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March 4, 2004

CONTACT: Jerry Flanagan, (415) 633-1320

New Report Finds Widespread Support For Health Care Cost Controls

Group Pledges to Take Model Ballot Initiative to the People If Legislature Fails To Act

Following two years of the most comprehensive consensus building process on health care reform in the state's history -- including patients, care providers, health insurers and small business owners participating in 6 broadcast town halls -- the Foundation for Taxpayer and Consumer Rights (FTCR) found overwhelming support for health care cost controls that could lead to universal access.

In a new report released today documenting the consensus building process, Crisis and Opportunity: Forging a Universal Health Care Consensus, FTCR announced 3 model cost-control laws and a model ballot initiative. The model laws, based on the consensus developed in the town hall process, are designed to address the immediate affordability crisis: prescription drug bulk purchasing, health insurer premium regulation, and hospital market stabilization. The model ballot initiative will be further refined and developed over the next year.

The report, model laws, town hall videos and patient and small business profiles can viewed at:

According to the report, "If the Legislature fails to provide the necessary reforms, the Foundation for Taxpayer and Consumer Rights will propose a ballot initiative to allow California patients to have the final say in the policy debate."

The town hall process included more than 700 patients, small business owners and prominent health care stakeholder groups, including:

** CA Medical Association, representing doctors;
** Catholic Healthcare West and the Healthcare Association, representing hospitals;
** CA Nurses Association;
** CA Association of Health Plans, representing insurers;
** Service Employees International Union (SEIU) Local 660;
** Chamber of Commerce executives from San Francisco, San Diego, and Los Angeles;
** State legislators including Assemblyman Dario Frommer (D-Los Angeles), Senator Liz Figueroa (D-Fremont) and Assemblyman Keith Richman (R-Northridge);
** Dozens of nurses, physicians, paramedics, advocates for the uninsured, and patients who navigate the health care system each day.

The report provides policy makers and opinion leaders with first-hand testimony from more than 50 key state and local health care leaders. In addition to town hall discussions, FTCR conducted 40 individual interviews with small business owners and patients and convened work groups throughout the state.

Though participants disagreed on who was at fault, nearly without exception they agreed that skyrocketing administrative costs, inefficiency and excessive profits are causing hardship for all health care stakeholders.

"Nearly everyone agrees that stabilizing costs is the key to reform and that there is enough money in the health care system to insure everyone, but it is being mismanaged," said Jerry Flanagan of FTCR. " While doctors, hospitals and insurers blame each other for skyrocketing costs, it is patients and small business owners that get short changed. Only a break from the current regime -- where an unregulated and uncompetitive market controls health care planning -- will allow for rationalized costs. More public control over health care financing is necessary to ensure that those with an economic stake in the outcome of policy decisions are servants, not masters."

FTCR noted that rapidly increasing health insurance premium costs, falling government reimbursement rates, and a lack of system-wide planning has destabilized health care over the last decade -- a trend that is likely to continue for the foreseeable future.

Cost-Control Model Laws

The three model cost control laws utilize both regulatory and market-based strategies to rout out inefficiency, waste, and profiteering in the health care market:

1) Prescription drug bulk purchasing

Canada and the U.S. Department of Veteran Affairs (DVA) receive discounts of 30-60% off of U.S. made drugs as a result of negotiated bulk purchasing discounts. The California Public Employees Retirement System (CalPERS) bulk purchasing pool should be expanded to provide patients and businesses access to the same discount prescription drug rates that state employees, legislators, and the Governor currently receive.

2) Hospital Market Stabilization

Tenet Healthcare Corporation's recent announcement that it intends to sell 19 California hospitals brings to the fore several key failures of the hospital market. Independent oversight of hospital finances is needed to stabilize costs and allow for the kind of long-range planning necessary to make our hospitals safe. The state of Maryland has used a similar model to effectively control costs since 1971.

3) Health Care Premium Regulation

California consumers have saved more than $23 billion dollars on their auto insurance rates as a result of voter-approved Proposition 103, which requires auto insurers to get approval of their rates from the Insurance Commissioner. Health insurers should be required to abide by similar oversight and to justify their administrative costs and profits before raising rates. As much as 25 cents of every premium dollar that state health insurers collect is used to pay for advertising, overhead and profits. In 2003, health insurance overhead costs increase by more than 16% to become the fastest growing component of health care costs -- eclipsing even annual prescription drug increases. As a result, all consumers pay more for fewer benefits.

Model Ballot Initiative

The California Health Consensus Project's model universal health care law includes policy elements to address the needs of patients and stakeholders:

1) Universal access to a comprehensive health benefits package

Universal access to care will provide dramatic savings for taxpayers and patients because health care will be provided preventively rather than later in an Emergency Room when the patient's condition is critical, and care is much more expensive. By insuring everyone, the cost of care will come down for all consumers because risk is spread more widely.

To maximize administrative efficiency, those without health care coverage should be provided access to the same benefits that state workers, legislators, and Governor Schwarzenegger receive from the California Public Employees Retirement System (CalPERS). Hospital and physician networks should be organized directly, bypassing insurers, and drug purchases should be aggregated in order to achieve maximum bulk discounts. Competition between the state plan and private plans would help to control costs.

2) Health insurer premium control and hospital and medical group rate stabilization

There is no equitable way to provide sustainable coverage for the insured and provide coverage for the uninsured without guaranteeing fair and reasonable insurance premiums and physician and hospital rates. An independent body should be charged with monitoring and controlling overall costs of California's health care system by weeding out waste, inefficiency, and profiteering at all levels.

3) A public decision making process

In order to achieve equitable distribution of resources and incentives to practice in under-served areas, health care priorities should be determined by the population as a whole. Currently, there is no integration of disparate state decision-making bodies; as a result market forces alone -- which rarely reflect the needs of individuals or the system as a whole -- often control and bring about changes in the health care market.


The Foundation for Taxpayer and Consumer Rights is the state's leading non-profit and non-partisan consumer watchdog organization. For more information, visit us on the web at: