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March 28-April 4, 2007

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State Sen. Sheila Kuehl and Gov. Arnold Schwarzenegger

Health plans or insurance scams? State Sen. Sheila Kuehl and Gov. Arnold Schwarzenegger have put forth radically different proposals to change our health-care system.

A Cure for the Common Health-Care Crisis?

A March 30 forum will bring together Santa Cruz leaders and proponents of Sheila Kuehl's universal health-care bill

By Steve Hahn


A World Health Organization comparative study released in 2000 found that the United States spends twice as much of its GDP on health care as any other country, yet is rated 37th in the world when it comes to the overall quality of medical care.

These troubling numbers made the systemic failings of our health-care system a hot-button issue in last November's midterm elections, and the issue is shaping up to be a central focus of the 2008 presidential election as well. In fact, the subject was to have been a focus of the presidential primary debate that was abruptly canceled earlier this month after a spat between the Democratic Party and Fox News.

The closing of emergency rooms, deterioration of U.S. business competitiveness in the international market and a sense of dread for uninsured citizens threatened with the constant specter of ever-increasing medical costs are fueling the fire of the health-care debate throughout the nation.

Candidates in the 2008 presidential election may soon be pointing to California as the testing grounds for an alternative to our current health-care system based on private insurance plans.

The results of this experiment will only be known, however, if California Senate Bill 840 (S.B. 840) passes through both houses--as it did last year--and is this time signed, not vetoed--as it was last year--by Gov. Arnold Schwarzenegger.

S.B. 840, sponsored by state Sen. Sheila Kuehl, proposes a radical reconfiguration of how Californians pay for health care. Instead of selecting an insurance plan from a multitude of options offered by privately owned insurers, every citizen would have an insurance plan administered by the state government. There would be one plan, and every California resident would have it. While there would be a new tax implemented to pay for the coverage and the Universal Health Care agency that will distribute payments, supporters of the bill say the price-tag would still be significantly less than what insured citizens pay for premiums, co-pays and deductibles now.

"Employers pay about 7 percent of payroll [under S.B. 840], compared to what they pay now if they are providing any plan, which is 10 or 11 percent with no control of the fact that the prices rise every year," Kuehl told Metro Santa Cruz. "Individuals would pay about 3 1/2 to 4 percent of their income, which is a lot less than they pay now because they're paying huge deductibles and there would be no deductibles or co-pays in this plan."

Of the numerous health-care fixes floating around Sacramento, S.B. 840 is by far the most extreme rejection of the current infrastructure. According to a Feb. 27 Los Angeles Times article, "The plan has retained its appeal because it would eliminate the least popular part of the healthcare industry: insurance companies."

This may seem like a critical flaw for a bill introduced into a political environment where connections to insurance companies are not unheard of. However, that same L.A. Times article reports, "[Kuehl] is not including the taxes needed to put her bill into effect--$95 billion, according to the Lewin report--even if it were to be signed by the governor."

What's in It for Santa Cruz?

Those interested in the bill's specifics and the impact it might have in Santa Cruz can join Supervisor Neal Coonerty, Rev. Deborah Johnson and County Treasurer Fred Keeley at a March 30 talk being put on by the Santa Cruz chapter of California single-payer advocacy group Health Care for All.

The high costs of medical insurance under the current rubric have grabbed national headlines in recent years as prominent U.S. businesses either drop employee coverage altogether or cut back on their contributions to stay competitive with their peers in other countries, where health insurance costs are lower or covered by the government.

Coonerty has seen the effect of these rising medical costs on his own business, Bookshop Santa Cruz. He says he was one of the first business owners in Santa Cruz to publicly endorse S.B. 840 because he believes it will take the financial burden off small businesses like his that voluntarily provide health benefits out of genuine concern for employee health.

"The health-care premiums since the year 2000 have increased 87 percent compared to the general inflation rate of 18 percent," says Coonerty, who will be speaking at the March 30 forum. "So, those expenses keep going up and up and up and it's really putting pressure on businesses that aren't mandated to give this kind of coverage that they can no longer afford. This is a higher increase than businesses are seeing in anything else they do in terms of income. Therefore they start to drop out, which means there are less and less people who have access to insurance."

This financial pressure was one of the reasons Santa Cruz small business owners, including Coonerty, opposed Measure G, which would have raised the minimum wage in the city to $9.25 in last November's election. Coonerty argued, in a January 2006 Metro Santa Cruz article, that the bookshop's income would have to be transferred from the already high, but voluntarily paid, costs of health insurance coverage to a high, and legally mandated, wage increase if the measure passed.

The Lewin Group, an independent analyst that studied the 2004 version of S.B. 840 (then titled S.B. 921), estimates that California businesses already covering their employees, such as Coonerty's, would save nearly $8 billion a year if Kuehl's bill became law. Businesses that do not currently offer insurance, Lewin estimates, would see their costs increase by nearly $9.5 billion, though this amount would be less than they would pay in today's insurance market.

Clearing the Arteries

S.B. 840 calls for money currently spent in county-run programs supporting the uninsured to be reallocated to a central pool that would also draw funding from the payroll tax revenue. The Universal Health Care Agency would then draw from this pool when reallocating money to doctors and hospitals for services provided. Bill supporters, including Santa Cruz resident and member of Health Care for All Carol Robertson, believes this centralization of the insurance market will eliminate the "duplicity" that exists in a fragmented and competitive private insurance market.

"A very substantial chunk of what we spend is wasted on what the insurance companies refer to as administrative costs," Robertson explains. "Although the [Universal Health Care Agency] will be a bureaucracy, it's going to be small in comparison to the bureaucracies that are part of the present system, where we have hundreds of insurance companies who in California have between them thousands of different plans."

According to the Lewin Group, the bill would save a total of $25 billion in administrative costs as well as from the discounted prices on bulk pharmaceuticals and durable medical equipment that the state would negotiate with distributors.

"A drug like Lipitor is made in the United States, yet it is sold here for much more money than it is in Canada," says Robertson. "How's that? Well, the Canadians are negotiating for 34 million people, just the same as the commissioner here would be if he were negotiating for California."

The bill's plan to extend health-care coverage to all of the state's citizens may also be a key to reversing the expensive trend of overburdened emergency rooms.

"Half of the Emergency rooms in Los Angeles have now closed because it's costing the hospitals too much to keep them open," says Robertson. "They're losing too much money because there are too many unreimbursed costs. Of course, the hospitals jack up and inflate their other billings, so that it's essentially passed on to the consumer, who is paying higher premiums to cover the hospitals losses."

County governments could also see a reduction in bureaucracy under S.B. 840. Santa Cruz County leaders say that the time and energy now spent administering health services to the uninsured within the county could be refocused on other pressing needs if coverage was universalized.

"When people are not insured or underinsured, we have to find out how to provide services for them," explains Supervisor Coonerty. "It's not only the right thing to do, but we're responsible for the public health issues in the county and we want to make sure if there are any health problems that need to be addressed that they're addressed. So, having a comprehensive insurance program where everyone would be covered would take a huge amount of that burden off county government."

A Clash of Civic Ideals: Kuehl vs. Schwarzenegger

S.B. 840 is far from being the only option on the table when it comes to health-care reform, however. As problems within the health insurance market continue to intensify, more and more politicians are designing fresh solutions they can slap their name onto. President Bush and Gov. Schwarzenegger have both floated different plans that would expand coverage to the uninsured through tax breaks and subsidies to individuals, while keeping the overall structure of the private insurance market intact.

Schwarzenegger proposes "an individual mandate to purchase health insurance" involving the extension of state-run programs and subsidies for low-income residents via a "purchasing pool" financed by noninsuring employers, federal reimbursements, a redirection of current spending on indigent care and hospital fees.

Sabrina Lockhart, deputy press secretary for Gov. Schwarzenegger, outlined the reasoning behind his plan: "The governor prefers an approach that has everybody become a part of the solution, and that's the concept of shared responsibility that his health-care reform plan is based upon," says Lockhart. "It doesn't put the entire onus on a single entity. Instead it has the individual as well as business, hospitals and doctors all being part of the solution. If everybody stands to benefit from having all Californians insured, then everyone needs to be a part of the solution."

While the governor's proposal would cover all Californians and therefore resolve the aforementioned crisis in emergency rooms by ensuring payments for hospital services, Sen. Kuehl is skeptical that it will offer the comprehensive coverage guaranteed under her bill. S.B. 840 would cover a long list of services ranging from eyeglasses and wheelchairs to mental health and adult day care, options generally reserved for the more expensive private insurance plans.

"The governor is talking about very high deductible policies, up to $5,000 deductible, and up to $7,500 out of pocket," she says, adding that anyone with an income over $9,000 a year would be legally required to purchase insurance under his proposal. "So, between the bare bones policies you could buy to satisfy his mandate and the high deductibles, it would almost be like paying premiums but never being able to access your insurance."

Kuehl is confident that the bill will pass both houses of the Assembly and end up back on the governor's desk this year. While Lockhart says the governor will veto any bill that "puts all the burden on taxpayers," S.B. 840 advocates believe the gears have already been set in motion on health-care reform and it will only be a matter of time before major restructuring will be necessary to save the system.

"This governor is not the end of the road for the concept of universal health-care coverage," says Kuehl.


The Single Payer Health Care Forum takes place Friday, March 30, 7-9pm, at the Vets Hall, 846 Front St., Santa Cruz.


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