COLUMN ONE : Uninsured: One Step From Ruin : The crisis, evident for years, has finally caught the attention of business and lawmakers alike. But agreement on a rescue plan is still elusive.

In California--the richest state in the richest nation in the world--more than 5 million people are living without health insurance, risking financial ruin if they fall ill or suffer injuries in an accident.

If they are hospitalized, most of the uninsured must depend on public programs or charity from private hospitals to pay for their care, adding to the tax burden and medical bills of the rest of the state’s citizens.

Under that weight, much of California’s health care system is sagging. Soaring costs threaten to price middle-class working people out of high-quality care, and the rich and poor alike run a greater risk of dying in accidents because emergency rooms and specially equipped trauma centers are closing their doors.

The crisis has been evident for some time to ordinary Californians. Many have gone bankrupt paying for health care. Others who are still healthy but cannot afford insurance live in fear of an illness that could send them into a financial tailspin. People with insurance through their jobs find themselves paying more for less.

“I don’t think people have understood that this thing is dead serious and it’s not going to go away,” said Jim Krause, a San Dimas owner of a small print shop who was saddled with more than $40,000 in medical bills after a heart attack. “Basic health care is a right, not a privilege.”

Perhaps because of its growing impact on the middle class, the issue now has caught the attention of lawmakers, the governor and special interests in the state Capitol, who have vowed to find a solution before the year is out. In a state with one of the 10 most-productive economies in the world, they say, there must be a way to provide basic medical services to the entire population.

If these efforts fail, three groups stand ready with proposed initiatives to be placed on the ballot beginning in 1992, including one that would create a system of universal, tax-supported health care.

Lawmakers of every philosophical stripe and special interest groups from all sides seem to agree on this basic outline of the problem:

- More than 21% of state residents under the age of 65 lack insurance, up from 17% in 1979, according to a recent UCLA study. Although most of those people are poor, about one-fourth of them come from families earning at least three times the federal poverty level of $12,100 for a family of four.

- Another 3.5 million poor people get their only health care through the Medi-Cal program, which doctors and hospitals say covers only 35% to about 60% of their costs. Fewer and fewer doctors and hospitals are willing to treat the poor at these rates, so the needy often defer medical care until they have an emergency.

- Health care costs not paid by patients are covered by the taxpayers or shifted to customers who pay in full. Hospitals provided $3.1 billion in charity care in 1989, about 17% of their overall costs, according to an industry group. Most of this shortfall was passed on to paying customers in the form of higher room charges and higher insurance premiums.

- Insurers are caught in a vicious competitive spiral, with every company seeking to cover only the healthiest customers, leaving the chronically ill who cannot afford exorbitant rates to fend for themselves.

- Employer costs are soaring: A recent survey found that health care expenses for California businesses climbed by nearly 25% in 1989. In Los Angeles, a worker’s health insurance typically costs his or her employer about $250 a month, the study said.

Small businesses are even more vulnerable because insurance companies charge them higher rates and adjust premiums frequently to reflect the health histories of their employees. If one worker gets seriously ill, the costs for the entire firm can escalate.

- Even employees who have health insurance are feeling the pinch, as companies try to shift their increasing costs onto the work force. Employees are paying higher premiums, deductibles and co-payments. And health benefits were a central issue in five of the six major strikes in California last year, according to the Service Employees International Union.

But that is where the agreement ends. Each interest group is pushing its own solution, and many of the ideas are in conflict.

Employers tend to favor methods that would contain the costs of insurance and medical care without requiring any additional commitment on their part. Doctors and hospitals want to require companies to insure their workers, but they oppose the more onerous efforts to control medical fees, such as direct government regulation of their rates.

Two influential consumer-advocate groups have proposed eliminating the current, employer-based system and replacing it with universal, tax-supported coverage. Much of organized labor supports a plan to tax those businesses that do not provide coverage for their employees.

That kind of byplay has led to legislative paralysis in the past, and it could again this year. But if most or all of those groups could agree on a single approach, it could well breeze through the Legislature and into law.

Congress is also wrestling with the issue. A federal commission on March 2 recommended an expanded, employer-based system. But the proposal already has been attacked as too costly by the Bush Administration, and most California observers believe no solution will be forthcoming from Washington. So state lawmakers, like their colleagues in Hawaii, Massachusetts and Oregon, intend to try to solve the problem themselves.

So far, three major proposals have been floated in the state Capitol, and each would place most of the burden for providing insurance on employers.

Gov. George Deukmejian’s top administrators of health and business programs have offered a plan--not endorsed by the governor--that would require all California businesses to insure their employees and their workers’ families. Companies would pay at least 75% of the premiums for the workers and half the cost for their families.

The plan includes subsidies for low-wage workers and low-profit businesses, allowing them to buy cheaper insurance through the Medi-Cal program, which now is limited to the poor. Also included in the proposal is a provision that would require insurers to accept everyone who applied, regardless of their health history, and limit differences in their rates to about 40%. This proposal is backed by much of the insurance industry as a way to head off more Draconian notions calling for state regulation of insurance premiums.

The Deukmejian Administration proposal, now contained in a bill authored by Assembly Speaker Willie Brown (D-San Francisco), has been attacked on several fronts. Business groups say the mandate is an unfair imposition on employers, while advocates for the poor complain that the plan would cost more than the Administration is prepared to spend and leave uncovered more than 1 million people who need care the most. Doctors and hospitals have criticized the proposed expansion of the Medi-Cal program, which they say already is moribund.

The Administration plan is remarkable only in its ability to draw fire from virtually every side of the health care debate, said Dr. Charles Plows, president of the California Medical Assn. “This is California’s first consensus on health insurance in years,” he said, referring to the nearly unanimous condemnation of the plan.

The CMA’s own plan, which will be carried in the Legislature by Senate Republican Leader Ken Maddy of Fresno, also would require every employer to provide insurance. But the doctors’ proposal couples that requirement with significant new taxes to raise at least $1.5 billion annually for subsidies to low-income employees and businesses. Maddy originally considered carrying the governor’s proposal but recently has criticized it as unworkable without new taxes, which Deukmejian opposes.

A third measure, advanced by Assemblyman Burt Margolin (D-Los Angeles), would cover all Californians, not only workers and their families. Like the others, the Margolin bill depends largely on employers to provide coverage, but it would impose an 8% payroll tax on those businesses that do not participate, using this money to provide coverage for people who cannot obtain it in the private market. This is known as a “play or pay” system.

The measure would create a state commission that would negotiate with private doctors, hospitals and insurers to care for all those who could not get insurance on their own. Workers not covered by their companies would get this state-sponsored coverage but would have to pay a 2% tax on their earnings. The plan also includes subsidies for low-wage workers and start-up businesses.

Despite the promise of subsidies or tax breaks in all of these plans, many employers remain deeply suspicious of any scheme that requires them to provide insurance.

Business groups, including the California Chamber of Commerce and the National Federation of Independent Businesses, are working on a proposal that seeks to bring down insurance rates so that more employers can afford to buy coverage without a government mandate that they do so. If that approach fails, some business leaders are saying that improved health care would be better funded by broad-based taxes than by an added burden on companies.

Jo Linda Thompson, counsel to the California Restaurant Assn., said her members are “absolutely, totally focused on” the health insurance issue. She said the various employer mandate proposals would be particularly tough on restaurants, a large proportion of which do not provide insurance.

“We as employers are not the solution to the health care problem in California,” Thompson said. “A tax on jobs is not a solution to access or cost containment.”

But a leading labor lobbyist in Sacramento said employers who contend that providing insurance would bankrupt them are crying wolf.

“This is not going to put them out of business,” said Tom Rankin, a lobbyist for the California Labor Federation. “They will pass it on. I don’t think anybody should be deceived by these dire predictions.”

Actually, the business community does not speak with one voice on the issue. Companies that are already providing insurance, particularly large, self-insured corporations, would probably benefit from a mandate requiring their competitors to offer insurance as well. And others believe that an expanded role for employers is inevitable and want to shape the final product to their liking.

“We have an obligation to society at large,” said Larry Kaplan, president of the Hollywood Chamber of Commerce. “The political reality is that there is going to be some kind of mandate for health insurance. It behooves us to participate.”

Health insurance has been linked to the workplace since the 1930s, when companies and labor unions began providing hospital coverage for their employees and members. This was done primarily through nonprofit Blue Cross plans, which dominated the market and charged every enrollee a flat fee--a practice known as “community rating.”

But after World War II, when more and more workers obtained insurance as a tax-free fringe benefit, commercial insurers began to capture a larger share of the market. They did so by offering lower rates to groups, like large employers or unions, which from their health histories could be expected to pay more in premiums than they would use in medical care.

This kind of competition among insurers set off a vicious spiral that continues to this day. As more and more healthy, low-risk people were insured at comparably lower rates, insurance companies would only offer to cover the sick at prices high enough to justify the increased financial risk. Today, rates for the chronically ill are so high that almost no one can afford them.

“There really is no insurance out there anymore,” said Brent A. Barnhart, secretary of the Assn. of California Life Insurance Companies. “It is a game to make sure your opponent ends up with all the bad risks and you end up with the good risks. It’s like sharks in a feeding frenzy. Nobody can afford to be a good guy without going under.”

At the same time that the sick were being excluded from health insurance, so were the poor. Throughout the 1980s, the fees doctors and hospitals collect from Medi-Cal for treating the needy fell further behind inflation. Now, according to Plows of the CMA, Medi-Cal pays physicians only about 35% to 60% of what they can earn treating privately insured patients.

For example, Plows said, Medi-Cal pays pediatricians $12 for a $35 patient visit, and pays obstetricians $1,000 for delivering a baby, a procedure that would cost a private patient $1,600.

In addition, the state in 1982 cut more than 250,000 people from the Medi-Cal rolls and gave the counties the responsibility of caring for them. Although the Legislature promised to pay the counties 70% of what it had cost the state to provide the care, lawmakers and the governor have not lived up to

that pledge. This funding gap has left more of the working poor with no access to care.

Doctors are not required to accept Medi-Cal patients or the uninsured, and many do not. But hospitals by law must treat everyone who arrives in need of emergency care. Last year, according to the California Assn. of Hospitals and Health Systems, hospitals spent $1.3 billion treating non-paying patients and lost another $2.8 billion providing care to government-funded patients.

The shortfalls have prompted some hospitals to shut down their emergency rooms rather than continue losing money on charity cases. Particularly hard-hit have been the specially equipped and expensive trauma centers, which hospitals around the state established in the early 1980s, only to discover soon after that as many as half of their patients could not pay their bills.

The same centers that had opened with great fanfare--they were set up to save lives by having medical specialists on duty and sophisticated equipment on hand--began closing their doors. In Los Angeles County last month, Huntington Memorial Hospital abandoned the trauma care network, leaving just 12 of the 23 hospitals that were part of the county program when it began in 1983.

“Everybody is trying to avoid being stuck with the government’s underpayments and the cost shift from the uninsured,” said Duane Dauner, president of the California Assn. of Hospitals and Health Systems.

Medical providers have tried to make do by charging different fees to different customers. An identical procedure can be billed at one price if the patient is on Medi-Cal, and another if the customer is paying for it. One rate applies to patients with indemnity insurance, which reimburses them for their costs, while another price is quoted to members of group plans, which are able to negotiate substantial discounts.

“It doesn’t make sense for doctors and hospitals to have five different rates depending on who approaches them,” said Gene Preston, general manager of the California State Employees Assn. “It doesn’t accomplish anything except squeezing one place and pushing it out somewhere else.”

Many believe that policy-makers are simply chasing their tails by grappling with various approaches that are based on the status quo. They argue that no reform will be effective unless it scraps a large part of today’s health care structure and replaces it with something completely different.

“We’ve got to be willing to start out with a clean sheet of paper, to throw out a lot of assumptions, a lot of sacred cows,” said Assembly Republican Leader Ross Johnson of La Habra. “The system cannot work as it is designed today. Eventually, no matter how many additional bells and whistles we add, it is going to fall of its own weight.”

On the other end of the political spectrum from Johnson but holding a similar viewpoint about the flaws in the current system is Lois Salisbury, president of Health Access, a consumer and labor coalition preparing a possible ballot initiative for 1992 to require basic health coverage for every California resident. The plan would be financed in part by raising the sales tax one-half cent and increasing income taxes on the affluent.

Under the Health Access plan, everyone would be entitled to basic benefits, with little or no out-of-pocket expenses to the patient. The state would collect all health care premiums now paid to insurers and channel those dollars to private doctors and hospitals chosen by patients. The health care providers would be paid from annual budgets that would give them an incentive to maximize efficiency, Salisbury believes, much as the universal system in Canada allows that country to provide broad-based care for all its citizens at a per-capita cost that is 40% below what the U.S. spends.

Without significant change, Salisbury said, the outlook for health care in California is bleak.

“We will have many people sick and many people dying needlessly,” she added. “We have it now. We’ll have more.”

PROFILING THE UNINSURED

The more than 5 million Californians without health insurance come from every age and ethnic group and include the working and non-working alike. They live in every corner of the state. In two recent reports to the Legislature, UCLA professor of public health E. Richard Brown and associates provided a comprehensive profile of this population. The graphs below provide some highlights :

BY RACE

Non-Latino Whites: 15.1%

Blacks: 25.2%

Latinos: 37.1%

Others: 19.9% Latinos are twice as likely as Anglos to be uninsured. More than 37% of Latino adults are without insurance, compared with about 15% of Anglos and 25% of blacks.

BY POPULATION

1.1% Retired

1.4% Unemployed

1.8% Others

2.2% Ill or disabled

6.3% Students

7.2% Homemakers

27% Children (Under age 16)

Overall, 80% of California’s uninsured are working adults and their families. Non-working adults constitute 20% of the uninsured population. Among the non-working adults, more than half are homemakers and students.

BY AGE

Under 6: 21.2%

6-17: 21.9%

18-29: 30.1%

30-44: 15.7%

45-54: 15.8%

55-64: 17.7% Men and women in early adulthood are more likely to be without insurance than children or older people. About 31% of men and 27% of women aged 18 to 29 do not have insurance. Although children are more likely than adults to be insured, they still account for about one-third of the state’s uninsured residents.

BY AREAS OF STATE

Fresno: 29.9%

Bakersfield: 26.4%

Los Angeles / Long Beach: 26.3%

Anaheim / Santa Ana: 23.1%

San Diego: 22.1%

San Francisco: 21.3%

Riverside / San Bernardino: 18.4%

Oakland: 14.3%

San Jose: 13.9%

Sacramento: 12.8%

Oxnard / Ventura: 12.5

People in the Fresno, Bakersfield and Los Angeles/Long Beach metropolitan areas are less likely to be insured than residents in other parts of California. Nearly two-thirds of California’s uninsured live in the Los Angeles, Orange and San Diego County areas alone. People living in the Oxnard/Ventura, Sacramento and San Jose areas are most likely to have some kind of medical insurance.

The above figures represent the non-elderly population, those less than 65 years of age for 1986. Relatively few people over 65 years of age are uninsured. This is primarily because of Medicare, a national acute health care insurance program for the elderly.

Compiled by Times editorial researcher Michael Meyers