THE STATE : The History That Haunts the County’s Health-Care Overhaul

The Los Angeles County health-care crisis is a textbook example of what is bad--and good--about politics.

Post-Proposition 13 politics, coupled with economic recession and a huge influx of immigrants, got the county into fiscal trouble. Presidential politics, coupled with interest-group pressures on politicians, rescued it--for now. Politics will also determine whether or not the solution--a $364-million federal bailout linked to a restructuring of the health-care system--will work.

In a climate derisive of politics-as-usual, it’s important to note that the deal came off not because Burt Margolin, the health-care czar appointed by the Board of Supervisors, was a government “outsider.” It came about because Margolin is a consummate political “insider.” A former Democratic Assemblyman from the Westside, Margolin chaired the lower house’s Health Committee. He is also close to Rep. Henry A. Waxman (D-L.A.), the Democrats’ point-man on health issues in Congress. Because Margolin served in Sacramento and worked on Capitol Hill, he knew what had to be done and could get to the players who could make it happen.

There were several other state and county strategists involved in bailout negotiations who could rely on long-standing relationships with Californians in the White House. Steve Thompson, a former Assembly staffer who represented the California Medical Assn. in the talks, said, “A lot of the participants had the right political relationships and right political access.” All of which is good, old-fashioned “politics of friends and neighbors,” grounded in the kind of trust that moves policy in a democracy.

Still, will the deal work? One thing is sure: The politics that shaped the problem and dictated the solution will affect its implementation. But there’s a strange sense of deja vu surrounding the project.

The bailout is linked to reforms that would shift the county’s health-care system away from expensive hospital care to less costly outpatient care at health centers and community clinics. Some of these facilities would be privatized.

A similar restructuring has been tried before. In 1967, the state Legislature passed the Lanterman-Petris-Short Act, which shifted the emphasis in mental-illness treatment from long-term institutionalization to community clinics. Remarkably, liberal Assembly staffers sold this most radical of mental-health reforms to conservative Gov. Ronald Reagan as a cost-saving device.

The staffers took the calculated risk that the federal government would continue to pick up the tab for “bridge” support programs--housing, job training and counseling--that would enable the reform, known as de-institutionalization, to work. But the political climate took a conservative turn, a change the reformers did not not anticipate.

State and county community-services programs were cut back. Then President Reagan pushed through spending reductions in housing and social services. These cutbacks left many mentally ill abandoned on the streets. The unintended consequences of reform exacerbated California’s homeless problem.

Could something similar happen as the county health-care system moves toward privatization and community care?

Some contend that the state’s experience with mental-health reform and plans to restructure county health care are not analogous. As one expert explained, the county already has clinics in place. “We’re not betting on the future . . . creating new ones.” Nonetheless, there is no guarantee that the unintended consequences associated with the state’s mental-health reform will not haunt the county’s health-care overhaul. Today’s Congress is as determined as was the Reagan Administration to slice federal spending, and it is looking to slash Medicare and Medicaid. The result, which could leave the county at least $600 million short next year, would put the already-diminished health system at further risk.

Medicaid reform, coupled with block-grant funding and Congress’ proposed “devolution” of authority for social programs to the states, would continue the county’s dependence on state government “at a time,” Waxman says, “when the state will have less money than it’s projected to have.”

The fatal flaw in the state’s attempt at mental-health reform was the assumption that innovative programs would continue to be funded. Similarly, said Waxman, the county’s move toward privatization “is not so big a problem” unless “the money dries up.”

There are other lessons to be mined from the Lanterman-Petris-Short experience. Reform is not a one-shot deal; it is a process. Nothing can--or should--work forever in a county whose economy, demographics and politics are forever in flux. Oversight and mid-course correction--until now, sorely lacking in the county’s budget deliberations--are key.

The Board of Supervisors’ stunning retreat last week from a 5% pay cut for non-union county employees points up how hard health-care reform will be, even in a crisis atmosphere. Add to that, previous attempts at “money-saving” reforms. Together, they highlight a lesson: Even in a crisis mode, defining solutions is the easy part. Implementing them is quite another, especially when they come up against the demands of politics and the unintended consequences of reform.*