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Prop. 186's Defeat Need Not End Reform : Health care: Start with smaller doses like catastrophic coverage for all and ending some state mandates.

November 14, 1994|PAUL J. FELDSTEIN | Paul J. Feldstein is a professor and the FHP Foundation Distinguished Chair in health-care management at UC Irvine's Graduate School of Management. He is also chairman of the UCI Graduate School of Management's annual Health Care Forecast Conference. and

Californians may believe that everyone should have comprehensive, cradle-to-grave health insurance coverage, but they aren't willing to pay for it. Nor are they willing to trust that government will do a better job of running the health-care sector than private industry.

Voters made that clear on Tuesday when they defeated Proposition 186, which would have established a single-payer health-care delivery system financed by the largest tax hike ever imposed in any state and managed by a vast state bureaucracy.

As President Clinton learned when Congress began dismantling his mammoth health-reform plan, the American people are not ready for radical change. They want their health-care reform to come in smaller doses.

Now that California voters have rejected a plan to overhaul the state's entire health-care system, it's time to consider less drastic measures that would provide greater health security for everyone.

At the very least, the state Legislature should require all California residents to have catastrophic coverage, which those under age 50 can get for $400 to $700 a year.

Most of California's 5 million uninsured are low- to middle-income working adults whose employers don't provide health plans.

Nationwide, only 28% of the uninsured are officially classified as poor.

An individual mandate requiring everyone to have minimal catastrophic coverage would substantially reduce the cost-shifting that occurs when the uninsured end up in hospital emergency rooms. Many of these people can afford a catastrophic policy; they shouldn't be getting a free ride at the expense of California taxpayers.

The state should subsidize those who can't afford catastrophic coverage--and could do so at a cost far less than that of providing the rich benefit packages for which some families are paying more than $6,000 a year. Of course, those who are poor should have better coverage so they won't have to wait for an emergency to get care. But a catastrophic policy would be better than nothing.

California also needs to make health insurance more affordable by eliminating the plethora of state mandates that drive up costs. These mandates, which don't apply to the large firms that are able to self-insure, have greatly expanded the kinds of services that must be covered, the types of providers eligible for payment and the categories of people eligible to receive benefits. Studies have shown that many small firms that don't offer health insurance would be able and willing to do so in a market free of mandates, many of which are enacted in response to pressure from special-interest groups.

Among the services that receive mandated coverage in California are alcoholism and drug-abuse treatment, mental-health care, orthotic/prosthetic care, diabetic education and acupuncture. These and other mandated services are certainly desirable. But they make health insurance so comprehensive that people with lower incomes can't afford it. We can't cover everything. We must start making tough choices if we want more people to have the security that health insurance provides.

In addition to these two steps--requiring catastrophic coverage and eliminating state mandates--the Legislature should also enact health-insurance reform that would provide guaranteed renewability within standard rates and portability of insurance for all California residents. We should not have to be afraid of losing our insurance because of a job loss or change, or because we have incurred a large medical expense.

We could add much more to California's legislative agenda for health-care reform, but, as Proposition 186's defeat demonstrates, we would do so at the risk of ending up with nothing. Besides, there are many signs that the marketplace is succeeding where government has failed.

Between 1981 and 1990, while per-capita health expenditures in the United States and Canada went up by 9.5% and 9.3%, respectively, California saw a 7.9% increase. In recent years, per-capita health spending in the state has been staying down, and health insurance rates have been dropping--remarkable trends that can be largely attributed to the rapid growth of low-cost managed-care insurers and the intense competition in California's health-care market.

It's time for a new perspective on health-care reform, one that acknowledges that there are limits to what we are willing to pay for, and doesn't expect government to provide all the answers.

We can't have it all. But we can have a lot more than we do now if we stop looking at health-care reform as an all-or-nothing proposition.

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