What Kind of Health Care Vehicle Is California Looking for?

In any kind of reform process, one question inevitably leads to another.

The first question is usually pretty fundamental: “Is reform really necessary?”

In California — and perhaps the country as a whole — it’s taken several years to reach consensus regarding health care, but there does seem to be agreement now that the system does indeed need fixing.

The next question, also fundamental in nature, is, “Shall we tinker with what we already have — try some new parts and modifications — or shall we go for a whole new vehicle?”

That’s roughly where the debate is now. The fix-what-we-have camp is led by California’s Republican governor and Democratic leaders in the Senate and Assembly. This side of the argument probably is dominant at this point in California with bipartisan support and no shortage of ideas.

The let’s-try-something-new camp is by and large lined up behind Sen. Sheila Kuehl’s (D-Los Angeles) proposal for a state-run, single-payer health system. The movement here is gaining steam, but most health care experts — even those who favor a single-payer plan — admit that such a change is not likely for years, if ever.

Small Businesses on the Fence

“There may be broad public appeal and even some of our membership likes the idea of a single-payer system, but politically, it’s just not going to happen anytime soon,” says Scott Hauge, president of Small Business California.

Small Business California, a non-partisan trade group based in San Francisco, conducts a survey each spring to get a sense of priorities for the state’s 1.1 million small businesses.

“For the second year in a row, we’re getting a very clear statement that the No. 1 priority for small business in California is health care,” Hauge says. “Eighty-eight percent of our responses so far say health insurance availability and affordability are the most important issues these small businesses face in 2007.”

There appears to be moderate support for a government-run, single-payer system among small businesses. Of the 400 responses to the survey so far, 45% said they “somewhat or strongly support” a single-payer system, Hauge says.

“And you can see the appeal — to get health care off the employer’s back. But there’s also strong opposition,” Hauge adds. Thirty-seven percent in this year’s small business survey “strongly oppose” a single-payer system.

“I think a lot of that opposition is a basic hesitancy to say the government could run anything right,” Hauge says.

There is strong ideological opposition in the business community to a single-payer system that would move health care away from the competitive, profit-driven marketplace and make it a publicly run enterprise similar to the public schools system.

Expect a Fight From Health Insurers

Not surprisingly, one of the strongest opponents of single-payer systems is the California Association of Health Plans, the trade group representing insurance companies.

A single-payer system such as that proposed by Kuehl in SB 840 essentially would eliminate private insurance companies from the health care equation and redirect money used for insurers’ administration and profit to a government-run agency. A study by Harvard Medical School researchers estimates that about 31 cents of every health care dollar spent in this country goes to health care administration.

“This organization supports the concept of shared responsibility,” says Nicole Kasabian Evans, spokesperson for the California Association of Health Plans. “We have embraced the idea of employers being responsible for providing coverage, but they shouldn’t be expected to do it alone.”

In a letter last fall urging Gov. Arnold Schwarzenegger (R) to veto Kuehl’s bill after it had been passed by the Senate and Assembly, Charles Bacchi, vice president of legislative affairs for the Association of Health Plans, wrote:

“Important functions such as claims payment, utilization review, disease and care management programs, the development of drug formularies and customer service operations will need to be replicated under a government-run health system. However, unlike our competitive health insurance market, there will be no competitive reason for the government to keep these costs low.

Solid evidence exists that competitive forces in the private marketplace are vital in health care and must be preserved.”

The governor agreed and vetoed the bill.

Sight Set on Businesses

Kuehl, who chairs the Senate Health Committee this year, is expected to reintroduce single-payer plan. For the past two years, Kuehl’s legislation was the only big-picture idea on the table. This year, she has lots of company. The governor, Assembly leader Fabian Nuñez (D-Los Angeles) and Senate President Pro Tem Don Perata (D-Oakland) all have sweeping proposals in the works. Senate Republicans have offered a more modest plan for health care reform.

California’s last attempt to change the status quo — a series of reforms including an employer mandate to provide coverage for workers or pay into a government pool — was passed by the Legislature, signed by former Gov. Gray Davis (D) and subsequently repealed in the Proposition 72 referendum spearheaded by wealthy business interests and supported by Schwarzenegger.

The governor has not forgotten the Proposition 72 campaign and is dutifully courting well-heeled business interests to endorse his market-based plan to provide health coverage for everyone in the state. Support from the business community could be more important than support from his own Republican party, if only to avoid another referendum at the ballot box.

The governor’s plan calls for individuals to help share the burden and levies fees on businesses that don’t provide insurance, doctors and hospitals. Schwarzenegger’s main pitch to business leaders is that his plan could improve their bottom line by improving the business climate in the state.

For any plan to work in the current vehicle in which employers carry most of the burden, the business community has to sign on as one of the drivers.

“I think that could happen if the percentages are kept within reason,” says Small Business California President Hauge, who also is president and owner of CAL Insurance & Associates, specialists in providing insurance for small-to-medium-sized businesses.

“Most small businesses in California don’t provide coverage for spouses and dependents” of employees, Hauge says. “If they’re going to be asked to pay into a pool for dependents coverage, the percentage of the businesses income has to be kept low enough so they don’t go broke.”

“I don’t know where that falls for other businesses, but for me, personally, it’s about 6% or 7%,” Hauge says.

Controlling Costs Is the Big Issue

Even if one of the fix-what-we-have-now plans on the table is adopted, Hauge says that “we’re still not out of jeopardy until we can get a handle on how to keep costs from rising.”

“The governor’s plan — and to some extent the other plans, too — have cost-containment measures in them: prevention, medical record improvements, chronic disease management, reducing medical errors. Those are all good ideas,” Hauge says. “But for any changes in the system to work on the long term, we’re going to have to figure out ways to make those good ideas actually keep costs down.”

KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.