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Should Los Angeles Secede From the State Health Care System? March 18th Town Hall Should Provide Some Answers

by Jerry Flanagan, 9:00 a.m. PST, (415) 633-1320

Los Angeles City and County face a range of health care problems that policy makers might best solve by seceding from the state's dysfunctional health care system and establishing local control:

**Annual insurance premium increases of 20-30% or greater mean small business owners and average consumers cannot afford basic coverage;
**Though we spend more per capita on health care than any nation on earth, 40% o fall L.A. City residents, and 31% of County residents under 65 are uninsured -- 80% of whom are working;
**Tenet Healthcare's recent announcement that it plans to sell 19 hospitals in California means than 10% of Los Angeles' already overburdened hospitals could close.

This Thursday at 5 pm, Los Angles City Councilman Antonio Villaraigosa will convene a meeting of health care stakeholders and patients in a County-wide town hall meeting at L.A. City Hall to build support for strategies to help L.A. get more bang out of its health care dollar. Prescription drug bulk purchasing and health care purchasing pools are two topics on the agenda.

The most economical approach to health care reform is to insure everyone because everyone saves when risk is spread more widely, and people get care when they need it. Under the current system, the uninsured must wait until health conditions become critical before receiving care in emergency rooms, where treatments are more expensive and resources limited which means long waits for all patients.

Not covering those without insurance spells economic disaster. Research shows that the cost of sick days and lost productivity can be up to five times more expensive to a business compared to providing health benefits.

To maximize administrative efficiency, L.A. City and County should organize physician and hospital networks directly, bypassing insurers, and purchase drugs in bulk in order to achieve maximum discounts.

L.A. City & County have enough market clout to operate as their own health care and prescription drug bulk purchaser: L.A. City with 3.7 million residents according to the 2000 census, is the second largest in the U.S. after New York. Los Angeles County -- 9.8 million people -- is larger than 41 states.

If Los Angeles County incorporated its own health insurance pool for all residents it would be larger than any HMO in the state, including Kaiser (6.2 million enrollees). Among the big seven plans that control approximately 84% of the health care market, a Los Angeles city health plan would out-compete PacifiCare, HealthNet, Cigna, Blue Shield, and Aetna.

The benefit of direct negotiations with hospitals and groups of physicians is bypassing health insurance administrative costs. Insurance overhead (one component of administrative costs) rose by an unacceptable 16.8% in 2002, after a 12.5% increase in 2001, making it the fastest growing component of health expenditure over the past three years.

The U.S. Department of Veteran Affairs, which provides care for 39 million veterans -- a statistical blip larger than California's 35+ million residents -- receives a 50% discount off the list price of prescription drugs as a result of bulk purchasing agreements. Why can't California go it alone? Los Angeles could lead the way.