SACRAMENTO — The numbers remain impressive. In the Byzantine world of American health economics where price hikes far outstrip the rate of inflation, here was a virtual freeze on the cost of health insurance in 1993 for nearly 900,000 Californians.
The momentous development was broadcast at an $11,000 news conference convened in February by the California Public Employees' Retirement System, the vast quasi-public organization whose main purpose is running a giant pension fund for government workers.
It was the second straight year in which CalPERS, which has the ancillary role of administering health insurance plans for many public workers, had reined in the demands of the 25 health insurance firms bidding to do business with this health-purchasing gorilla.
Using the bargaining clout that results from consolidating hundreds of public sector agencies--most with fewer than 100 workers--under its administrative umbrella, CalPERS demanded that those proposing to insure its members find ways to stop the runaway health care locomotive. The 1993 result: an average 1.4% increase in premiums versus a national figure of 14%.
Over the past two years, the rise in health care costs for CalPERS members came to 7.6%, versus a national average of 30%.
The success bolstered its stature as a system to emulate--and as the nearest thing to the health insurance purchasing cooperatives envisioned by President Clinton under the mantra of "managed competition." The clear message was that it worked.
But now, critics from the left--opponents of managed competition, although traditional allies of the innovative $73-billion pension fund and its unique brand of social activism--have begun to impugn CalPERS' apparent success at slowing the surge in health care costs.
CalPERS has done little more than sit on its suppliers and declare poverty, said Rep. Pete Stark (D-Oakland), chairman of a key congressional health subcommittee. This simply shifts higher costs onto the health insurers' other clients who do not have the same bargaining power, said Stark, who wants a single payer--the federal government--rather than insurance companies to pay all health bills.
"It doesn't take a genius to do that (shift costs to others)," a Stark aide said.
Skeptics add that CalPERS is not the only buyer this year to slow the health premium rise in today's recessionary, crisis-ridden California economy. Besides, they argue, CalPERS achieved the freeze with onetime measures and will never be able to duplicate it. And many members are now paying nominal fees for services that used to be free.
CalPERS, which spent the $11,000 on press agents to spread the idea of the California venture as a national prototype, now protests bashfully that it is not a prototype for anything. And please leave us alone.
After Stark had the General Accounting Office look into CalPERS' claims as part of a pending review of various health programs, the fund's board president, William Crist, wrote a conciliatory note to Stark, a big ally on other issues. Crist assured Stark that the fund's approach "differs from managed competition in a number of important ways" and hoped that "we will not be further swept along with this debate."
Does the CalPERS system--whatever it is--merely illustrate the bullying power of a giant customer, or does it indeed point the way to a more rational health system for Americans?
As far as Tom J. Elkin is concerned, it is not an either-or question. Elkin, who runs CalPERS' health program, said the 800-pound-gorilla brand of power is indeed central to any solution to today's fragmented, inefficient and unacceptably costly system.
And if CalPERS' clout does drive up health insurance premiums for others, Elkin said, they should create their own purchasing cooperatives and do the same hard-nosed bargaining--which is the theory behind Clinton's expected proposal for a nationwide system of regional health buying alliances.
In California, two such health buying cooperatives loosely patterned after CalPERS are in the works: one designed to consolidate the purchasing clout of small businesses and the other an alliance of large Bay Area corporations. Similar plans are being developed by the states of Florida and Washington, Elkin said.
"There's no patent on this idea," Elkin said. "And negotiating for 1,000 or 2,000 or 3,000 people just isn't going to cut it."
Although CalPERS is best known for tossing its considerable financial weight around such corporate boardrooms as IBM and General Motors on behalf of shareholders, it long ago became a big player in California's health insurance game as well.
CalPERS' health care role, financially unrelated to the pension system, has expanded to create a risk pool of 887,000 "covered lives"--employees, dependents and retirees of the state of California, the California State University system and nearly 800 local public agencies in the state.
