San Francisco has its own ‘public option’


Over the last two years, three-quarters of San Francisco’s uninsured adults have enrolled in a public program that guarantees access to medical services, an effort that is being touted as a national model during the rancorous debate over healthcare reform.

More than 46,000 adults have enrolled in Healthy San Francisco since it was launched; this first-in-the-nation, city-run universal healthcare effort has received high marks in recent independent studies.

The program is funded in part by an employer mandate, a controversial component of the plans under discussion in Washington. One analysis has concluded that this mandate on employers with 20 or more workers has not driven businesses away. Patient satisfaction is high, according to another recent survey.


But although many laud the program, which Mayor Gavin Newsom described as “a public option . . . a strategy to provide healthcare regardless of your ability to pay, regardless of your preexisting condition.”

But even some supportive critics, including Dr. Mark Smith, president of the California HealthCare Foundation and an advisor to the San Francisco effort, warn against “making more of it than what it is.”

“It is a stretch to suggest that this is a model for a full-fledged insurance plan acceptable to broad sections of the population that competes head-to-head with private insurance companies,” Smith said.

Healthy San Francisco is not insurance, is not portable and is worthless outside of the 49 square miles that constitute the self-proclaimed “city that knows how.”

But here’s what it does do: Any uninsured adult who lives in San Francisco and earns up to 500% of the federal poverty level annually is eligible. That’s $54,150 for individuals and $110,250 for a family of four. (Children are covered under a separate city-run program.)

Patients must pay a quarterly participation fee based on their annual income, along with certain co-payments for services. But care is free for those earning 100% of the federal poverty level or below -- about 70% of all participants.


Patients must pick a medical home out of a network of more than 30 public and private clinics, physician groups and hospitals within the city limits. The idea is that patients get consistent care and the system avoids duplicating services. Although about half of the network is government-run, Kaiser Permanente just joined and plans to accept up to 3,000 patients.

Patients receive preventive services, such as mammograms and colonoscopies, care when they are sick or injured and ongoing treatment for chronic conditions. Prescriptions are covered. So are hospital stays, which cost participants no more than $200 per day at San Francisco General Hospital.

But if you have a heart attack in Phoenix or go to a provider outside of the limited network, you’re on your own. In addition, dental and vision care are not covered. As the Healthy San Francisco handbook warns those who have health insurance, “Do not drop it. Insurance is always the better choice.”

But the program is a lifeline for people like Cayetano Castaneda, 53, who washes dishes at a restaurant in Union Square. Castaneda cannot afford the insurance his employer offers and still pay his rent.

Before enrolling in Healthy San Francisco, he stayed away from doctors’ offices, even though he has high cholesterol and suffered from headaches and fevers.

“I was afraid I would not be able to pay the high bills in the hospital,” he said. “I never got care. I waited and waited.”


Today, he pays $60 every quarter to participate in the program. The Castro-Mission Health Center is his medical home. One recent Wednesday, he waited in its busy lobby for blood test results that would tell him if new medication had lowered his cholesterol.

Castaneda’s case underscores many of Healthy San Francisco’s strengths -- but also what critics point to as a key weakness.

Even before the program began in 2007, Castaneda could have gone to the same clinic, operated by the city’s Department of Public Health, and paid for care on a sliding scale.

Some argue that the program is simply a repackaging of the city’s existing clinic network, and they wonder why business owners are on the hook for healthcare costs to support it when they were not before.

Since 2008, private employers here with 20 or more on the payroll have been required to spend a minimum amount on healthcare coverage for their workers. They can fulfill that obligation by offering insurance, selecting Healthy San Francisco or paying into a medical reimbursement or health savings account.

Businesses with 20 to 99 workers must pay $1.23 per hour per employee for coverage; those with 100 or more must pay $1.85 per hour. Healthy San Francisco costs about $125 million annually, of which about $14 million comes from employers.


“Healthy San Francisco is a really good idea and a good program, a reorganization of the public clinic system giving each resident a medical home,” said Kevin Westlye, executive director of the Golden Gate Restaurant Assn. But “we vehemently disagree” with the employer mandate, he said.

Dr. Mitchell Katz, director of the city’s public health department, is sympathetic, acknowledging that the employer mandate is seen by many as a third assault on business in recent years. The city has also raised the minimum wage and required employers to cover a certain number of paid sick days.

But “anyone who says it’s just a beefed-up [clinic] system, either they’re not being honest, or they don’t know” Healthy San Francisco, Katz said.

“You can join Kaiser,” he said. “You can see a private doctor through the Chinese Community Healthcare Assn. . . . People today are getting their surgeries done at private hospitals.”

And a study by the UC Berkeley Institute for Research on Labor and Employment, released in August, concluded that “the substantial job losses that some worried would be generated by the employer requirement have not materialized.”

The study looked in particular at eating and drinking establishments in San Francisco, San Mateo and Alameda counties between December 2007 and December 2008, the most recent data available that overlapped with the Healthy San Francisco program.


It found that food service employment in San Francisco rose 0.2%, but dropped by 0.1% in the two counties without an employer healthcare mandate. In the six years before the mandate, restaurant job growth in the three counties was similar.

Ken Jacobs, chairman of the Berkeley institute, sees that as a major lesson from the San Francisco model, which actually charges employers more than any plan floated nationally and yet has not cost the region jobs.

The city’s plan is government-run and subsidized -- a so-called public option -- and has not caused workers or employers to bail out of private insurance, another lesson for the national debate.

The restaurant association and the San Francisco Chamber of Commerce dismiss Berkeley’s numbers.

Jim Lazarus, the chamber’s senior vice president, called the report “a bogus, biased document that tries to compare San Francisco’s historically better unemployment rate to surrounding counties’.”

When the city passed the employer mandate, Jennifer Piallat, owner of Zazie Restaurant, said she couldn’t raise her prices to cover the cost. She’d already done it twice -- once to absorb increased gas prices passed on by her suppliers and once to adjust for the minimum wage.


Instead, she put a $1-per-person surcharge on the menu, which allows her to offer health insurance through Kaiser Permanente, dental coverage and a 401(k).

“I’m not saying that Healthy San Francisco is a great plan,” Piallat said. “I just feel that it gave me the ability to charge this surcharge to give my employees benefits. . . . If I had done it alone, it probably would have hurt us.”

Though her customers have largely taken it in stride, one woman demanded an audience so she could say how “truly offended” she was “that I have to pay a dollar to subsidize your employees’ healthcare,” Piallat recounted recently.

Piallat’s response? “While we’re being honest, I’m offended that you’re wearing a 4-carat diamond and complaining about a dollar.”