As Republicans in Congress continue their efforts to undo Obamacare, California is going in the opposite direction.
State lawmakers are exploring how – and when – to expand coverage to all Californians, while also reining in soaring health care costs that make the U.S. the most expensive country in the world for medical care.
The best option for California is to create the nation’s first universal, taxpayer-financed health care system that gets rid of the need for private insurance companies, some Democrats said this week after hearing from a blue state governor who tried to create such a system, known as single-payer health care.
Democrat Peter Shumlin, the former three-term governor of Vermont who was succeeded in office earlier this year by a Republican, said California can learn from Vermont’s failures. He abandoned his own effort to create a universal, single-payer system in 2014 because of its sizeable cost.
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He remains a staunch proponent of the health care model and says it can drive down costs, if done right. In a wide-ranging health care hearing in Los Angeles, Shumlin outlined a political and legislative strategy for California lawmakers:
Set specific goals
“I would write a bill that sets very clear goal posts that you have to meet, before your public financing kicks in,” Shumlin said. “I’d write the bill for the next governor – not this governor – because as someone who was trying to work on this toward the end of my tenure as governor, I found that I lost a lot of political clout.”
The issue this year has vexed California Democrats, who held majorities in the state Senate and Assembly. A hastily drafted proposal that sought to establish a single-payer system for California stalled in the Assembly after earlier clearing Senate without a financing plan.
Still, lawmakers this week endorsed Shumlin’s idea, saying their efforts should be focused on writing a bill that improves on Senate Bill 562, the single-payer proposal introduced earlier this year.
Earlier, Assembly Speaker Anthony Rendon refused to bring it up for a vote, criticizing the bill as incomplete and suggesting it was politically motivated. He instead created the committee to study the issue.
RoseAnn DeMoro, head of the California Nurses Association, the bill’s chief sponsor, blasted Rendon for interfering with the legislative process and on Twitter this week, said he’s sabotaging Democratic-led efforts to create a “Medicare-for-all” type system championed by Vermont Sen. Bernie Sanders.
Assemblyman David Chiu, D-San Francisco, a co-author of the Lara-Atkins bill, said he’s open to reworking the proposal or writing a new bill.
“We have no choice but to address the skyrocketing cost of health care,” said Chiu, one of seven members of the health care committee charged with drafting a blueprint to improve California’s health care delivery system.
Assemblyman Tom Lackey of Palmdale, the sole Republican on the committee, said this week that his goal is to “listen.”
“I think we all would agree that we need to do a better job than we’re doing now,” Lackey said. “Universal coverage is certainly a goal that we need to work toward.”
Tie the bill to cost controls
“My big mistake was not going after cost before I promised a better plan,” Shumlin said.
Any form of single-payer coverage would require a new taxing system to replace current insurance premiums, co-pays and deductibles. Shumlin, first elected governor of Vermont in 2010, made publicly funded universal health care his most ambitious campaign promise. His proposal included an 11.5 percent payroll tax on businesses and an additional income tax on employees of up to 9.5 percent.
Shumlin said that initially he didn’t understand the importance of controlling health care costs. Tied to new taxes, as those costs rise, taxes have to rise, too.
“That was my biggest make. Where I really failed is that when I ran for governor, I did not get the connection between public financing and cost,” he said. “In the end, when I had to get legislators to vote, if they had to vote to increase (taxes) at the rate that health care costs are currently occurring in Vermont, there was no way they were going to vote yes.
“They ran from me because they suddenly realized that every year the increase in premiums...would result in having to pay for an annual tax increase. So my point is simple: To pass this, you’ve got to get cost containment first.”
American health care costs have risen steadily over the past 60 years, according to an analysis of federal data by the Kaiser Family Foundation, an independent research group. In 1960, total national health care spending was about $27 billion. Today it’s 3.3 trillion.
In 2016, total spending increased by 4.3 percent from 2015. That comes to $10,430 per person in health care costs each year, according to data released this month by the Centers for Medicare and Medicaid, and the upward trend is expected to continue.
Change how providers are paid
Shumlin attributed escalating costs, primarily, to the fact that many medical providers are paid based on volume of care rather than quality. Architects of Obamacare sought through the law to change long-established incentives in the health care delivery system to pay providers based on better health outcomes in patients rather than the volume of services provided.
While states and the federal government, insurers and hospitals have slowly changed the way care is delivered to focus more on outcomes, fee-for-service medicine is still an industry-wide practice.
Shumlin suggested California adopt a model under way in some states, in part through Medicare and Medicaid, called Accountable Care Organizations. The idea is to “align provider and payer incentives to focus on value instead of volume, with the goal of keeping patients healthy and costs manageable,” according to the Center for Health Care Strategies, Inc., an advocacy group.
“Look at Vermont’s example, and quickly move away from fee-for-service to an outcome-based payment system or I don’t believe you’ll ever get number one, the savings you need or number two, the outcomes you need,” Shumlin said. “Let’s not forget we spend more money on health care than any other nation in the world. Our outcomes aren’t as good. It’s bankrupting us, and until we crack that nut, no system will work.”
Impose tighter regulations on health insurers
Vermont regulates health insurers, in part, through its Green Mountain Care Board, created by the state’s legislature in 2011. Its mission is to reduce the rate of health care cost growth while ensuring quality care and access. The state also regulates insurance companies by requiring consumers to purchase plans on the state-run exchange. California does not have such a system in place.
“You can’t buy insurance in Vermont right now, as an individual, without going through the exchange,” Shumlin said. “What that allowed me to do is have my insurance regulators push out anyone who was in the market to...cherry-pick the easy lives, the cheap lives, the safe lives, the young lives, the healthy lives and leave everybody else behind.”
To increase rates, health plans looking to sell insurance in Vermont must file requests with the state and obtain approval from the state’s health board. California Insurance Commissioner Dave Jones backed a similar statewide proposal in 2014 that would have required changes to health insurance rates be approved by the state insurance commissioner. The initiative was defeated at the ballot box. Currently, Covered California negotiates rates with insurers that sell plans on the state-run exchange. The Department of Insurance and the Department of Managed Health Care, the state’s insurance regulators, determine whether rate increases are reasonable.
“You’ve got to get the regulatory system up and running to move this from the private sector to government having the ability to say ‘no,’ whether it’s CEO salaries or what you’re paying pharma,” Shumlin said.
Improve the Affordable Care Act
Shumlin acknowledged that restructuring the state’s health care system with state and federal financing would require federal cooperation, including approval of waivers.
“You need a federal partner,” Shumlin said, but California should “start work toward a fairer system now... We worked with the Obama administration to get the first waiver in America... that allows us currently to take Medicaid, Medicare, private pay – the entire system – and move it to an outcomes-based payment system from fee-for-service. That’s an incredibly difficult thing to do.”
He recommended that California assume it will get nothing in Washington for the next three years, setting up for a new president that would be willing to work with the state.
In the meantime, he said the state should add funding to current subsidies that help Californians pay for health coverage. California lawmakers could also expand Medi-Cal to cover all undocumented people, as well as open it to the wider public for a state-run insurance option.
“Enrich the program, don’t give up on it,” Shumlin said. “The reason people are complaining about it is because it’s not adequate. So do everything you can to make it whole.”
In the end, he said, the Trump administration’s opposition to Obamacare may prove politically helpful.
“The great thing about Trumpism, if there’s one thing great ...it’s making single-payer great again,” Shumlin said. “People realize that as they take away all the small bits of progress that we’ve made, most Americans actually really care about having access to affordable, quality care without having to make horrid choices to get there.”