Health Reform Déjà Vu: Will Federal Efforts Follow State’s Path?

“This year will be the year we get health care reform done,” Dora Hughes, HHS’ counselor for public health and science, said earlier this month at the 6th Annual World Health Care Congress in Washington, D.C.

To Californians, her statement might sound awfully similar to Gov. Arnold Schwarzenegger’s (R) declaration that 2007 was the “Year of Health Care Reform.”

And they’d be right.

Health Reform Déjà Vu?

Len Nichols — health policy director at the New America Foundation, a not-for-profit think tank — said the first parallel between the failed California health reform efforts of 2007-2008 and the current national reform efforts is executive leadership.

Nichols said, “In my mind, there’s no way California would have [pursued health reform] had Schwarzenegger not decided to make this a huge initiative and put his own prestige and his own administration’s many resources behind it trying to make it happen.”

Nichols noted that Obama clearly has made health care reform a priority, too. “If you look at the economy, if Obama had said in November after the election or in January at inauguration time, ‘Look, we just can’t do this kind of stuff,’ the advocates would have been crushed, but everybody else would have said, ‘Yeah, that’s right,'” he said, adding, “So we wouldn’t be having this conversation without executive leadership.”

The second parallel between the California and national health care reform efforts is “broad consensus among the so-called stakeholders — which would include the people who run the hospital systems, the physician groups, as well as insurers and employers — that our system is broken and the cost of doing nothing is high,” Nichols said.

“The third parallel is that the middle class is pretty worried about paying for health care. And I think that was true in California, and I think it’s definitely true here,” he said.

As federal health care reform efforts pick up steam, it makes sense to look at the successes and failures of efforts to overhaul health care at the state level.

While Massachusetts enacted landmark universal health care coverage in 2006, the state’s high income level, low rate of uninsured residents and significant federal waiver funds make it unlike any other state in the country.

However, California’s large low-income population and high rate of uninsured residents more closely mirrors the rest of the country.

California Roadblocks Offer Lessons for Nation

In January 2008, the Senate Health Committee voted 7-1 to reject the compromise health care reform bill negotiated by Schwarzenegger and Assembly Speaker Fabian Núñez (D-Los Angeles).

The demise of the state’s “Year of Health Care Reform” can be attributed to several factors.

The health reform bill received a stiff blow when the Legislative Analysts’ Office reported that the plan could leave the state with a $4 billion shortfall within five years of being launched if costs were underestimated.

Nichols added that the fact that the state’s projected $14.5 billion budget deficit “was about the same size as the Schwarzenegger proposal would have cost … turned out to be very unfortunate aesthetically.”

In today’s economic state, the federal government faces similar costs concerns. However, Nichols noted, “At the federal level, the numbers are monopoly money.”

Nichols explained that the large amount of money the federal government has directed toward stimulating the economy could elicit two very different opinions from the public on health care spending. He said, some U.S. residents may “think ‘My God, we’ve spent so much money, how could we possibly spend another dime?'” However, he said, “On the other hand, these sums are so large, the amount we’d actually have to spend per year on health care looks like lunch money.”

While the federal government is not held to the same balanced budget requirements as states, Nichols warns, “It will be hard for people to write a check for a new commitment unless they are darn sure that the financing of that commitment is feasible.” He said, “Congress is going to have to appropriate revenues to pay for the coverage expansion that is being discussed. We’re not going to finance health reform with deficit financing.”

At the World Health Care Congress, Bruce Bodaken — chair, president and CEO of Blue Shield of California and a supporter of Schwarzenegger’s health care effort in California — said the lack of transparency was partly to blame for the failure of health reform in California.

He said the health reform discussions were “inside baseball” and “not as open as they should have been.”

Bodaken said, “It is critically important along the way to check in with all of those constituencies more regularly and publicly.”

While cost concerns and lack of transparency may have presented stumbling blocks on California’s road to health care reform, the biggest hurdle was politics.

Nichols said, “The single payer advocates in California never embraced [Schwarzenegger’s] proposal, and they are a large part of the union movement out there and a fair number of legislators — including importantly Sheila Kuehl, then the chair of the Senate Health Committee,” adding, “So you really had a number of people who are in the party and the constituencies that typically support reform who were hostile to the private insurance model that Schwarzenegger felt like he should propose because he wanted it to be bipartisan.”

On the other end of the political spectrum, “Republicans in the Legislature basically take an attitude that they’ll never vote for any tax increase for any reason,” Nichols added.

He said, “So to me, it was a double political whammy. You had the single-payer crowd that wanted to undermine it because it wasn’t their perfect vision and the anti-tax zealots who refused to even engage a discussion on the relative costs and benefits of health reform versus doing nothing and that tied Schwarzenegger’s hands on financing in a way that was ultimately debilitating.” Nichols added, “You could say the extremes killed it.”

Politics at Play at the National Level

Bodaken said California’s efforts highlight the importance of “leaving ideology at the door.”

He noted that while the Democrats likely have the votes to pass health care reform legislation on their own, it “will ultimately fail” if it does not have bipartisan support.

Nichols agreed, noting that while he believes Democrats could pass health reform legislation without Republican support, “I don’t think it would be wise, and I don’t think it would ultimately work.” He explained, “I think for health reform to be credible and sustainable, it needs to have bipartisan support and that doesn’t mean 90 votes in the Senate, but it does mean something like 65 to 70 because you need to have a critical mass of Republicans who agree a) with the goals and b) with the methods.”

Nichols warned, “If the Republicans are united in opposition, then it’ll be much easier to divide the population and scare them as the stakeholders who prefer the status quo always want to do.” However, “At the same time, it is risky for the Republicans to not be reasonable and try to engage because if Obama … wins the PR war, and [Republicans] are united in opposition, then they really would suffer a major political blow,” he said.

“On the Democratic side, you have forces at war as well. You have some who prefer to do it without Republicans and just do it the Democrat way,” Nichols said, adding, “They’re kind of the national equivalent of your single payer crowd out there. They are not single payer per se, but they are very much more liberal and into regulation than the moderate Democrats who would prefer to have Republican support.”

The Obama administration has stressed its intention of including all stakeholders in the health care reform process and ultimately coming up with a bipartisan proposal.

Hughes said, “We want this to be a bipartisan effort,” adding, “This is a top priority. We have every intention of getting this done.”

Whether 2009 actually becomes “the year we get health care reform done” remains to be seen.

If cost, transparency and political hurdles get in the way, the outcome of U.S. health care reform efforts could mirror California’s. But if the lessons and insight gained from the state’s failed health reform efforts are applied, national health reform might just have a shot.

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