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Sep 04, 2003

CONTACT: Jerry Flanagan - (415) 497-1710

Consumer Advocate Testifies That the Good, the Great, the Bad and the Ugly Must be Reconciled in Universal Health Care Effort

SACRAMENTO -- Consumer advocate Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights will testify today that, "while universal health is a critically important endeavor and must proceed, a workable system will require cost controls on hospitals, physicians, insurers, and pharmaceutical companies."

Under the proposed "pay or play" plan, employers with 20 or more employees must either provide health care benefits directly to workers or pay a fee for the worker to receive care from a state run health insurance purchasing pool. Dependents of workers receive care if the employer employs more than 200.

The Foundation for Taxpayer and Consumer Rights (FTCR), which has not taken a position in support or opposition to the plan, offered the following analysis:

The Good & the Great:

- Theoretically, by insuring more people the cost of care will come down for all consumers because risk is spread more widely.

- The current version of the bill has the potential of significantly increasing access to health care, in that over 80% of California's uninsured are members of working families.

- The new plan offers a comprehensive benefits package including prescription drugs for all eligible workers and dependents.

- The proposed plan could be expanded in the future by allowing all Californians to have access to the state purchasing pool.

- The proposal will level the playing field for employers by taking away the competitive advantage of those employers that currently do not offer health benefits to their workers.

The Bad & The Ugly:

- The proposal contains no cost controls on doctor and hospital fees or insurer premiums. The hope that insurers, hospitals, and physicians will lower rates voluntarily under the new system is contrary to experience where new administrative costs, soaring profits and other expenses continue to drive up costs.

- The bill currently offers no protections for consumers on the amount of the out-of-pocket charges they will be required to pay in order to access medical services.

- Hawaii's 30-year experience with a similarly constructed "pay or play" system has shown that without cost controls, the solvency and stability of the health care system is threatened:
A) After 3 consecutive years of 10-28% premium increases, the Chamber of Commerce of Hawaii asked the state legislature and the governor to provide independent oversight of rates in 2002.
B) During that same year, health care premiums had increased 250 times faster than medical inflation.
C) The Hawaii legislature approved, and the Governor signed, legislation allowing a regulator to deny unfair premium increases.

- To hold together an unlikely coalition of insurers, hospitals, physicians, and organized labor, bill supporters have yet to provide meaningful cost controls in the proposal that will alienate these interest groups.

"The most politically viable plan is not necessarily the best policy for California," said Jerry Flanagan of FTCR. "The legislature must demand a policy that is as attractive as the politics behind the proposal."

The Foundation for Taxpayer and Consumer Rights (FTCR) is a non-profit and non-partisan consumer advocacy organization. For more information, visit us on the web at or

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