Let a Public Board Set Health-Care Rates

The only way to ensure access to Los Angeles County’s emergency rooms and hospitals is by employing the same model that Angelenos use to protect their electricity and water costs and Marylanders use to maintain their hospitals: public utility regulation.

A publicly accountable state “cost-control commission” could save our medical infrastructure by redirecting excess profits in one part of the system to underfunded priorities in another.

Maryland long ago protected the stability of its hospital system through a similar model. An independent commission determines appropriate reimbursements for hospitals, and all payers are required to pay commission-approved rates. The system ensures access to essential services, controls prices and rationalizes “cost shifting,” where payments from the insured or taxpayer commonly cover the uninsured.

In Southern California, cost-shifting has undermined many hospitals because HMOs pay so little for services for the insured that there is no money left to care for the uninsured and sometimes not enough to keep the doors open.

It’s not that there is not enough money in the health-care system; it’s that it is going to all the wrong places. HMOs are making a killing, while the county system is hemorrhaging.

Public utility regulation of health services in California would create a governmental body with representation from patients, providers and other stakeholders to determine the equity of the financing of vital community medical infrastructure and to guarantee adequate public access to emergency rooms and hospitals. For example, the cost-control commission could set reasonable limits on profit-taking by HMOs and guarantee sufficient payments to providers. HMOs and insurers simply are not paying their fair share to keep hospitals and emergency rooms open and the safety net secure. Private for-profit hospital chains, in order to boost profits, have also played fast and loose with their public obligations to take all comers in the ER. These practices have helped overload the county’s ER system, which takes all patients regardless of ability to pay or insurance coverage.

The rate-setting system for Maryland hospitals operates under the principles that similar services at similar hospitals should cost the same; that charges should be related to actual costs; and that all payers should share the burden of “uncompensated” care for the uninsured. The system has had widespread support and has been a success in reducing the costs of care.

What’s needed is statewide public control over all health-care dollars so that money can be directed to where it’s most needed. With nearly half of the state’s voters living in Los Angeles and its four adjacent counties, flexing the region’s political muscle through a statewide ballot initiative could protect underfunded emergency rooms, hospitals and clinics.

A California ballot initiative expanding on the Maryland model is particularly salable because the overcrowding of emergency rooms and disappearance of medical infrastructure is a middle-class issue. In an emergency room, the insured and uninsured are all treated the same. With or without insurance coverage, patients rushed to the ER by ambulance in Los Angeles can be forced to wait up to five hours before being seen by a doctor or nurse.

Also, when an underfunded hospital disappears from a community, it makes no difference how generous one’s insurance coverage is. In an emergency, the patient who has the best insurance may still have to travel too far or wait too long to be saved.

The Los Angeles County supervisors should lead a ballot campaign for a cost-control commission. A ballot initiative can put directly to the people the issue of whether the insured and uninsured alike can afford to wait any longer for public control over all health-care dollars.

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Jamie Court is executive director of the Santa Monica-based Foundation for Taxpayer and Consumer Rights. E-mail: jamie@consumerwatchdog.org.