While people reflexively refer to fixing the health care system, the truth is that we really don't have one system; what we have is an almost uncountable number of entities – governmental and private – with their own ways of operating. The real issue is how to stop patients from falling through the gaps.
Some advocate addressing all the problems in one grand reform. Others believe that it should be done in smaller steps. Having worked in both the private sector and now in state government as insurance commissioner, I know the value of both adapting a system to new developments and the virtue of building on what works before throwing out what doesn't.
First, we have to prioritize the problems that exist. To date, I do not believe California legislators have done a good job of this.
While they have been busy on bills to mandate coverage for acupuncture and "amino acid-based elemental formulas," they have let one major problem fester for more than a year: the high-risk pool for health insurance.
The idea behind insurance is very simple: to spread risk across a large number of people. Those with serious medical conditions are the most costly to treat; but when they get health insurance at work, their higher costs are balanced out by other, healthier employees whose costs are lower. Spreading these costs is what makes insurance affordable.
However, when people have to pay for their insurance individually, the dynamics change. Sick people want to buy it, but many healthy people do not. When this happens, the risk pool changes. As a result, individuals often can't get insurance for the simple reason that they are sick and need insurance.
Periodically, the free market fails to address some problems. That is the case with auto and homeowner's insurance. In those cases, the Legislature created programs to deal with high-risk applicants who couldn't otherwise get insurance. A similar program exists for health insurance, but it has reached the breaking point.
Our poorest citizens are guaranteed health care through a number of programs such as Medi-Cal and Healthy Families. But those who make more than the bare minimums rely on the Major Risk Medical Insurance Program. The major risk program is the health insurance safety net that protects our middle class.
When a working mother loses her health insurance, or a computer engineer is an independent contractor and has no employer, they often have to purchase insurance on the individual market. If they have reasonably good health, they may decide that health insurance isn't as important to them as paying the rent or buying food.
But those who have preexisting medical conditions don't have that option. If insurers won't accept them, they must turn to the major risk program, and it has reached its limit. Because of an outdated funding structure and the Legislature's failure to act last year, the major risk program can no longer accept everyone who applies.
Since January, the number of people on the program's waiting list has grown from 62 to more than 1,000. In the past three months it has seen an astonishing growth rate of 18 percent a week. These people not only have to worry about their medical conditions, they must also live with the real possibility of hospitalization or intensive treatment – costs that could lead them to bankruptcy.
There are two problems with the major risk program. First, we have not adequately spread the risk necessary to keep it financially sound. California is one of a handful of states that does not spread the costs of this high-risk population across all health insurers. This does not make economic sense. Those on the major risk program's waiting list do want to provide for their health care, and we can't ignore them any more. If we do not fix the high-risk pool, taxpayers will spend more money than we need to on expensive emergency room care for people who wanted insurance but could not get it, dealing with illnesses that could have been prevented or treated. This is penny wise and pound foolish.
The second problem has to do with the unnecessary constraints placed on the major risk program. Currently, the program cannot offer benefit options the rest of us have, such as varying deductibles or Health Savings Accounts. The major risk program is prohibited from providing riders to cover all of a person's health care except – for a short period – the preexisting condition that made them uninsurable. And the program's current policies have an annual cap of $75,000. These limitations demonstrate how far behind the market the major risk program has fallen and make its policies both more expensive (in the case of the first two issues) and less effective (in the case of the benefits cap).
The major risk program is the frayed safety net for California's middle class. Everyone is a pink slip away from needing its protections. We need to get focused and fix it now.
Steve Poizner is the California insurance commissioner.
