Come health or high prices

Critics say Núñez-Schwarzenegger health-care proposal does nothing to control costs

Schwarzenegger-Núñez health-care-reform plan sickens Donna Gerber, director of governmental relations for the California Nurses Association.

Schwarzenegger-Núñez health-care-reform plan sickens Donna Gerber, director of governmental relations for the California Nurses Association.

SN&R Photo By Larry Dalton

There’s no question what’s ailing our festering health-care system. Soaring costs for insurance premiums have pushed health care beyond the reach of 47 million Americans, including 7 million Californians. Assembly Speaker Fabian Núñez and Gov. Arnold Schwarzenegger say they have the cure for what ails us in ABX1-1, the health-care-reform package the duo hacked out shortly before the holidays. But critics say the proposal is just more of the same bad medicine, since it does nothing to rein in the high cost of medical care.

“This is the fundamental flaw in the premise of the health-care debate in the Legislature,” said Donna Gerber, director of government relations for the California Nurses Association. “And we have known this for a very long time.”

The Núñez-Schwarzenegger proposal was passed quickly by the Assembly last month and mandates that most Californians buy health insurance from existing private providers. In the last hours of 2007, the duo filed an initiative with the attorney general to finance ABX1-1 via hospital and cigarette taxes, which must be signed by close to 1 million registered voters in order to qualify for the November ballot. The reform plan’s next hurdle is in the state Senate, which will debate the bill later this month.

The proposal is anathema to the CNA and legislators, such as Sen. Sheila Kuehl, D-Los Angeles, who support a single-payer, fee-for-service health-care system modeled on Medicare, the popular federal-government program that provides quality care to roughly 50 million elderly Americans at a fraction of the price private insurers charge. Nonprofit Medicare’s administrative costs account for just 3 percent of the average medical bill—one-tenth of the 30 percent fee that private, for-profit insurers take.

“These companies don’t provide health care—not labs, hospitals or doctors,” Gerber said. “They do, however, take 30 percent of policyholders’ premiums for administrative, marketing and profits.”

The Schwarzenegger-Núñez reform plan would subsidize existing providers like Blue Cross and Health Net—whose CEO raked in a $1.3 million salary last year—to cover up to half of the 7 million people uninsured in the state now. Supposedly, the proposal would limit overhead and profits on premiums to 15 percent. However, as Kuehl recently noted on her Web site, the health-insurance industry maintains it already operates within that limit.

It all depends on how the word “care” is defined.

“The companies are required [by ABX1-1] to spend 85 percent of premiums on care, but they maintain they do that now, and count marketing, information technology and other kinds of administrative overhead as care,” Kuehl said. “The bill would allow this characterization to continue.”

Moreover, although the proposal calls for “implementation of meaningful, system-wide cost-containment strategies,” this legislative language is nonbinding and has no enforcement mechanism. Gerber thinks the private health-care system has already been given enough chances to control costs.

“Private medical insurance is a 40-year experiment that has failed,” she said.

This four decades of failure rolls on. Consider just one facet of the crisis: the decline in job-based health insurance coverage. According to the Economic Policy Institute, 2.3 million adults and 3.4 million kids lost employer-provided health-insurance benefits nationwide between 2000 and 2006. In California, job-based health care fell from 58.7 percent in 2000 to 54.7 percent in 2006, said Sarah Muller, a policy analyst with San Jose-based Working Partnerships USA.

Soaring insurance prices are propelling cuts in employer-provided coverage. At the same time, real wages are declining, which makes it even harder for employees to buy insurance on their own. According to Kuehl, “Premiums imposed by the insurance companies are rising three to four times faster than wages every year.”

Núñez spokesman Steve Maviglio noted that while Democrats ideally would prefer a single-payer system, politically it’s unfeasible. “The Democratic leadership backs single-payer health care, but there’s no political way to pass it,” he said. In fact, the governor vetoed Sen. Kuehl’s single-payer bill, SB 840, after it passed the Democratic-led Legislature in September 2006. The governor called the bill too complex and costly. No one asked him if the single-payer health-care system in his native Austria had the same problems when he was growing up. But while Democrats have been adamant in their support for single payer, Maviglio calls Núñez’ new proposal a more pragmatic approach.

“The Núñez bill is politically feasible, not fantasy,” he said. “It is real, affordable and we’ve got a coalition which includes Republicans, the American Association of Retired Persons, Service Employees International Union and the American Federation of Federal, State, County and Municipal Employees.” He added that unions that object to the proposal, such as CNA, suffer from “radical leadership” that is “willing to let 5 million Californians remain uninsured.”

However, Kuehl noted that the SEIU, which is currently trying to organize health-care workers, “is positively salivating over the bill, to the extent that their national leader, Andy Stern, is engineering moving out the current state leader, who has questioned the bill, in favor of a new leader who will go along with it.”

Kuehl was referring to Sal Rosselli, who in December was replaced by Annelle Grajeda as the state council president of SEIU. Rosselli is also the current president of United Healthcare Workers-West SEIU, a 150,000-member labor union. He would not comment on why he is no longer the president of the state SEIU, a post he held for two-and-a-half years. SEIU spokeswoman Jeanine Meyer Rodriguez said Rosselli’s departure was part of the regular rotation. Rosselli supports ABX1-1, but only if certain changes are made to ensure access to health care.

“From our point of view, this is close to the real reform that achieves our long-term goals,” Rosselli said. “But the bill’s mandate to buy accessible and adequate health insurance has to be defined in the law and not by a state bureaucracy. Voters need to be secure about access to affordable health care.”

In short, voters need to know that the bill will contain health-care costs, and that’s a problem, because as it’s currently written, it doesn’t. The absence of such words reveals their importance.

“Mandating that people buy coverage without controlling out-of-pocket costs would be a disaster,” said Sacramento author and resident Kenneth Burt, political director for the California Federation of Teachers. The California Labor Federation’s Marty Hittleman agreed. “There are really no price control mechanisms in the bill.”

Will the new proposal control costs? Massachusetts’ experience with a health reform mandate similar to ABX1-1 is telling. Harvard University professors of medicine David Himmelstein and Steffie Woolhandler, co-founders of Physicians for a National Health Program, recently noted in The New York Times that “few can afford the sky-high premiums” in Massachusetts.

The state GOP opposes ABX1-1 for the new taxes it would raise to help the uninsured buy coverage beyond their means now. Funding sources for the $14.4 billion reform package range from employer contributions (which a judge recently ruled violates a 1974 federal law on employers’ benefits) to a tax on cigarettes and hospitals. But the biggest pot of money is federal dollars from taxpayers, about a third of the total.

“In Massachusetts, the deadline in that state for buying insurance was December 31,” said CNA president Rose Ann DeMoro. “Most of those who have enrolled—79 percent—get full or public subsidies; in other words, the state is using public money to enrich the insurance industry.”

Simple math says that Californians with the lowest incomes—like janitors, security guards and waitresses—need the most relief from rising health prices. Therefore it’s not surprising that a California Field Poll of roughly 1,300 registered voters taken the week ABX1-1 passed found the working poor are the biggest backers of reform. They might want to take a spin through author and economist Dean Baker’s 2006 book, The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer, free at, before fully signing on. Writes Baker:

“In order to prevent a dysfunctional health-care system from devastating the economy and leaving an ever larger segment of the population uninsured, it is essential that the health-care system be reformed in a way that contains costs—a feat that every other wealthy country in the world has managed to accomplish.”

The fact that the Núñez-Schwarzenegger reform sidesteps the very real problem of controlling rising costs does not bode well for the state’s uninsured population. Their hopes for better health care dim where such details begin.