January 27, 2007
Relieving California’s Healthcare Crisis
Can we get there from here?
by Linda Halderman, M.D., FACS
Private Papers

Paved with good intentions, California’s proposed road to universal coverage will lead straight to chaos. The Governor’s current proposal aims to provide relief for Californians suffering under a healthcare system in desperate need of repair.

This proposal has merit, but it lacks common sense.

Achieving a workable solution first requires that we understand the problem.  For 4.8 million uninsured Californians, no explanation is necessary (the often-cited figure of 6.5 million refers to those uninsured “at some point” during the prior year, including many who are currently covered).

But for the rest of us, here is some background:

• Health insurance premiums have risen at an unsustainable rate for consumers over the past decade, peaking at a 10.5% increase in 2002.  Faced with rising costs, employers have been unable to maintain coverage, leaving workers with limited or no employer-based health insurance.
• The cost of providing medical care has skyrocketed over the same period.  Increasingly expensive medical equipment, office supplies, staff salaries, Malpractice/Worker’s Comp/Liability insurance premiums — all squeeze the bottom line for doctors trying to keep their doors open for patients.  Federal and State taxes excise an additional share of shrinking revenue.
• Reimbursement for physicians has lagged far behind inflation.  Medicare, after years of pay declines and freezes, has committed to a 10% pay cut for doctors in 2008, to be followed by a 5% cut for each of the successive six years. Naturally, doctors who care for Medicare recipients pay the price. These cuts are magnified because private health insurance plans base their reimbursement on the Medicare-fixed prices.
• The situation is worst for doctors who accept Medi-Cal, California’s version of Medicaid.  This top-heavy State program, subsidized by the Federal Government and run by nearly 6,000 Sacramento-based bureaucrats, spends nearly $7,500 yearly per patient. This money could fund a private Blue Cross-type plan for every man, woman and child that Medi-Cal currently covers. However, unlike Blue Cross, California physician participation in Medi-Cal is the lowest of any state sponsored program in the country.  Medi-Cal payments to California’s physicians rank 49th in the U.S.  With only a single increase in 20 years, Medi-Cal reimbursement often does not even cover the cost of keeping a doctor’s office open during the patient’s visit. In short, accepting Medi-Cal is the surest way to destroy the viability of a California medical practices.

With this information in mind, let me now review the provisions in the Governor’s proposal.

Medi-Cal and similarly inefficient programs would be expanded. Because the root dysfunctions of the programs are not addressed, including a shortage of providers for the current number of patients enrolled, patients will have no greater access to treatment.

The $12 billion proposal supposedly addresses the problem of low reimbursement for doctors who care for Medi-Cal patients. Given that the Governor’s 2006 budget included no increases in Medi-Cal reimbursement, and he actually attempted to force a 10% cut to doctors who accept Medi-Cal, the new proposal’s promise to increase rates “significantly” for providers, hospitals and health plans seems empty.

This proposed increase, moreover, is tied to new and unspecified performance measures.  It is also tied to doctors’ adoption of health information technology (HIT) such as Electronic Medical Records and e-prescribing.

This “carrot and stick” approach defies logic. Portable, universal, affordable HIT that adequately safeguards patient privacy currently does not exist.  So the conditions mandated by the Governor’s Medi-Cal reimbursement plan are like requiring the paving of a road that is not yet on the map.

While claiming to create “more efficient health care delivery,” the Governor’s plan includes the “expansion of lower-cost models.” This language actually means that patients will be treated by independently practicing physician assistants and nurse practitioners instead of doctors — a violation of current State and Federal statutes.  While this practice may provide cost savings, it is certainly not universal coverage.

Limiting Californians’ care to “physician extenders” without adequate physician supervision contradicts the stated goals of improving patient safety.  While physician assistants and nurse practitioners play a valuable role in caring for patients, there is no evidence that using them to replace doctors reduces medical errors.

To improve healthcare outcomes by any measure, it is critical to achieve better patient safety and reduction of medical errors.  The Governor’s plan does not support these critical success factors. Patient safety cannot be traded for “efficient health care delivery,” no matter how cost-effective.  Patients deserve better.

In order to fund the expansion of the troubled and expensive programs now in place, the Governor proposes that all hospitals and doctors pay a new tax.  According to the Governor’s healthcare team’s “State Fiscal Impact Summary,” the tax will generate $3.5 billion. The same report reveals that the projected Medi-Cal reimbursement increase is $2.2 billion.  Therefore, as the reward for caring for uninsured and underinsured Californians, doctors and hospitals will be forced to finance $1.3 billion in new taxes.  This is in addition to the Governor’s proposed “Pay or Play” 4% payroll tax on California employers.

Who’s going to pay for it?  If business owners, doctors and hospitals aren’t forced to subsidize this program, what are the alternatives?

One answer relates to foreign remittances, the payments immigrants send back to their home countries.  Under the Governor’s plan, California’s undocumented immigrants will receive health coverage.  The reasoning is that California’s doctors and hospitals already provide it — largely unreimbursed — so paying for their own healthcare makes economic sense. Is this a sound premise? Consider these statistics:

• One group of California’s undocumented immigrants sent $9.6 billion back to Mexico in 2004.  From 1960-2003, the amount sent increased by an average of 12.8% yearly.  It is projected that by 2010, the total remittances sent by undocumented immigrants will reach $25 billion.
• According to Mexico’s President Vicente Fox in September 2003, remittances from Mexican nationals residing in the U.S. “are our biggest source of foreign income, bigger than oil, tourism or foreign investment.”
• A conservative estimate of California’s undocumented immigrant population is four million.  Using 2004 statistics, the annual remittance to Mexico from a family of four in California is a minimum of $2,400.  The figure is very likely to be higher, given the difficulty of tracking demographics in this population and the fact that the newest statistics are not yet published.

$2,400 easily covers a basic family healthcare plan.  While the issue of California taxpayers funding health insurance for undocumented immigrants is not addressed here, it is relevant to question the obligation of those with up to $3,000 in disposable income to accept some financial responsibility when California’s legal residents already struggle to do so.

Again, the logic that informs the Governor’s proposal is elusive, if not simply unsound.

Uninsured and underinsured Californians need help.  Doctors want to keep their office doors open and serve their communities.  California hospitals, particularly trauma centers and emergency rooms, are overwhelmed by patients after the closure of scores of facilities across the State.  Business owners want to provide for their employees, but are frustrated when constantly increasing costs force them to choose between offering health insurance and keeping their businesses solvent.

The Governor’s proposal should be applauded for its good intentions.  But it should not be enacted in its current form.

What is needed now is not a new or expanded bureaucracy that will shuttle uninsured patients into state programs without the resources to provide quality, sustainable medical care.  Nor will our critical problems be solved by empty promises of economic relief.  The answer is not to levy a $3.5 billion tax on those who are already subsidizing care not covered by the State. To burden California’s employers further is an equally poor path.

We can succeed, but only if we rely on sound economic principles, simplicity, accountability and — above all — ethical principles.

The right road is not covered with unrealistic promise, it is paved with common sense.

Dr. Halderman (www.drhalderman.com) is a Board-Certified General Surgeon practicing in rural south Fresno County.