FEATURE ARTICLE

Who Killed Health Care Reform?

By Assemblymember Noreen Evans

Sonoma County’s health care system teeters on the verge of collapse. Palm Drive Hospital declared bankruptcy last year. Sutter Medical Center (formerly Community Hospital) has faced financial difficulties. Santa Rosa Memorial Hospital recently announced plans to lay off 212 workers and close its psychiatric, skilled nursing and acute rehabilitation units. Sonoma County has already closed its acute care psychiatric facility. Our community is paying an enormous price for the failure of health care reform.

Unfortunately, this picture could get worse before it gets better. Medi-Cal providers face a 10% cut in their reimbursement rate this July. President Bush recently vetoed an expansion of the popular and successful State Children’s Health Insurance Program, which provides health insurance to low-income children. Bush has also made changes to Medicaid that will cost California billions of dollars over the next several years.

Autopsies are never pretty. But with health care reform dying three times in as many years in Sacramento, it’s time to diagnose the causes of failure.

In a perfect world, we would have a single-payer health care system. I have supported single-payer legislation ever since assuming office in 2004. When the Legislature passed a single-payer bill in 2005, Gov. Schwarzenegger promptly vetoed it and promised to veto the legislation again if it ever crossed his desk in the future. Thus, single payer is off the table until at least 2010, when Schwarzenegger completes his final term. Whether any future governor will sign single-payer legislation is completely unknown.

After the failure of single payer, Assembly Democrats worked with Schwarzenegger to craft legislation that he would sign into law. This effort resulted in a compromise that was introduced last year: Assembly Bill (AB) X1-1. The bill would have brought health care coverage to 70% of California’s 5.1 million uninsured, including 800,000 children.

The biggest strength of AB X1-1 was that everyone shared responsibility for its success. Employers were required to spend a percentage of payroll on insurance or pay an equal amount into a state fund. Individuals were required to have health insurance to diversify the risk for insurers, with tax credits and subsidies available to make coverage affordable. Insurers were required to accept all applicants for coverage and spend no less than 85 cents of every premium dollar on health care services. Financing would also be provided by a combination of hospital fees, federal funds and tobacco taxes.

AB X1-1 was carefully crafted to obtain broad support. Members of its sometimes-shaky coalition saw that their contribution paid dividends by improving the state’s health care delivery system and expanding coverage to many California residents. The bill was the perfect compromise: everyone gave something and no one was completely satisfied.

AB X1-1 had weaknesses. It did not address the possibility of high deductibles and expensive copayments limiting health care access. It did not clearly state what would and would not be covered. It also had a $14 billion annual price tag. Since $5 billion was to come from a tobacco tax that had yet to be approved by California voters, the plan’s financial fundamentals were not rock solid.

As the legislation was evolving, I met with a cross-section of our community, including local business leaders, physicians, nurses, other health care professionals, labor unions, and ordinary citizens. Their opinion was surprisingly unanimous: We need to start somewhere to address our health care crisis, and AB X1-1, imperfect though it was, provided an excellent starting place.

During that time, special interests rallied their troops against reform. Tobacco companies hit my Assembly district and others with garish mailers threatening mayhem if tobacco taxes were increased. They called my constituents and patched them through to my office—resulting in many confused constituents who didn’t know why they were calling me or how they had reached my office. Blue Cross, one of the state’s largest insurers, lobbied heavily against AB X1-1. The California Nurses Association started its own campaign against AB X1-1 because the association supported only single payer and wanted no other reforms.

Furthermore, some people, including some lawmakers, simply denied a health care crisis exists. In their opinion, the United States has the best health care in the world—end of story. In that view, there is no need for health care reform of any kind.

Ultimately, I supported AB X1-1, which passed the Assembly on a strictly party-line vote. Although 61% of Californians support paying higher taxes for universal health care, not a single Republican in the Legislature voted for AB X1-1 because it included new taxes and fees. All but one of the Republicans in the Legislature have signed a pledge opposing any and all new taxes. Because our state constitution requires a two-thirds vote of the Legislature to pass any new tax, the health care plan’s financing could not be approved without Republican support.

After passing the Assembly, AB X1-1 went to the Senate, where it died in the Senate Health Committee after only one lonely senator voted to support it. The ostensible reason for killing the bill was our state’s budget deficit.

Deficits have become an unfortunate fact of life in California for many reasons. A few years ago, when finances were good, we cut several general-fund taxes, including a nearly $5 billion cut in the vehicle license fee, cuts to corporate taxes, and an increase in the dependency exemption. To pay for these cuts, Schwarzenegger obtained approval from the voters for $15 billion in debt bonds. Recent tax cuts and interest on the debt bonds account for nearly all our existing deficit. To make matters worse, the downturn in the real-estate market means substantially lower tax revenues. Corporate and personal incomes are down. Higher energy costs increase the price of state services.

These problems are not going away any time soon. In my opinion, however, a health care plan that is fully funded with new revenues avoids worsening the current deficit. More importantly, by stabilizing our health care delivery system, such a plan does several positive things: it creates sustainable health care for our local communities, it directs more money away from insurance premiums and into direct health care delivery (which benefits the entire economy), and it improves the lives of our citizens. To me, that’s the bottom line. There is simply no perfect time to pass health care reforms. This is one of those situations where people will literally die if we fail to act.

In the end, ideology, intransigence, greed and ignorance killed health care reform.

Now we face even more challenges to passing a comprehensive reform plan. Many of the legislators who crafted or supported AB X1-1 are termed out at the end of this year. Thus, we must begin at the beginning with a whole new crop of legislators to build consensus for a compromise. This pattern will repeat itself every two years as new and termed-out lawmakers are cycled through the Legislature. In the meantime, entrenched special interests need only continue beating their drums against reform or denying the need for reform.

Our budget deficit continues to worsen. We face enormous cuts to education and existing health care services, and even closure of 48 state parks. Some experts say we face stagflation in our economy.

Those who benefit from the status quo must be positively gleeful. Meanwhile, Sonoma County residents pay the price.

Despite these disappointing setbacks, hope remains for incremental reforms. Numerous bills have been introduced this year to make important changes to our health care system. Senate Bill 1440 will require insurers to spend at least 85% of medical premiums on patient care. SB 1552 will require insurers to offer five “benchmark” health plans to help consumers identify the best insurance policy for them. And AB 1945 will require insurers to receive approval from state regulators before canceling patient policies.

As your elected representative, I will fight for these crucial changes and continue working toward the comprehensive health care reform our community desperately needs and deserves. Please join me to make sure that these reforms, and others, succeed.