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Consensus Commentary

Jan 02, 2003

The Universal Approach: Affordability is basic in health-care reform
San Francisco Chronicle

by Jerry Flanagan & Frank Smith

This article appeared in the San Francisco Chronicle on January 2, 2003
by Jerry Flanagan and Frank Smith
Jerry Flanagan is a health-care advocate with the San Francisco-based Foundation for Taxpayer and Consumer Rights. Frank Smith is a senior fellow at the Institute for a Civil Society and a co-author of "Making a Killing: HMOs and the Threat to Your Health" (Common Courage Press, 1999).
While Blue Shield CEO Bruce Bodaken announced his universal health care plan for California last month, Blue Shield customer Don Lapin from San Francisco received notice of a 25 percent premium increase -- on top of last year's 30 percent increase.

Bodaken and other HMO executives around the country are sudden converts to universal health care because they know skyrocketing costs, in the long run, can have only one result -- a universal health-care system that lets government tackle what corporations cannot handle.

"If we don't do something in a darn hurry about the uninsured, the whole health-care system in this country will collapse and the government will step in," warned Chuck Butler, a V.P. of Blue Cross Blue Shield of Montana, in an article Dec. 7 in the New York Times.

The truth is that no solution will work unless it deals with the public's main concern -- affordability. That means taking a hard look at exorbitant HMO and drug company profits.

Since 1995, Lapin's monthly premium has more than tripled. Like many of us, Lapin is paying more for fewer benefits. Though healthy (he is on a swim team and is a ballroom dancer), he pays for chiropractic visits resulting from a 1983 bicycle accident mostly out of pocket because Blue Shield limits him to 12 visits per year, at a maximum benefit of $25 a visit.

Lapin is self-employed and relatively lucky in that he qualifies for benefits -- a state of affairs that doesn't apply to increasing numbers of people, especially recent retirees. A report released last month by the Henry J. Kaiser Family Foundation of Menlo Park noted that a third of the country's large employers will soon drop health-care benefits for new retirees, who most likely will not be able to afford coverage until they can qualify for Medicare, because seniors have borne the worst insurance price increases.

The answer to our crisis lies not with simply creating a product that everyone is required to buy. We must reformulate the health-care system, make services available to all who need them and place cost-efficiency requirements on every player.

Recent news reports showed yet another way that the state's HMOs are getting fat at the public expense. Kaiser, Health Net, California Physicians, Aetna and Blue Cross are sitting on more than $2.2 billion in excess cash reserves, called "tangible net equity," while instituting premium increases.

Rampant profiteering and creative accounting strategies leave employers, employees and consumers such as Lapin with no recourse in the face of 30 percent to 40 percent premium increases. Unfortunately for us, California is not one of the 26 states that require health insurers to get "prior approval" from the state before raising rates. California can stop an unreasonable premium increase for our auto insurance, but not for the most precious possession -- our health.

This is only one piece of the problem. California needs a system-wide plan to resolve growing inequities in health care. One middle-ground solution would be a public-utility model, which would strictly regulate profiteering in health care to achieve universal coverage and cost-efficiency. It would retain private delivery with strict public control and address the public's biggest concern: affordability.

Recently, former Vice President Al Gore was quoted by the Wall Street Journal as saying that he believed the public-utility model should be the future of health care. Such a model would appoint an independent commission to implement a three-part plan:

-- Cost control and stability: The overall aim of rate-setting would be to assure that providers, hospitals and health plans are sufficiently reimbursed to maintain financial stability and that net revenues do not exceed reasonable requirements for profit and reinvestment.

-- Universal access: A new state health plan would provide care for all who do not have access to, or choose not to utilize, benefit plans provided by employers. Competition between the state and private plans would help stabilize premium costs.

-- Modernize quality oversight: A single state agency would be responsible for setting quality standards, collecting data and reporting outcomes. Outcome reports would be fed back into the rate-setting process so that providers and plans with the highest outcomes would be rewarded.

Health-care reformers can appreciate Bodaken's entry into the universal health-care debate. Yet absent insurance-premium controls, his plan would be little more than a blank check to insurers, who would be guaranteed new customers but would not be accountable for what they charge them. Maybe, with Bodaken's help, California can implement a universal health-care system. But the key is cost controls and accountability outlined above, without which our health-care system will continue to unravel.