Insurance ‘Reform’? Consider the Source

At town hall meetings across the state, the voices of average working people have been heard: A middle-aged, middle-class Woodland Hills woman said insurers wouldn’t sell her a policy she can afford because she was 30 pounds overweight. A Studio City family could no longer pay its $750 monthly premium. A Los Angeles businessman had to drop his company’s coverage because his health insurance premiums doubled in the last three years.

New census figures show that one out of four Americans was uninsured at some point during the last two years. This underscores that health care has become a middle-class crisis.

The most politically important message the public heard during the recent “Cover the Uninsured” week was that the fastest-growing group without health insurance is middle-class workers, a fact that fuels a will for reform in Sacramento.

The danger is that many of the profiteers that already have robbed the health-care system blind -- including hospital chains, HMOs and drug companies -- are now trying to influence contemplated reforms.

For example, the message of the “Cover the Uninsured” campaign was brought to moviegoers at their local theaters by the very insurers whose double-digit premium increases are pushing their coverage beyond reach.

“By the end of this movie,” one industry ad said, “another 465 Americans will lose their health insurance because of runaway costs.”

But don’t let them fool you -- the HMOs and insurance companies are not on your side: They’re the ones driving up the costs. In 2002, the cost of health insurance increased 250% more than the rate of medical inflation. PacificCare reported a $37-million profit in the fourth quarter of 2002 after raising premiums. The profits of Wellpoint, the parent company of Blue Cross, jumped 64% in the fourth quarter from the previous year. HMO stocks are up 23%, compared with the S&P; index’s 21% decline.

What the HMOs want the public to forget is that 12% to 33% of every premium dollar they collect is eaten up by their increasing profits and overhead. Who is responsible for runaway costs if not the companies charging them?

Analysts say that less of the premium dollar is going to patient care than ever before because of added layers of administration and profiteering. In addition to the HMOs, there are large physician-run medical groups, hospital chains with the power to demand higher profits, and profit-hungry pharmaceutical marketers and managers.

The insurers’ solution is to propose legislation mandating that every person who can afford insurance buy it, without price controls. This would help the industry, of course, but it’s like General Motors pushing through a legal requirement that everyone buy a new car each year at whatever price it wants to charge -- not the best public policy.

Ultimately, if we really want to cover the uninsured, we’re going to need a 2004 ballot initiative that gets past the “Kumbaya” spirit of “Cover the Uninsured” week to the question of who is to blame for the problem.

As the insurance debate begins, any real solution must address these issues:

* Universal access requires universal price controls. No government body is now charged with watching and holding down the overall costs of California’s health-care system and weeding out waste, fraud and inefficiency. In 26 states, health insurers must ask for approval for premium increases. This standard is applied in California for auto insurance, but it does not exist for health care. There is no way to cover the uninsured without the government ensuring reasonable costs in the system for premiums, doctors’ fees, hospital services and drugs.

* Alternatives should remove the middleman and spur competition. Soon state employees will receive their health care through a state-organized hospital and physician network that bypasses insurers and can buy drugs at bulk discounts.

All Californians should have access to this network, created by the 2-million-member California Public Employees’ Retirement System. This would spur HMOs to compete with a public entity that does not profiteer.

* All the uninsured should be covered. The “employer mandate” proposals in Sacramento would cover only those who are employed by someone else (along with their dependents), not the self-employed and unemployed. The benefit of covering all Californians is that the more participants there are in the risk pool, the cheaper it is for each because risk is spread more widely. Leaving no patient behind is critical to achieve maximum cost efficiency. In the end, the best way to insure the uninsured is to guarantee that all the insured get the best price for what they are buying.