California Has Already Tasted Clinton Remedy

While the rest of the nation grapples with the notion of managed competition, purchasing alliances and other concepts in President Clinton’s health care reform plan, experts say California--long a national leader in the managed care movement--is uniquely poised among states to implement these ideas.

One-third of Californians are enrolled in health maintenance organizations, compared to a national average of about 16%. An estimated 75% of Californians with health insurance receive it in some form of managed care. And the state has already established several programs that mirror Clinton’s plan in theory, if not in scope.

“California is way ahead on managed care,” said Judith Bell, who serves on the executive committee of Health Access, a consumer advocacy group. “Millions of Californians are in managed care. They’re used to it. They like it. So from that perspective, we are well-positioned.”

Indeed, California helped give birth to the managed-care movement. The first health maintenance organization in the nation, the Ross-Loos Clinic, was organized in Los Angeles in 1929. Kaiser Permanente, founded in California during World War II, has also played an important role. Kaiser alone provides 20% of insured health care in California.

While all that has occurred in the private sector, state officials have recently begun putting the machinery for managed care into place for public programs. Last year, California embarked on a program to shift all patients in Medi-Cal, the state’s insurance program for the poor, into managed care. Today, 600,000 of the 5 million Medi-Cal recipients have made the switch.

Just two months ago, the state established a first-of-its-kind program to help small businesses pool together to buy low-cost insurance for their employees. The little-known Major Risk Medical Insurance Board--dubbed “Mr. MIB”--works the same way as the Clinton plan would with one exception: It is voluntary.

Backed by new legislation that requires insurance providers to sell coverage to small groups at reasonable prices, the group has built an alliance of 1,000 small businesses that buy low-cost coverage from 18 different plans.

Now, 13,000 employees are covered through the alliance. Among them is the owner of a small advertising firm. A diabetic who recently had a kidney transplant, he was forced to give up his own coverage, which cost $3,000 a month, so he could insure his five employees. Now, he pays $900 a month for the whole company, himself included.

Along with the small businesses alliance, the California Public Employees’ Retirement System--the pension fund for hundreds of thousands of government workers--has been touted as a model for health care reform.

And the state has already lived through a health care debate. Last year, legislators approved a reform package put forth by state Insurance Commissioner John Garamendi--a plan that, although vetoed by Gov. Pete Wilson, serves as a blueprint for the Clinton agenda.

“California is well-positioned to enact the Clinton plan because it was designed for California,” Garamendi said. “Many of the details necessary to implement his plan have been worked through, and the necessary preparation has been done. . . . Most of the systems that we would need to implement the plan in California exist.”

Yet Clinton’s proposal poses some special difficulties for a state so large and diverse. Of particular concern is how California, home to half the nation’s estimated 3 million illegal immigrants, would pay for the care of these people, who would not be covered under the Clinton plan.

Because federal law bars hospitals from turning away people who require emergency care, hundreds of thousands who are here illegally are cared for at taxpayer expense.

While Administration officials said the federal government would set aside a special pool of money to pay for this tab, only $1 billion is proposed nationwide. State officials estimate that California alone will spend more than that this year.

That sets the stage for Wilson to resist Clinton’s reform initiative. The governor has already called for states to be relieved of the responsibility of caring for illegal immigrants--a controversial suggestion that has fallen on deaf ears in Washington.

Aides to the governor said he will demand that the health care reform package provide more money to care for illegal immigrants.

“We can’t even provide for the health care needs of people who live here legally and are citizens,” said Kim Belshe, the governor’s chief health care adviser. “If states are going to be required to provide emergency care for people who are here illegally, then the federal government should be required to pay for 100% of that cost.”

Wilson, in a statment before the plan was officially unveiled Wednesday night, said that although he “applauds” the President’s efforts, the plan “could also leave taxpayers in states like California holding the bag in the face of new and unfunded federal mandates covering undocumented immigrants, the medically indigent and long-term care.”

Wilson also opposes the “employer mandate”--a requirement that employers pay 80% of their workers’ health care premiums--arguing that it would drive business away from California. Belshe pointed to the California small business program as evidence that a voluntary approach can work.

But the architect of that program said he believes that the employer mandate is crucial if all Americans are to have health insurance.

“We’re doing wonderful things here, but it isn’t enough,” said John Ramey, the program’s executive director. “For there to be universal coverage, which is a goal of health care reform, it has to be something more than just voluntary. I think that all serious students of the issue would agree with that.”

Insurance premium levels are likely to be another point of contention in California. Clinton’s proposal would allow patients to choose among different insurance providers, but a federal board would also set premiums and require consumers to make up the difference for plans that offer benefits--such as cosmetic surgery--beyond the basic package.

Nationwide, the Administration has estimated that the average annual premiums paid to insurers to provide the benefits would be $1,800 for an individual and $4,200 for a family.

The premiums would likely be more in states like California, which has a high cost of living. But how much higher is unclear--and that reckoning is crucial for California.

Even with the adjustment for cost-of-living and out-of-pocket payments for extra services, insurers would still be prohibited from charging more than 20% above the regional average.

Some California insurers warn that, if the premiums they can charge are insufficient to cover their costs, they would be forced out of business, ultimately limiting choices for California consumers.

“I think it’s just going to drive everybody into HMOs,” saiX. McLellan, chief executive officer of Aetna Health Plans of California.

In Los Angeles, a 40-year-old man in good health would currently pay $1,872 per year to belong to an Aetna HMO, while a family of four, also in good health, would pay $4,368--figures comparable to the Clinton estimates.

But the cost would be considerably higher for an Aetna plan that offered a wider choice of doctors--$2,692 per year for an individual and $8,560 for a family.

At the same time, the Clinton plan offers some clear benefits for California. While Californians make up 12% of the nation’s population, they make up a disproportionate number--16%--of the uninsured. Of the 37 million uninsured Americans, an estimated 6 million live in California.

“As a whole, I think the plan would be a major step forward for California,” said Molly Joel Coye, who recently stepped down as state health director. “It solves some of our most difficult problems in financing care for the uninsured.”

Currently, the state sets aside $1.5 billion to help counties maintain their “safety net” of public hospitals that provide health care for the indigent. Once those people are insured, the state could conceivably put some of that money to other uses.

“We have a chronic problem with this persistent recession,” said state Assemblyman Burt Margolin (D-Los Angeles), who has long been an advocate of health care reform. “This will help us with balancing our budget.”

No matter what Congress does with the Clinton plan, one thing is clear: Reform is already happening in California, with or without new laws to back it up.

Already, the state has more preferred-provider doctor networks--65--than any other state in the nation. “Merger mania” as one health care industry expert put it, has arrived, with big hospitals and health plans gobbling up small ones.

“We are seeing things happening in our state that aren’t occurring anywhere else in the country,” said Dr. David Holley, president of the California Medical Assn. “That process is going to continue to evolve.”

HMOs in California

California has a larger share of its population in health maintenance organizations than does the nation as a whole.

Percent of population enrolled in HMOs in 1991 California: 33.4% United States: 15.3%