Why is a Comprehensive Change to our Health Insurance System Needed?

Un-insured. Nearly seven million Californian lack health insurance during all or part of the year. About 70% of these people are employed but do not receive employer-based insurance.

Under-insured. Most insured Californians are “under-insured.” Under insurance means that you have health insurance but procedures or benefits are not covered or are only partially covered.

For example, your insurer has excluded a preexisting condition from your policy. Or it may be that your deductibles and co-payments will become a financial burden that could lead to personal bankruptcy if you become seriously ill. Or your lifetime policy benefit is too low and your share of costs will be enormously high if you have a catastrophic illness.

Last year two million Americans – 75% of whom had health insurance – were forced to declare personal bankruptcy because of their medical bills.

Lack of personal security. You should have the personal security knowing that whatever your employment status, age, income, or medical history or condition, you have health insurance. The United States is the only industrialized country that doesn’t have a national health insurance plan that covers everyone.

Runaway premiums. Annual health care premium cost increases far exceed cost-of-living increases. Both employees and employers are paying more and more. Very soon the average annual cost for a family health insurance policy will be $20,000 – not including the co-payments and deductibles for which you are responsible to pay.

Rising deductibles and co-payments. Even as premiums rise dramatically, we are paying more and more out of pocket for the heath care services we need.

Employer squeeze. Employers are placed in the uncomfortable position between employees and insurers. Employers face the difficult task of choosing among insurers and among the myriad of policy plans. They must then communicate the unwelcome news to employees about higher premiums, co-payments, and deductibles.

Emergency rooms closures. Today, for every Californian whether insured or not, emergency rooms are less and less available for emergencies. Why? Emergency rooms have become the health care provider of last resort for the uninsured. They are providing so much uncompensated care that some have been forced to close their doors.

Lack of choice of providers. Your choice of health care providers is severely limited by insurance companies. Often, you are not able to find a provider near where you live.

Poor benefits. Many insurance plans have limited benefits. For example, mental, dental, and vision health care are often non-existent or inadequate.

Inefficiency and confusion. We have thousands of insurance companies and tens of thousand of insurance plans. It is confusing for patients and providers and very inefficient. Much too much of the health care dollar – nearly 30% – goes towards administrative costs, marketing, and profit instead of towards direct health care services.

Poorer medical outcomes. The United States has the worst population-based health care outcomes in the industrialized world. For example, our life expectancy is the lowest in the industrialized world. To a large extent, this is because there are no system-wide standards of care or standards for reporting and investigating errors. It is estimated that over 700.000 Americans die each year in from preventable medical errors in hospitals. Clinical waste in our system is a big a problem as administrative waste.

What Do We Support?

Introduction

We support a comprehensive system to improve care quality and decrease medical errors.

The California Health Care System would be established by the State of California as the insurer for all Californians who meet residency requirements. The system establishes the Health Insurance Fund to manage all money that is going to be spent on health care. The fund pays providers of care.

Patients choose their primary providers. The health system works with providers to establish standards of care, to support physicians in providing high quality care, and to monitor care quality.

Coverage and Benefits

Every California resident who meets a residency requirement will be covered.

Benefits will be comprehensive. Coverage includes all care prescribed by a patient’s health care provider that meets accepted standards of care and practice. Specifically, coverage includes hospital, medical, surgical and mental health; dental and vision care; skilled nursing care after hospitalization; substance abuse recovery programs; health education and translation services, including services for those with hearing and vision impairments; transportation needed to access covered services, diagnostic testing, and hospice care.

Consumers choose a primary care physician from among all licensed providers, including solo practitioners, integrated health care systems, or group medical practices. The primary care physician refers consumers to needed specialists.

There are no co-payments or deductibles when the system begins. Two years after the system goes into effect, this policy will be reviewed.

Employers will no longer have the responsibility each year to choose the plans to offer their employees and will no longer have to pass on premium costs to employees. This will save employers time and money and will improve employee relations.

Financing

The system would be funded from several sources. All federal and state money that already goes to health care (about 30% of health care expenditures) would be deposited into the Health Insurance Fund. California residents would pay a health insurance premium when filing their state tax return in proportion to their income. California businesses would pay an employer premium in proportion to their wages – as they do now. (The specific financing plan for SB 840 will be released in 2006.)

These funds would replace all premiums now paid to insurance companies as well as all co-pays and deductibles now paid to providers. This would also replace all expenses now paid by consumers out-of-pocket that would be paid for by the more comprehensive coverage provided by this system.

This would make premiums affordable for everyone.

Administration

The system will be headed by an elected health commissioner who will have budgetary authority, establish a state health care budget, and employ an array of fiscal tools to control spending.

Other agencies would:

Plan for the health care needs of the population, including capital health investment planning.
Oversee the delivery of high quality care.
Evaluate costs and benefits of new technology.
Establish physician compensation rates through negotiations with physicians.
Monitor and police the system for abuse and fraud.
Advocate for consumers within the system.
To bring decision-making as close to consumers as possible, many of the planning boards that will set policy will be regional rather than statewide.
When appropriate, stakeholders will participate in boards, including consumers, health care providers (physicians and nurses and others), durable equipment suppliers, hospital administrators, pharmacists, etc.

Planning

Currently, there is no system-wide, coordinated health care capital planning in California. The new system will ensure that we have the hospitals, clinics, and emergency room facilities where they are needed. In addition, funding will be stabilized for these facilities.

Health Quality Oversight

Currently, there is no system-wide coordinated oversight of health care quality in California. The Office of Health Care Quality will be responsible for setting standards and communicating best practices to providers. Information technology systems will be utilized to deliver information to providers and gather information to guide best practices.

How Can We Afford This?

Surprisingly, we already spend more than enough money on health care to finance comprehensive universal health coverage!
We spend over $6,000 per person in the U.S. –two to three times the amount spent in other countries that insure everyone and have better health outcomes. By correcting the inefficient way we finance health care and by improving care quality, we can both save lives and money.
An independent consulting firm has studied and reported the financial impact of four different systems similar to (but not exactly the same as) what we propose. In one of these studies, dollar savings were identified in the following areas:

Streamlined administration. A simple claims and payment system with one clear set of rules reduces administrative costs. Overhead costs of private insurers now consume 25% to 30% of the premium dollar; under universal health insurance this would be less than 5%. In California, this could save $14 billion per year

Bulk purchase. If the State of California used its purchasing power, it could save $5.2 billion per year and make prescription drugs affordable for everyone.

Preventive care. Emphasizing preventive care and providing a primary care physician reduces emergency room visits and improves outcomes for every Californian, saving $3 billion per year.
Savings will also be realized in other areas. The dollar amount of these savings were not measured in the California studies. These areas are:

Planning. System-wide health care capital expenditure and facility planning will likely yield significant savings.

Financial and operational auditing. A vigorous audit department including the use of the latest information technology to minimize fraud and misuse will be implemented in the Office of the Inspector General.

Cost controls. Universal health insurance will make our health care system more reliable and secure by stabilizing the growth in health spending; linking spending increases to the state Gross Domestic Product, population growth, employment rates, and other relevant demographic indicators.

Why Should You Support This Plan?

The health care we receive is a very personal – even emotional – issue for each of us. You want to be assured that you will benefit from this reform.

You will always be covered. Between jobs? Working at a job that doesn’t provide insurance? Traveling after college? Starting a new business? Retiring from work before age 65? Have an existing medical condition? No matter your situation, your health care needs will always be met. Health insurance for a lifetime.

You have freedom of choice of providers. You choose from any licensed health care provider as your primary provider. whether from a solo practitioner, a group medical practice, or an integrated health care system (such as Kaiser Permanente). (Women can also choose a gynecologist or obstetrician.)

You will not be limited to certain providers, as occurs today with managed care. All providers remain private and independent.

You receive more comprehensive benefits. The proposed health insurance plan delivers full inpatient and outpatient services by health facilities, medical, dental, mental health and emergency care, prescription drugs, acupuncture, chiropractic care, vision care, substance abuse treatment, and eyeglasses, among many other benefits. Preventative care is emphasized.

You have affordable premiums. The vast majority of consumers should pay less out of pocket for their health care.

You participate in the decision-making. Consumers and all stakeholders participate in the decision-making in regional boards. An elected health commissioner will represent all users and providers. Compare this to the secret decision-making now made within private insurance companies that directly affect the health care we receive.

You will benefit from a dynamic health care marketplace. Enlarging the demand for services by including seven million uninsured Americans in the health care market will offer economic opportunities to businesses of all kinds.

For more information about how specific groups benefit from universal health insurance, see our page Everyone Wins.