States lead latest charge in effort to solve crisis over medical coverage

The San Francisco Chronicle

The effort to fix the nation’s broken health care system is receiving more attention than at any time since the Clinton administration in the early 1990s.

Since last spring, when Massachusetts’ Republican governor signed a law to cover the state’s uninsured population, state and local officials have introduced a wave of proposals to expand coverage to take in at least some of the 46 million Americans who lack health insurance.

In California, where an estimated 6.5 million people lack coverage, Gov. Arnold Schwarzenegger declared 2007 “the year of health care” and is poised to unveil a major health reform proposal in his State of the State address in January. Senate Democratic Leader Don Perata, D-Oakland, earlier this month proposed a plan designed to cover some 4.2 million working Californians and their families.

San Francisco plans to start phasing in a program in July to cover the city’s 82,000 uninsured residents, making it the first city in the country to provide so-called universal coverage.

“Once every decade or two, this country has a major health care reform debate,” said Anthony Wright, executive director of Health Access, a California coalition of consumer and labor groups. “It started with Harry Truman, but there have been other iterations with Johnson and Nixon and Clinton. Now we’re refocused on it.”

The push for wider health care coverage comes as premiums are rising several times faster than the rate of inflation. Employers have been pushing a greater share of health costs onto their employees by raising copayments and deductibles, and cutting back on benefits. Employees increasingly are feeling the squeeze as their out-of-pocket payments for care climb.

Now many employers are reaching the limit of how much health costs they can shift onto their workers. A survey by Mercer Human Resource Consulting last month found that in 2006 employers did not increase copayments and workers’ share of health premiums as much as in recent years.

In the absence of a broad national effort to reform health care, states are leading the way. Ohio, New Jersey, Vermont, Maine, Illinois and Oregon, among others, have proposed sweeping programs. Some proposed health reform packages in other states are detailed; others are little more than concepts.

“The flurry of activity at the moment seems to be happening at the state level,” said Katherine Swartz, professor of health policy and management at Harvard University’s School of Public Health. “More than 20 states are now actively involved in trying to do something to reduce premiums and make health care more accessible for small business owners.”

Questions remain as to whether states and local municipalities can survive legal challenges over mandates that require employers to provide coverage and other issues.

Federal law limits the ability of state and local governments to force employers to provide insurance. San Francisco’s law has already been challenged in court by the city’s restaurant association.

Another major obstacle involves funding. It costs a lot of money to expand access to health care. States and localities might be hard-pressed to find the resources to care for the uninsured. And some public officials, including Schwarzenegger, say they oppose raising taxes to pay for the additional coverage.

The Massachusetts plan requires residents to buy insurance by July 1 or risk tax penalties. Employers with 11 or more employees must provide coverage, or pay $295 annually per employee into a state fund that will subsidize coverage for those who can’t afford it.

Many health advocates hope that some of these programs could serve as a model for other state initiatives or even for national health care reform. The sheer numbers of ideas suggest a change in political dynamic that could give reform a fighting chance.

“What happened in Massachusetts seems to be something that’s stimulating other people,” said Gary Claxton, vice president of the Kaiser Family Foundation.

While most health experts don’t anticipate major reform at the national level during the next two years of divided government, they do expect health care to receive more attention with the Democratic takeover of Congress in January.

Sen. Ron Wyden, D-Ore., has already announced plans to introduce ambitious legislation that would guarantee coverage for all U.S. residents. Congress is expected to tackle more modest health care issues, such as fixing thorny problems in Medicare’s prescription drug program.

“The fact that the Democrats are going to take over the House and Senate has people at least thinking there will be broader talk about health reform that doesn’t include the words ‘health savings accounts,’ ” Claxton said, referring to a type of insurance product favored by the Bush administration.

As the nation’s health coverage crisis has intensified in recent years, health insurers have responded by introducing lower-priced policies with fewer benefits. The number of people without any health insurance and those with insufficient coverage — known as the underinsured — grow with each passing year.

Now, as medical costs continue to rise and the nation runs out of options for financing health care, the issue is reaching a new level of political discourse.

Managed care, the great hope of the ’90s, turned health maintenance organizations, or HMOs, into a household acronym. This restrictive form of health insurance was originally hailed as a potential solution to the cost problem because of the way HMOs limited consumer choice and held down provider reimbursements.

HMOs, however, appear to have run their course in their ability to control health costs. Consumers lashed back at them due to their strict policies. Less-controlling forms of managed care coverage started to become more popular. Today, HMOs are no longer always the cheapest option.

Some people see potential cures for the health care crisis in doing a better job managing chronic diseases. Others believe information technology will be the cure. But most experts don’t believe these developments are the silver bullets that will keep health care affordable. They agree that some of those efforts show promise, especially for improving health outcomes. But, they stress, love it or hate it, managed care doesn’t have an understudy ready in the wings to hold down health costs.

For its part, the Bush administration points to health savings accounts — high-deductible plans paired with tax-deferred savings accounts — as a key force for controlling health spending.

These accounts, known as HSAs, are designed to reduce health expenditures by making consumers more financially responsible for their expenses and choices. But while growing in popularity, HSAs have not gained widespread use. If given options, workers tend to choose more traditional and comprehensive insurance over HSAs.

Some consumer advocates argue that trying to fix our health care system is futile unless those efforts address the factors that keep driving medical costs out of control. The causes of medical inflation are complex and varied, including everything from new technologies, such as innovative drugs and equipment, to waste and bureaucracy in the medical and insurance industries.

Most of the current state and local health coverage initiatives don’t address these issues.

Mandating that individuals and employers buy into the existing health insurance structure forces people into a broken and inefficient system, said Jerry Flanagan, health policy director of the Foundation for Taxpayer and Consumer Rights in Santa Monica.

“What makes us nervous is they require people to buy from the private market without any affordability controls,” he said. “Health insurers see an opportunity to get on the health care bandwagon, but they’d like to redefine ‘universal’ to mean universal profits for insurers.”

But Harvard’s Swartz, who serves as a consultant for the Massachusetts plan, said she’s encouraged that politicians are willing to tackle the issue of expanding access to health care without becoming stymied over the cost question.

“What’s different now than 10 years ago… is we’re willing to deal with uninsured issue anyway and then turn to trying to slow down growth in health care expenditures,” Swartz said. “I don’t sense people are using the growth in health care expenditures as a reason not to do anything.”