Health Care Crisis Could Be Solved by--Yes--a New Tax

This crisis too shall pass. The great health financing problem of Los Angeles County will be solved by a combination of private contractors, federal subsidies, a new flexibility in health care delivery and, finally, by a new kind of tax on providers of medical care.

Hospitals, physicians, medical plans will all be taxed to pay for health care for the totally indigent--those without any kind of medical insurance or eligibility for Medi-Cal benefits.

That means, of course, that all users of the medical system will pay through increased fees to finance public health, which is really a form of insurance against the worse off in society passing on communicable diseases to the better off.

Such a tax is a new idea that’s gaining respectful attention in medical circles here and nationwide. Minnesota pioneered a provider tax three years ago to finance health care for the indigent. The state imposes a 2% tax on the gross revenues of hospitals, doctors, dentists, chiropractors and wholesale drug distributors and a 1% tax on gross premiums of health maintenance organizations, Blue Cross, Delta Dental and other nonprofit health service companies. Minnesota now collects more than $200 million a year with such taxes, about what it costs to treat its uninsured patients.

Los Angeles and Southern California have many more uninsured patients than Minnesota, but the proceeds of a provider tax in this area would be commensurately larger as well. Los Angeles County estimates the number of uninsured poor people needing to be covered by extraordinary financing--beyond Medi-Cal programs--at 1.4 million patient visits a year.

Orange and San Diego counties, which contract public health to private providers, don’t issue estimates of the uninsured. Both counties spend less per resident on public health than does Los Angeles, although both acknowledge that private contractors face health care finance problems.

To be sure, a provider tax won’t be imposed immediately, nor will it come without fierce opposition and the usual grandstanding that accompanies public actions in California.

Meanwhile, against a background of union demonstrations in the streets and county health officials in Washington lobbying for money, we should keep in mind that the region’s problems are organizational and financial, not medical. To fix the county system, which has congealed into an inefficient mess, we may have taxes but we won’t have epidemics. Behind the scenes, competent people are working on solutions.

Los Angeles health czar Burt Margolin and his associates, in Washington now, will probably get a waiver allowing the county to use Medicaid funds for outpatient treatments rather than solely for more expensive in-hospital care. The flexibility will help trim costs while newly approved minor taxes will help keep the system going.

There are numerous private health organizations bidding to occupy and operate almost three dozen clinics after the county ceases to operate them on Oct. 1.

Bidders vary from well-established private hospitals to County-USC Medical Center itself, bidding in a partnership with Drew University and an entrepreneurial company named Medi-Manager Inc.

How can they hope to provide health care for the uninsured without going bankrupt? In cases of federally qualified institutions, such as the Community Health Foundation of East Los Angeles, special subsidies are available for treating the poor. Other hospitals are bidding in groups to provide care for the poor before they swamp the emergency system.

Care for the poor need not diminish as private organizations operate clinics more efficiently without the civil service rules that hobble county operations. In the current layoffs, those rules dictate that highly trained emergency room nurses lose jobs to less well-trained personnel with more seniority.

Even County-USC Medical Center, the giant 1,000-bed hospital, would run better if privately managed by a national chain like Humana or Columbia HCA--as it could be once earthquake damages are repaired.

But the county’s Health Task Force firmly rejects the idea of closing County-USC and trying to spread its work among private hospitals. That would be hard to do given County-USC’s burn center and its trauma facilities, which are on a scale suitable for a city this size, explains Dr. Ronald Kaufman, County-USC’s chief of staff.

Indeed, the very scale of County-USC reflects an important point: Los Angeles County, like the United States, has an impressive health care system that needs modernization and change, but not demolition. Talk of scrapping the system doesn’t address the problem, which is how to pay for health care for the working poor and uninsured.

The emerging solution of a provider tax makes sense and would be more honest than cost shifting--the practice of billing fully insured patients 20% extra to pay for the uninsured. That has hurt companies that bought coverage for their employees, but not those that neglected to do so. Provider taxes, passed on by hospitals and doctors, would touch all fairly.

“Tarzana Hospital gets fewer of the uninsured poor than my hospital,” says County-USC’s Kaufman. “A provider tax would share the burden which, by law, both hospitals must assume.”

Like reform of Los Angeles County’s health care system, it seems to be an idea whose time has come.