies have shown that a family of four does not have disposable income to pay for health care until they are earning at least $30,000 a year.

“These costs may not sound like much, until you realize that your choice is to spend the money on health insurance or on food for your family, or a winter coat for your child to go to school, or bus fare to get to work,” Salisbury said. “The truth is you don’t have choices.”

- The plan as now envisioned cannot work without more money. Administration officials have not estimated how much the program would cost, but they insist that it can be funded by shifting some existing resources, levying a new tax on employees’ health benefits, and using funds that had been earmarked for small business tax credits.

“If you’re talking about a proposal that would cover all employees, no matter how many hours they work, and subsidizing that, you’re talking about big bucks,” said Martyn Hopper, state director of the National Federation of Independent Businesses. “I don’t know where they are going to get the money.”

Times staff writer Virginia Ellis contributed to this story.

HEALTH INSURANCE PLAN

Following are highlights of the Deukmejian Administration’s proposed health insurance plan. Who’s Covered? The plan would require every California business to provide health insurance for all workers who have been on the job at least three months and their dependents. This would cover about 4 million of the estimated 5.2 million people without health insurance today. Who’s not covered? The unemployed, retired, homeless, some disabled people and students who are not dependents of their parents. People 65 and over already are covered by the federal Medicare program, and welfare recipients get their health care through the state Medi-Cal system. What’s in the benefit package? Doctors’ visits, hospital stays up to 30 days a year, drug prescriptions, prenatal and maternity services, limited mental health care and preventive health and dental care for children, including immunizations. Employers could provide additional benefits, as well. How much would coverage cost? Monthly premiums are expected to range from $105 to $128 per person. What would employers pay? Employers would pay 75% of their workers’ premiums and 50% of the premiums for their employees’ dependents. What would workers pay? Employees would pay 25% of the cost of their own premiums and half the cost of covering their dependents. Employees would also pay $5 per doctor’s office visit, $2 for drug prescriptions, $25 for emergency room visits and $50 for hospital admissions. In addition, 25% of the value of any health benefits employees received from their employers above the minimum benefit package would be considered income and be subject to taxation. Who would be subsidized? Businesses with fewer than 25 employees would be eligible for a tax credit of up to $15 per worker per month to help offset the cost of the premiums. Companies with low profits would receive subsidies of up to $37 per employee per month. But businesses receiving subsidies would have to enroll their employees in the state Medi-Cal plan.

Full-time employees earning less than twice the federal poverty level--$24,200 for a family of four--would receive subsidies of up to $12 per person per month. They could enroll in the Medi-Cal program or apply their subsidy to private insurance.

The state would also subsidize premiums for part-time employees and the self-employed.