New Health Plan to Benefit Children of Working Poor

State lawmakers will take up one of the most critical needs in the nation’s health care system today when Gov. Pete Wilson rolls out a $478-million plan for expanding medical insurance to children of the working poor.

Democratic leaders predict that the governor’s outline will trigger a landmark debate aimed at helping hundreds of thousands of children who now risk serious and lifelong disabilities when they acquire many easily treatable maladies.

State leaders also hope to seize an opportunity presented earlier this month when President Clinton signed a federal budget that offers states $24 billion for a new Children’s Health Initiative. Like welfare reform, the health initiative gives states broad discretion to design their own programs.

“I regard this as perhaps one of the most significant policy developments in this decade,” said Senate President Pro Tem Bill Lockyer (D-Hayward). “California has a disproportionately large number of uninsured kids and we now have a chance to extend health care benefits.

“If there were one thing I could get done in my remaining time in the Legislature, it would be to see these health benefits extended to every kid in California.”

Lawmakers had been waiting for the federal bill to pass, and now they plan to work fast after the governor makes his announcement at a news conference in Glendale this morning.

They hope to reach agreement on a new child health plan before they adjourn in less than three weeks. Otherwise, they said, the issue would not be considered until next year.

Even with such a quick accord, Wilson officials said the program would not be implemented until next July. Part of the delay is that there is no money in the current budget to satisfy a federal requirement that states contribute 35% of the program’s cost.

The new health initiative would seek to cover about 580,000 California children who fall into a health insurance gap because they live in working families earning too much to qualify for Medi-Cal coverage but not enough to receive employer benefits or to pay for their own policies.

For a family of four, that translates into an annual income of $16,050 to $32,100.

The health care chasm has widened during the last decade as rising health costs have caused businesses to cut benefits. Officials say California has suffered in particular because it has a large number of entry-level jobs in the service industry.

Today, more than one in six of the nation’s uninsured children live in California. Nearly half of the state’s targeted population is in Los Angeles County, local health officials say.

With such a sweeping reform, child advocates and health experts predict major change will ripple through the state’s medical industry.

They say emergency room costs could be cut because children will not be as sick when they are treated and because hospitals will be paid for some care to uninsured children that they are now forced to absorb.

Health experts say the new insurance program also could be designed in a low cost way that would allow families of the targeted children as well as some employers to buy into it.

The high stakes surrounding the health care initiative have caused both parties to appeal for political harmony in a state Capitol that has been rocked in recent months by hostile exchanges over a long-delayed state budget.

“My biggest concern is a failure to act where there is a clear opportunity to act,” said Assembly Majority Leader Antonio Villagarosa (D-Los Angeles).

The plan Wilson announces today, however, might put those tenuous hopes to a test.

Instead of a government-run health plan sought by some child advocates and Democrats, the governor will propose a privately operated insurance pool.

The California Children’s Health Plan, as described to The Times Tuesday by senior Wilson Administration officials, would direct the state to solicit bids from insurance companies interested in providing the necessary coverage. A state panel would set minimum benefit standards for the coverage that would include dental plans and mental health counseling, officials said.

Instead of participating in the state pool, some workers would also be given vouchers that they could redeem from their employers for inclusion in the health plan of that particular business.

The governor’s design is modeled after an innovative and highly successful private insurance pool that the state created in 1992 to lower the premiums for California small businesses. In five years, 127,000 workers have joined the program.

Wilson’s plan also claims it could provide comprehensive coverage for all of the eligible population at a substantially lower cost than the federal government has offered to California.

State officials estimate that California is eligible for about $855 million under the grant supplied by the federal Children’s Health Initiative. The federal bill requires the state to provide a 35% match, or about $460 million more from California.

The governor’s plan, however, would total about $478 million with just over $167 million from the state.

Federal health officials were unable to explain Tuesday how the state might accomplish its coverage goal at a lower cost.

“This is a private-based plan that receives a helping hand from the government,” explained one Wilson official. “It is vital that we continue to focus on this model because it allows government to maintain an appropriate and limited role.”

Some child advocates and Democrats fear, however, that a private-based system might cut corners at the expense of health benefits.

They have proposed instead that the state expand the public insurance already offered to the poor through Medi-Cal. Some, like Lockyer, suggest a blend of private and public groups would be best.

But administration officials argue that Medi-Cal is an unwieldy government bureaucracy that it does not want to expand.

Both sides agree that Medi-Cal has become so inefficient and cumbersome for recipients that thousands of eligible poor are left out.

Medi-Cal already provides insurance for 2 1/2 million poor children in California. But officials estimate that 500,000 more children are eligible but not enrolled.

They blame a cumbersome process, a lack of outreach by the state and the stigma of welfare attached to the program.

Wilson’s plan would respond to one Democratic demand for speeding up the Medi-Cal process by eliminating the requirement that applicants document the value of their assets. He would also spend $21 million over two years to advertise the benefits available in the Medi-Cal program and the expanded services in the new coverage program.

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* MAYOR’S TASK FORCE: Panel urges changes to add children to insurance rolls. B1