Attacks on Health Care

* I read with great interest your recent column “Health Industry Prognosis Looks Good to Wall Street” [James Flanigan, Aug. 6].

Our health-care system is under severe stress. California’s hospitals are facing staggering losses--64% of the state’s acute-care hospitals are operating in the red. Many health insurers are offering hospitals stingy contracts--to the point where it costs more to provide the service than the hospital is paid.

HMOs are withdrawing with increasing regularity from Medicare risk contracts as a result of federal budget cuts stemming from the Balanced Budget Act of 1997. Patients are wondering if their hospital and physician will even be there the next time a medical emergency develops.

Although health plans have been and continue to raise the premiums they charge employers, most of those rate hikes are not being passed on to the providers of health care.

Within the last two weeks, for example, the for-profit parent companies of two of California’s largest health plans--Blue Cross of California and HealthNet--have released their quarterly earnings statements. Both have seen their profits rise substantially and have stated that one of the reasons is that they have “held down” medical expenses.

In other words, these HMOs--the middlemen of health care--have used their premium increases and reduced reimbursements to hospitals and physicians to fatten their bottom line. The actual providers of health care, the physicians and hospital staff, have seen little benefit.

The government piece of the health-care financial puzzle is equally problematic.

In 1997, the federal Balanced Budget Act imposed more than $60 billion in Medicare payment cuts to hospitals for 1998 through 2002. The bulk of the payment cuts will occur in 2001 and 2002.

This translates into direct Medicare reductions of more than $6 billion to California hospitals. Although Congress last year reduced the cuts by about 10%, the gains were primarily for services unrelated to hospital inpatient care.

Medi-Cal is even a worse payer than Medicare. Since 1982, California’s Medi-Cal payments have dropped substantially in comparison with Medicaid programs in other states. California’s Medi-Cal expenditures in 1997 were $2,543 per eligible recipient, compared with the national average of $3,862 and the New York average of $7,595.

Hospitals are being pushed into a financial wasteland. Although health care may look rosy on Wall Street, it’s quite a different matter for hospitals on Main Street in California.

C. DUANE DAUNER

President

California Healthcare Assn.

Sacramento