The Concept Needs Work--and a Leader to Pull It Along : Insurance: Gov. Deukmejian’s erstwhile plan to provide health coverage for all workers has flaws, but it’s destructive for him to just drop it.

The staff of Gov. George Deukmejian released a proposal last Thursday to provide health insurance for workers and their dependents, and the governor immediately dropped it like a hot rock. He said that the wide-ranging preliminary document, written by his own chief advisers on health and business issues, is not really his or his Administration’s.

By backing away from a plan whose general outlines he heralded in January, Deukmejian loses an opportunity to show the leadership and resolve necessary to solve California’s health-care crisis.

Nearly 6 million Californians do not have any form of health coverage--private insurance, Medicare or Medi-Cal. Nearly 80% are working people and their families.

The proposed plan pushes the debate in Sacramento in a heartening new direction. It would require all employers to provide basic health coverage for their employees and to pay at least 75% of premiums for workers or 50% of premiums for families. Small, low-profit businesses, low-wage employees and the low-income self-employed would be allowed to buy into the Medi-Cal program, some with state subsidies. More than 1 million unemployed, uninsured people would remain without coverage.

Assembly Speaker Willie Brown (D-San Francisco) has said he may introduce this proposal as legislation. But unanswered questions about funding could lead to its demise, particularly if it lacks bipartisan support.

The proposal assumes that new revenues (meaning new taxes) could not be raised, so it would raid other programs and shift some current health expenditures to meet part of the projected costs. But the biggest of the planned revenue sources is a mirage. Starting in 1992, small businesses providing employee health benefits are now scheduled to receive a tax credit, estimated at $1.1 billion. The proposal would cancel or trim the credit and shift these dollars to the health plan. This is like a person on a tight budget deciding to buy something extra, canceling plans to make the purchase and calling the result “extra money to spend.”

It is also unclear how much would be budgeted for the state subsidy for small, low-profit businesses and low-wage employees. The amount needed would be substantial, since 60% of the working uninsured are in businesses with less than 10 employees and almost 50% of the uninsured are at or below 1.5 times the poverty level (approximately $16,000 per year in net income for a family of four). A recent study by the nonprofit consumer and labor coalition Health Access found that $1.4 billion would be needed for the small-business subsidy and $4.8 billion for low-income workers and their families.

There are other areas not adequately addressed:

* Many insurance companies blacklist small businesses. When coverage can be obtained, the cost is typically at least 300% more than a large employer would pay for the same coverage.

* The proposal’s only attempts to control health care costs are threats. The most stringent would allow any employer to purchase Medi-Cal coverage, potentially leaving the insurance companies without any customers. However, the stigma attached to Medi-Cal makes it likely that healthy, profitable companies would resist going into the state program.

* Medi-Cal may not provide needed care. In some areas of the state it’s impossible to find a dentist, a dermatologist or a surgeon who will accept Medi-Cal. More than 15 counties have few, if any, obstetricians who will accept Medi-Cal patients.

* The basic level of benefits proposed for workers leaves out some medically necessary care, including hospital stays after 30 days.

Finally, a health-care mandate carries a potentially fatal flaw. A federal statute, the Employee Retirement Income and Security Act preempts states from requiring businesses to provide coverage. Congress would have to grant a waiver in order for the plan to take effect. (Massachusetts’ new health insurance program may avoid the problem by offering businesses the choice of paying the state a tax or offering private coverage to workers.)

Ultimately, the lack of health-care coverage hurts everyone. Without coverage, preventive, cost-effective measures like immunizations, prenatal care and blood pressure checks lapse. When serious illness occurs, the costs are shouldered by county governments and health-care providers. Providers recoup most of these unpaid bills from insured patients. This “cost shift” accounts for at least 10% of California premium dollars paid.

An under-funded program, waiting for illusory congressional action, would be a cruel hoax. With many powerful interests involved and much at stake for each, a meaningful resolution to the health-care crisis will occur only when a leader gives a strong steering hand and doesn’t let go at the first touch of controversy. The opportunity still exists to create an adequately funded program with comprehensive benefits, universal coverage and meaningful cost containment.