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`Hummer in every pot' healthcare

April 08, 2006|Jamie Court and Judy Dugan | JAMIE COURT is president of the Santa Monica-based Foundation for Taxpayer and Consumer Rights. JUDY DUGAN is the foundation's research director.

WHAT IF the state of California required everyone to buy a Hummer? An expensive, wasteful and inefficient Hummer. Sound ridiculous? Well, it's not far off from a "bipartisan healthcare plan" that Gov. Arnold Schwarzenegger and some state legislators have suggested. It would force us all to buy the costly and ineffective machinery of the state's private health insurance industry.

Schwarzenegger and his allies may have gained ammunition this week as the Massachusetts Legislature passed a plan to require individuals in the state to buy health insurance. Leaders there are trumpeting the plan as a model for national universal health insurance. It's not, and certainly not for California.

The Massachusetts plan is more Honda than Hummer. Health insurance and medical care there are predominantly nonprofit, with nonprofit HMOs and university teaching hospitals, unlike the for-profit private market here.

Massachusetts will not allow insurers to reject individuals with health problems or charge the sick more for coverage (unlike the current system in California), and it has a far smaller proportion of uninsured people. The Bay State's plan will subsidize coverage, on a sliding scale. For example, a family of four can earn up to $60,000 a year and still qualify. Even so, critics say many people will not be able to afford individual plans, and employers who now provide good insurance are likely to be tempted to offer inferior bare-bones plans under the new system. Individuals who refuse to buy a policy face a tax lien of up to 50% of the policy cost.

The plan that has been talked about in Sacramento would require individuals who earn more than $19,600 a year and families of four with annual incomes greater than $40,000 to buy health insurance coverage at full cost. Currently, the average policy for a family in the United States costs $10,800 a year, according to the Kaiser Family Foundation. And as in most states, California has no regulation of how much insurers can charge for the coverage.

This lack of regulation means that about 25% of what policyholders pay to HMOs and insurance companies actually finances record corporate profits, high executive pay and excessive overhead. For example, Blue Cross of California parent company Wellpoint gave $250 million to its former chief executive in a recent merger, and policyholders are still paying that tab. A host of middlemen and bureaucratic operations have gotten rich on "managing" drugs, hospital care and mental health care in California. Their costs are also built into our puffed-up system.

A requirement to buy health insurance from California's private for-profit companies would look a lot like the tangled mess of the privatized federal prescription drug plan for Medicare beneficiaries, known as Part D. Seniors and the people trying to help them deal with the welter of private drug plans find they can't accurately compare the plans' prices and benefits. Health plans would be far more complicated, and comparisons all but hopeless.

Even in the Massachusetts plan, the seemingly less expensive policies may require customers to pay thousands of dollars out of their own pockets for hospitals stays, doctor visits and drugs. Insurers nationwide are pushing these high-deductible plans and even excluding once standard benefits such as maternity care. They reserve the right to raise premiums once a healthy patient becomes ill and makes a claim.

Not surprisingly, the "Hummer in every pot" concept is attractive to Schwarzenegger, who claims to have invented the domestic market for Hummers by telling the maker that the oversized, big-budget transport should be a civilian car. Such bloat is not what a healthcare system should tolerate.

Schwarzenegger said he supports a mandate because "like with car insurance ... we make it law that people carry insurance and that they are really insured, [because] it's unfair to so many people when you have people using the hospitals for emergency, and then creating a huge cost." In California's auto insurance market, however, insurance reform Proposition 103 has made auto insurance more affordable. No similar regulation or scrutiny of pricing and premiums exists for HMOs and health insurers. Moreover, one can safely choose not to drive, even if means taking overcrowded buses. Not so with confronting a health crisis.

If California wants genuine universal health insurance, it is going to have to do the hard work of restraining the healthcare system's waste, inefficiency and profiteering. But that would entail angering interest groups that finance politicians' elections. The uninsured and underinsured don't attend fundraisers or make political contributions. And, of course, politicians' own health coverage is paid by taxpayers. No wonder they don't understand the problem in making a working family choose between rent and insurance.

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