Vast Scope May Undermine Health Care Initiative : Prop. 186: Plan would take insurance firms out of system. Complexity makes it a tough sell for backers.

Behind in public opinion polls and endowed by its authors with breathtaking complexity, the all-embracing single-payer health care initiative on the Nov. 8 ballot appears in danger of being buried by its own colossal ambitions.

Proposition 186 raises so many issues--and represents such a sharp shift in health policy--that supporters say one of their biggest tasks is getting enough time with people to answer all their questions.

“It is not easy to explain,” said Bill Zimmerman, a campaign strategist for the measure. “We can’t win on sound bites.”

Figuratively speaking, the initiative would put more than 30 million Californians in the same waiting room. Its authors seek to enroll seniors on Medicare, low-income persons receiving Medi-Cal, the uninsured and workers and their families with private health insurance--in short, all legal residents.

The initiative promises cradle-to-grave health care coverage, a liberal package of mental health and medical benefits, and money for long-term medical care and prescription drugs. It gets the name single-payer because a single state agency would pay everyone’s medical and hospital bills.

Because of the single-payer feature, Proposition 186 goes well beyond the national health reform proposal made by President Clinton and so far stalled in Congress. Under the Clinton plan, insurance companies would continue to play a key role in the health system. But Proposition 186 is designed to take insurance companies--and the expenses they run up--out of the health care system. Initiative supporters argue that insurance profits and overhead consume about 27% to 30% of the health dollar, while their system can be run with overhead costs capped at 4%.

The anticipated administrative savings would help fund the system, but monumental tax increases would still be needed. Under the initiative, income, payroll and cigarette taxes would be hiked a combined $40 billion to $50 billion annually--roughly the amount now raised each year to run all of state government from combined sales, income, insurance and excise taxes on such things as cigarettes and alcohol. Most working Californians would pay an additional 2.5% of earnings in state income tax.

In return for the tax bite, individuals and employers would be freed of the payments they now make for insurance premiums and most medical co-payments and out-of-pocket expenses. While they are healthy, individuals under the new tax burdens could suffer a net loss, but with the promise of making it up when they become ill or grow old.

Should the measure pass, the authors anticipate that thousands of insurance company administrators and clerks, who now process claims, could be thrown out of their jobs. As compensation, the measure provides for up to $1 billion of the new tax money to go into job retraining for those affected.

Total dollars going into the system, counting tax money plus the state and federal transfers that now go into Medicare for seniors and Medi-Cal for the poor, could exceed $75 billion annually, according to the state legislative analyst, or close to $100 billion, according to analyses done by both supporters and opponents of the measure. Even at that, some economists say there will not be enough money and predict multibillion-dollar deficits.

Moreover, federal government approval would be required before Medicare and Medi-Cal patients and self-insured corporate plans could be folded into the proposed network.

All that adds up to an enormously complicated measure--and political problems for the sponsors of Proposition 186. A recent Los Angeles Times poll showed that the measure garnered just 9% approval among likely voters, although the poll did say that two-thirds of those questioned did not know enough about it to form an impression.

As a forum to explain the initiative as well as to raise campaign money, strategists have developed an extensive network of volunteers who are hosting house parties up and down the state. Usually a couple of hours long, the parties are attended by friends and neighbors of the hosts. Typically there are several speakers, often a physician who gives a detailed summary of the initiative, then answers questions.

One such house party in the Los Feliz section of Los Angeles, co-hosted by Channing Chase, an actress, and her husband, Dan Saxon, an art dealer, attracted about two dozen people who sipped wine, ate cheese and talked about health insurance. Chase said she was drawn to Proposition 186 and its guarantee of universal coverage because so many of her actor friends are forced to live without health insurance when they are between jobs.

Spirited debates developed about both the need for health care reform, which everyone seemed to agree on, and Proposition 186, which produced a split.

“We’re in a frying pan now, and I think (Proposition 186) would catapult us into a bonfire,” commented one of Chase’s neighbors. She was clearly in the minority. House party guests chipped in just over $1,000 in contributions.

In mid-September, the campaign was holding 50 parties a week, creating what was described as a positive cash flow to the campaign of about $40,000. Campaign strategists hope to have those figures up to 100 house parties and $100,000 in contributions per week in October.

Proposition 186 strategist Zimmerman said that since surveys show that more than 80% of the voters in California have health insurance, part of the message of the campaign is how easily they could lose their coverage through job loss, divorce or some other circumstance.

“When you explain it to people--the benefits they would receive, the insecurity they are subject to now--we get a consistent two-thirds majority favoring the initiative. The problem is it takes us 10 minutes to explain it,” Zimmerman said.

Opponents don’t share the view that time is all that is needed to persuade people to support the initiative.

“We find that the more people hear about the initiative the more they don’t like it,” said Richard A. Wiebe, the communications director for the “no” on Proposition 186 campaign.

One key group, the California State Employees’ Assn., came out strongly against the measure after a lengthy review. The opposition is key because the group has been an aggressive advocate of improved health benefits for retired state employees. The association’s stand has helped neutralize a long list of groups representing seniors and retired workers who are helping lead the charge for Proposition 186.

“We looked at it very closely and decided there is no way they could provide all those benefits with (the) amount of money covered,” said Sheena Wolfe, spokeswoman for the group’s 31,000-member retired persons division. She said analysts decided that the proposed payroll, income and cigarette tax increases would provide “nothing more than a minimum benefits package.”

Supporters of the initiative say the state employees’ association is an exception to other working groups because it has a heavily state-subsidized health plan.

During a month of unanswered radio and television ads, the opponents spent at least $2 million hammering away at what their research showed were the biggest negatives in the minds of voters--fears of a state-run system headed by an elected officeholder, big tax increases and job losses.

Wiebe said one of his biggest concerns is complacency by opponents of the measure who, he declared, “believe this thing is so preposterous that nobody would vote for it.”

“All the movement so far has been in our favor,” Wiebe said. But he said he was concerned that could change because the other side hasn’t “come to the plate yet” with their radio and television ads.

Sponsors of Proposition 186 make it clear that they are part of a national effort aimed at ultimately moving the United States into a single-payer system. Many see the California election as providing a crucial test vote on single-payer.

“If this goes down, we will be back. I promise you that,” said one well-placed official in a campaign with no lack of passion.

Scratch the surface of any rally, fund-raiser or news conference for Proposition 186 and you will find doctors, nurses or individuals frustrated and fighting mad over the health system.

Although Proposition 186 is opposed by the leading establishment voice for physicians, the California Medical Assn., many doctors support it. Several physicians, among them Dr. Andrew Bindman, a San Francisco internist, helped write the measure.

Bindman said he simply got fed up with the increasingly complex and inefficient paper-driven system that he believes is at the root of many of the problems in the health care system. A huge benefit of single payer, he said, is that everything, from bill payment to medical policy, would come from one source. “The paperwork blizzard just turns to summer,” he said.

More than 300 groups have endorsed Proposition 186, among them labor unions, consumer organizations, senior groups and numerous nurses and physician organizations.

On the other side, the bulk of the opposition is coming from business groups, insurance companies and hospitals.

During the last financial reporting period, reflecting contributions through June 30, the “no” campaign, called Taxpayers Against the Government Takeover, took in $596,396 in combined contributions. Big contributions came from the California Hospitals Committee on Issues, $205,000, the Health Insurance Assn. of America, $132,285, and the American Council of Life Insurance, $100,000.

The “yes” campaign, Californians for Health Security, reported taking in more--$900,838 in cash and non-monetary contributions, including $350,000 from the National Education Assn. and its state affiliate, the California Teachers Assn. But most of that money was spent qualifying the measure for the ballot and the “no” campaign is expected to raise substantially more for the rest of the campaign.

Business leaders believe the proposed added payroll tax, which would range from 4.4% to 8.9%, depending on the number of employees in a given firm, would deliver a staggering blow to the economy. An economic consulting firm predicts that passage of the initiative would lead to the loss of 300,000 jobs, largely because employers would make up the cost of the tax by trimming payrolls.

Another big fear centers on the powerful government agency that would be established to administer a system so large that a 1% miscalculation on costs could create a $1-billion problem.

“There is no free lunch,” said Mark Wager, president and chief executive officer of Cigna HealthCare of California, a health maintenance organization and administrator of plans for businesses. “If someone would like to show me a government agency capable of creating the fourth- or fifth-largest health care system in the world and manage it well, I’d love to see it. Something that size, if you don’t manage it well, the costs will quickly escalate out of control.”

Supporters concede the reputation of government is a problem.

“The big thing we need to overcome is people’s distrust of government being able to do anything right,” said Proposition 186 spokesman Steve Hopcraft. “But insurance companies are not exactly doing the job. Our mission is to show people that insurance companies are more inefficient than the government.”

Inside the Initiative

Here are some main points of Proposition 186, the single-payer health care initiative on the Nov. 8 ballot:

* CARDS: Would establish the Health Security Act. Health insurance cards would be provided to all legal residents of California. Whether newcomers would be included would be up to the Legislature. Cards would provide for a wide range of benefits. Cardholders would be free to choose their own physician or provider as long as those chosen were in the system.

* PERMISSION: Federal permission to join the system would be required for the enrollment of Medicare and Medi-Cal patients and employees of self-insured companies.

* PAYMENT: Individuals earning up to $250,000 annually, or families earning up to $500,000, would pay an additional 2.5% of earnings in state income tax. Those earning more would pay 5%.

* PAYROLL TAX: Employers would pay an extra payroll tax of 4.4% to 8.9% on salaries, depending on the size of their work force, phased in over three years. Legal challenges would probably develop over whether the payroll tax would apply to self-insured corporations.

* CIGARETTE TAX: Cigarette taxes would be raised an additional $1 a pack.

* HEALTH COMMISSIONER: The program would be administered by an elected health commissioner. The first commissioner would be appointed by the governor and confirmed by the Legislature. Thereafter, the post would come up for a statewide vote every four years.

* BENEFITS: The health commissioner would define benefits, be empowered to cap costs, set co-payments for consumers in the event of budget problems, negotiate budgets with hospitals, determine reimbursement schedules for physicians, negotiate drug prices and establish a list of drugs allowed under the program.

* REGIONS: The state would be divided into an undetermined number of health care service regions, each administered by a local administrator appointed by the health commissioner.

* CONSUMER COUNCILS: Consumer councils with professional staffs would be funded in each region to represent the interests of consumers and help mediate disputes with the commissioner.