In the news today, the California State Senate passed its universal healthcare bill.
Here’s the website promoting the proposal. What does it promise?
It implies that every type of medical service is covered:
Covered benefits will include services to keep people healthy—mentally and physically—as well as those services that diagnose and treat diseases. In addition to emergency services, surgeries, and hospital stays, services such as home health care, day care and hospice are covered. Vision and dental care are also included.
It promises “free choice of licensed health professionals and services.”
It is inconsistent on the question of whether there are copays: on the one hand, it says “no out-of-pocket costs for covered services” but at the same time, it only claims to “lower,” rather than “eliminate” prescription drug costs.
And, although reports are saying that there is no funding mechanism yet, the site says that it’ll be funded by “a payroll and income premium, which is higher for upper income earners,” so presumably the reports mean that the exact tax rates haven’t been determined yet.
Dig a little further onto the site, and there are more promises:
Healthy California is accountable only to the public. Doctors and nurses, not insurance companies, work with you to decide your care. This ensures that private profit never comes before public health.
This implies, of course, that doctors and nurses (and hospitals and all the other staff involved in running hospitals, doctors’ offices and outpatient clinics) are not in it for the sake of “profit.” But will those doctors and nurses say “no” at any point, or offer any service at all and simply file for reimbursement? And how would those reimbursement levels be set, and would doctors be able to opt out of the system if those reimbursements aren’t satisfactory, or will any doctor practicing in the state be obliged to accept these rates?
Conveniently, the website also provides the text of the legislation. So what’s up?
Governance: the governing board shall have, minimally, a representative of the nurses’ labor union, a representative of the “general public,” a representative of labor unions generally speaking, and a representative of the “medical provider community” (but at the same time, no board member shall actually be a healthcare provider so I’m a bit lost on this one, especially since board service is unpaid).
A carrier may not offer benefits or cover any services for which coverage is offered to individuals under the program, but may, if otherwise authorized, offer benefits to cover health care services that are not offered to individuals under the program.
Which seems to say that if reimbursement rates are stingy enough that it’s tough to find a provider, no duplicate system of insurance is permitted to cover benefits for out-of-system providers. In other words, they’re using Canada, not the UK, as their model.
Future benefits: The board is charged with proposing a way of providing long-term care benefits, as well as a way of covering now-retirees living out of state, who, during their working lifetime lived in, and paid into, the Healthy California program. Actually, I’m not sure what’s meant by the latter; it’s “accommodating employer retiree health benefits” for these individuals.
Cost sharing: yup, it says,
A member shall not be required to pay any premium, copayment, coinsurance, deductible, and any other form of cost sharing for all covered benefits.
Benefit scope: there are 33 items on this list, which is generally stated to be “all medical care determined to be medically appropriate by the member’s health care provider.” They include eyeglasses, dental & vision care, prescription drugs, “health and wellness education,” “necessary transportation for health care services for persons with disabilities or who may qualify as low income” (that is, I think, transportation to doctors’ offices), home health care, chiropractic care,acupuncture, “therapies that are shown by the National Institutes of Health, National Center for Complementary and Integrative Health to be safe and effective,” adult day care, and “any additional health care services authorized to be added to the program’s benefits by the program.”
This list is so long that I can’t see anything missing from the list, and, therefore, anything that would potentially be provided by a health insurance company per the item on exclusivity above, except, I suppose, that, in theory, one could insure for treatments that would be denied by not being “determined to be medically appropriate.”
Care coordination: the proposal seems to mandate that everyone have a “care coordinator,” which, for all intents and purposes, seems to function in an HMO-like fashion. “Care coordination shall be provided to the member by his or her care coordinator.” And, although “referrals from a care coordinator are not required for a member to see any eligible provider,”
A health care provider shall only be reimbursed for services if the member is enrolled with a care coordinator at the time the health care service is provided.
Every member shall be encouraged to enroll with a care coordinator that agrees to provide care coordination prior to receiving health care services to be paid for under the program. If a member receives health care services before choosing a care coordinator, the program shall assist the member, when appropriate, with choosing a care coordinator.
which I take to mean that, if you go to the doctor or ER prior to having a designated Care Coordinator, you will be required to choose one on-the-spot.
Payment: copied more-or-less in full but with emphasis added in places:
Article 3. Payment for Health Care Services and Care Coordination
100637. (a) The board shall adopt regulations regarding contracting for, and establishing payment methodologies for, covered health care services and care coordination provided to members under the program by participating providers, care coordinators, and health care organizations. There may be a variety of different payment methodologies, including those established on a demonstration basis. All payment rates under the program shall be reasonable and reasonably related to the cost of efficiently providing the health care service and ensuring an adequate and accessible supply of health care services.
(b) Health care services provided to members under the program, except for care coordination, shall be paid for on a fee-for-service basis unless and until another payment methodology is established by the board.
(c) Notwithstanding subdivision (b), integrated health care delivery systems, essential community providers, and group medical practices that provide comprehensive, coordinated services may choose to be reimbursed on the basis of a capitated system operating budget or a noncapitated system operating budget that covers all costs of providing health care services. [Note: if I read this correctly, Kaiser gets to stay in business as an “integrated health care delivery system,” so long as it can exert enough power to keep reimbursement rates satisfactory.]
(d) The program shall engage in good faith negotiations [comment: what does “negotiation” mean when the state can unilaterally make demands?] with health care providers’ representatives under Chapter 8 (commencing with Section 100660), including, but not limited to, in relation to rates of payment for health care services, rates of payment for prescription and nonprescription drugs, and payment methodologies. Those negotiations shall be through a single entity on behalf of the entire program for prescription and nonprescription drugs.(e) (1) Payment for health care services established under this title shall be considered payment in full.
(2) A participating provider shall not charge any rate in excess of the payment established under this title for any health care service provided to a member under the program and shall not solicit or accept payment from any member or third party for any health care service, except as provided under a federal program. . . .
(g) Payment methodologies and payment rates shall include a distinct component of reimbursement for direct and indirect graduate medical education.
(h) The board shall adopt, by regulation, payment methodologies and procedures for paying for health care services provided to a member while the member is located out of the state. [Presumably they’ll have less power here, if providers bill patients directly.]
It is the intent of the Legislature to enact legislation that would develop a revenue plan, taking into consideration anticipated federal revenue available for the program. In developing the revenue plan, it is the intent of the Legislature to consult with appropriate officials and stakeholders.
So that’s that. It’s not entirely clear to me how the “care coordination” works if one is required to have a “care coordinator” but one can still seek services from any provider. Is the idea that one’s care coordinator proactively works with patients so effectively that they won’t want to seek out other doctors from whatever hospital they happen to be closest to at any given time? Or am I missing something?
But the bottom line seems to be that it all hinges on the negotiated fees: the lower they are, the more doctors are chased out of state; the higher, the higher the costs for the plan. More likely, those providers with political clout will secure the most advantageous reimbursement rates.
But consider the case of Kaiser: they’re insurance provider and care provider all rolled up into one, and presumably their insurance rates reflect this — but will the state now demand that they reduce their prices to be cheaper than the fee-for-service costs of directly reimbursing providers, or will the state acknowledge that a single capitated payment saves California money as well, vs. the cost of processing payments to one provider after the next? Or are they actually assuming that everyone will be covered by a Kaiser-like plan (that is, with other providers banding together and insurance companies taking a less visible role as provider of reinsurance to these Care Coordinators)? Is this not “Medicare for All” but “Staff-model HMOs for all”? And, if so, is the promise of “all benefits, at no cost” a bit deceptive if it’s being taken for granted that Care Coordinators will strategically recommend only the more economical choices (sure, you get eyeglasses, but they’re the coke-bottle kind, with an up-charge for contacts) and make their own decisions about when a treatment is not “medically appropriate”?
And what about the pharmas? Would the state set reimbursement rates that are more-or-less similar to the negotiated rates of your typical health insurance plan, or would the state of California play hardball and demand, “we will pay no more than your typical European country” and potentially sow chaos as pharmas refuse to go along, or face uprisings from health insurers in the other 49 states?
So, the bottom line is that how California chooses to fund this is the smallest of the issues in the plan. Payroll tax, income tax, whatever. (Except that Congress sure better take away the deductability of local income taxes so that the rest of us aren’t subsidizing this.) There are much bigger issues, questions of how the program will run that seem to be left to the governing board to decide. Honestly, it’s a mystery to me how they attached a fixed price tag to the program.
After writing the above, I looked a bit further and found a LA Times article, which referenced a legislative staff analysis of the bill. And apparently my interpretation is mistaken. The analysis states that, despite all the references to Care Coordinators, the guarantees of “see any provider for any care they deem appropriate” mean that care can’t actually be coordinated, and there are no real constraints on utilization in the proposal — they assume a 10% increase for existing Medicaid patients, for instance. The price estimate also assumes that the state pays Medicare rates for everyone. The analysis further notes that
With respect to health care prices – The bill would constrain the Program’s ability to negotiate prices with providers, since it would require all payments to be reasonably related to the cost of providing care. Requiring providers to be paid based on their cost of providing care is likely to lead to increased inflation in costs, since providers would have little incentive to control costs through increased efficiency.
Ultimately, their estimate is $400 billion per year. Considering that the population of California is about 40 million, that means a cost of about $10,000 per person. Which, as it happens, is almost exactly the current per capita healthcare spending in the U.S., reported to be $10,345. But their $400 billion estimate is so much a guess that there’s really no way of knowing what the end result will be.
Here’s a reference point for the $400 billion: according to a 2016 study,
n California, public funds will pay for 71 percent ($260.9 billion) of a projected $367.5 billion spent on health care in 2016, according to the study. Medi-Cal/Healthy Families expenses take the biggest bite, 27 percent, followed by Medicare at 20 percent. Tax subsidies for employer-sponsored insurance (the foregone taxes) account for a significant 12 percent of public spending.
Given the dominance of public spending in health care, the authors noted that a single-payer system might be more feasible than previously thought.
“For a majority of Californians, a public-run system is already the reality,” said Andrea Sorensen, a graduate student at the UCLA Fielding School of Public Health, who co-authored the study.
This figure of 71% plays the convenient game of including “tax expenditures” as a form of government spending, which seems like a bit of double-counting unless they adjust the figure for employer-provided insurance, to reflect the benefit of the tax deduction (there is no mention of any adjustment in the original report). But even so, this suggests that the proposed single-payer plan is not going to save, but rather increase, total spending.
Image: https://commons.wikimedia.org/wiki/File%3ADoctor_examines_patient_(1).jpg; By Unknown photographer [Public domain], via Wikimedia Commons