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Decision '94 / SPECIAL GUIDE TO CALIFORNIA'S ELECTIONS : Propositions : 186: Creates a Statewide Health System : WHAT IT IS

October 30, 1994

Proposition 186 would establish the Health Security Act, which would create a universal health insurance program aimed at putting all legal residents of California into one cradle-to-grave health plan. The intent is to eliminate insurance companies and use the dollars that now go into private-sector administration and profits to expand medical services to Californians.

* Eligibility: An amendment to the California Constitution, Proposition 186's start-up phase would begin immediately, but benefits and tax increases would not take effect until Jan. 1, 1996. At first, all Californians except those qualifying for Medicare, Medi-Cal or plans backed by self-insured companies would be covered. Eventually the initiative proposes to cover everyone, but congressional or federal administrative agency approval would be required for people covered under federal programs.

* Benefits: All inpatient and outpatient hospital or clinical services would be covered, as would eye care, home health care, prenatal, perinatal and maternity care, and durable medical equipment such as prosthetics, corrective lenses and hearing aids. Also covered would be podiatry, chiropractic, dialysis, rehabilitative care and prescription drugs. Mental health services such as treatment for substance abuse and outpatient counseling would be part of the package, as would dental care. Preventive care and long-term care benefits would also be included, although expenses for room and board, a significant cost in nursing homes, are excluded.

Each Californian would receive the same health insurance card, providing a uniform level of benefits. Physicians who agree to be in the program would be prohibited from seeing private patients.

* Costs: Estimates of the annual cost of the program vary, ranging from $75 billion to just over $100 billion. Increases in individual and business taxes would provide the chief source of funding, but architects of the plan also presume the availability of federal and state payments now going into the Medicare and Med-Cal programs.

* Taxes: Individuals earning less than $250,000 annually or families earning less than $500,000 would pay an additional 2.5% of their taxable income in state income tax. Those earning more would pay 5%. Employers would pay an extra payroll tax of 4.4% to 8.9% on salaries, depending on the size of their work force, phased in over three years. Legal challenges are likely to be mounted by self-insured corporations, which finance their own plans, on the issue of whether they should have to pay the payroll tax. Cigarette taxes would be raised $1 a pack.

As a trade-off for the higher taxes, individuals would be freed from paying health insurance premiums and high deductibles. Insurance policy costs now borne by businesses for their employees' health care would be eliminated.

* Administration: The program would be administered by a health commissioner elected in a statewide vote. The governor would appoint the first health commissioner; thereafter, the commissioner would be elected every four years in the same election cycle as the governor.

The commissioner would operate under sweeping powers. Among the commissioner's duties: negotiating reimbursement rates with physicians and other providers, setting annual payment schedules for each of the state's hospitals, deciding which drugs would be covered under the plan and, in the event of budget difficulties, establishing co-payment rates or rationing medical services allowed under the plan. The commissioner also would be empowered to set minimum nurse-to-patient staffing ratios in hospitals.

* Local Controls: The state would be divided into an undetermined number of regions, decided on the basis of population and other demographics after a formal study. Regional administrators, appointed by the state health commissioner, would be in charge of operating the regional health plans and performing tasks such as determining eligibility of residents and issuing health care cards. The Legislature would establish uniform residency requirements for all Californians.

Consumer councils with professional staffs of public advocates would be funded in each region to represent the interests of consumers and help mediate disputes that develop.


* Savings--For those now paying for health insurance, Proposition 186 offers better coverage, at a lower cost, even when the tax increases are considered. A family with a taxable income of $40,000 would have to pay an extra $1,000 a year under the 2.5% levy, but would be freed of deductibles and monthly premiums. As for businesses, sponsors say that businesses with more than 8.9% of payroll now going to pay for health care would save money.

* Accountability--An elected health commissioner would be more accountable to the citizens of California than insurance companies because voters could turn the official out of office every four years. Consumer councils add an extra level of protection for consumers.

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