...and we had such hopes. California Health Care
Date: December 21, 2007

ISSUE: Health Care Bill ABX1 1

ACTION: Contact you state Senators over the break and in early January.

We have worked diligently over this past year to help craft a health care bill that would bring genuine improvements to this state's uninsured and underinsured populations. ABX1 1, the bill that passed the Assembly this past Monday, does not serve that goal.

IMPACT has long believed that health care is a human right. It must be accessible, affordable, and is an obligation of our entire society, one to the other. It is not a commodity to be bought and sold like blue jeans, held or withheld as a reward or punishment for being affluent or not. Comprehensive health care defines our existence as a caring, compassionate people. It is also not a political football to be 'won' simply for the sake of doing 'something'.

With these principles in mind, we approach any health care plan in the hope of improving the human condition and forging a society in which we all care and share with one another.

The first version of the Assembly bill was AB 8 (Nunez) that passed both houses but was vetoed by the Governor. It had a myriad of problems not least of which was the fact that it went into final print on Saturday September 8 and was passed Monday September 10. In other words, no one had a chance to read it, and there were many loopholes that were of real concern. IMPACT took no position on this bill until the final day when our OPPOSE position with the Senate was simply to ask that they take more time and not rush it through. However, it did pass the Senate only to be vetoed by the Governor.

In the following months, a Special Session (or Extraordinary Session, hence the bill numbers with an X) was called into which Speaker Nunez introduced another version of the bill, ABX1 1. The Governor, through Legislative courtesy, introduced his version numbered ABX1 2. It never had an author but was the Governor's 'bargaining chip'.

The Governor's bill included no universal health care as IMPACT has always envisioned but imposed individual mandates that everyone would have to purchase health care insurance with no exceptions. If employers chose, they could contribute to a new 'purchasing pool' where individual insurance could then be bought by their employees. Supposedly this pool would keep premiums lower than in the private market, but the employee would have no real choice since if the employer entered the pool, the employee had to do the same. In addition, this bill had two provisions that were even more troubling: there were no standards mandated for quality of coverage, and the governor's initial approval of costs included a $5000 deductible and allowance of charges by insurance companies of up to $10,000 for co-pays and out of pocket costs such as ambulance, emergency room use, etc. Later versions made no such specifications but left these critical details to be worked out in the future.

For weeks there was a stalemate between ABX1 1 and the language proposals of ABX1 2. Suddenly on Monday December 17, the Assembly was called back to the floor and ABX1 1 was amended and passed - again without anyone having read it. It turned out to be a massive compromise on the part of Speaker Nunez incorporating some of what we believe were the worst aspects of ABX1 2.

ABX1 1 as of December 21, 2007

First - ABX1 1 does NOT "provide" health insurance coverage to anyone outside existing public programs. Instead, this bill has an individual mandate that everyone MUST have insurance regardless of cost. People who absolutely cannot afford it have to appeal on a case-by-case basis for hardship exemptions, and then their only recourse is to be uninsured. Since in Massachusetts where a similar mandate already exists, at least 51.9% of the uninsured report that they cannot afford the premiums and co-pays. This is a recipe for massive disaster. California has a huge uninsured population compared to that of Massachusetts.

ABX1 1 offers some great language on expansion of health care coverage for low-income people. It will cover all kids with private insurance at or under 300% of the Federal Poverty Level (FPL) regardless of immigration status. However, this coverage is contingent upon two things: federal SCHIP expansion that has already been vetoed by the President, and payment from either the proposed $14 billion in health revenue or from the state's General Fund since the feds won't cover undocumented kids. Families with income under $43,000 will have the premiums for their children subsidized for Healthy Families. However, there is no subsidy for deductibles, co-pays, etc.

At the moment the coverage from Healthy Families is good. It is not guaranteed to continue that way, and subsidy from both state and federal sources is very precarious. That is equally true for Medi-Cal. In this bill it requires people on Medi-Cal with kids to pay a monthly premium on those kids. It is low (at the lowest end it is $5 per child with a low cap) but for people living on around $800/month on CalWORKs, that is a real hardship. This "contribution" was part of the Governor's plan.

People newly-enrolled in public programs will no longer be served by private HMOs or providers or hospitals. They will all go exclusively to public hospitals. For those already on Medi-Cal, there is a high probability they will also be moved to public hospitals so those with Kaiser and other medical care will lose their physicians and known support systems.

For general "pool" or private insurance, for those not eligible for public programs such as Healthy Families or Medi-Cal, families earning $43,00-$68,680 (family of three) will have to pay full cost for uncapped premiums, then deduct any part that exceeds 5.5% of their income as a tax CREDIT. That part is reasonably good. However, they will get no tax credit for deductibles and co-pays or out of pocket expenditures.

What is deeply disturbing is that in ABX1 1 there are NO caps on premium costs or deductibles/co-pays/out of pocket. This is important because insurance companies will be given one of two mandates they must follow: one is for 'guarantee issue' - they will have to take everyone, including people with pre-existing conditions. They will have to have 'community rating' meaning they must charge relatively the same to all people enrolled in one of the five tiers of health coverage the companies can offer. The second is that they will have to spend 85% of their premium costs on health care. It all sounds great - except with no rate control, they can do the following:

-raise ALL rates to cover the really ill;

-raise 'risk rates' (age, geography, family size) without specified limit on what these cost. That can change what you pay dramatically just for having a birthday, another child, or moving;

-have large deductibles and co-pays and out of pocket costs.

The Governor's preference, though it is not spelled out in ABX1 1, is for the state pool policies, the MINIMUM coverage, to require $5000 in deductibles every year with $10,000 allowed for co-pays and all other out of pocket expenses (ambulance, etc.) Since these standards will be set by a new committee that will have the majority members from the Governor, it is deeply worrisome that this remains potentially so harmful.

High deductibles, co-pays, and out of pocket costs are annual 'rebates' to the insurers for having to direct 85% of the premium into health care - even though they still have marketing, information technology, and other kinds of allowable items as 'care'. These costs to the individual and family put money straight back into the insurance corporation coffers. High deductibles, etc. also create 'technically uninsured' classes of people who HAVE insurance but can't use it. If people have chronic conditions, they can incur thousands in obligations each year. Sure - it's better to be $15,000 in debt than $150,000 in debt - but year after year it would be a terrible burden on most families.

Remember - the median income for families in California is just over $55,000 (per the California Budget Project: www.cbp.org) Taking $5-15,000 from after-tax income would be a huge bite for a family with a chronically ill member.

Employer-Employee Coverage

Employers will pay between 1% and 6.5% of payrolls for employees to buy insurance. Employees would be required to take the insurance and pay whatever supplemental premium costs, co-pays, and out of pocket costs are NOT paid by the employer. There are no caps on costs for employees as there are for employers. If you are excused due to 'hardship; - you get the right NOT to be insured.

If the employer pays into the state pool insurance fund, employees will be required to buy insurance from the fund, with no clearly-specified standards of care or cap on premiums. Some argue we will set those standards, but when? Passing a bill without these specifications is dangerous.

It is our analysis that employers may well not want to enter the pool (because if they do, their executives have to as well) so they can do one of three things:

-All executives will be on 'temporary duty' but 'hired' in another state. That is somewhat tricky since everyone who lives here 6 months or longer are supposed to be covered, but if they have health insurance from Arkansas (e.g. Wal-Mart) California is hardly going to give them flak over that.

-Insurance companies will have products with five tiers of coverage. If the premiums for the good stuff - really comprehensive coverage - are high, the execs will take that. But the rank and file, in order to keep their payments on premiums down, will have to take the low rungs, and those will be tailored to save on premiums but be high in deductibles, etc.

-Really good insurance could be offered exclusively. Employers will have met their obligation - and their employees will be unable to afford it so will get out on hardship and aghain be uninsured.

The bill includes something we very much support - Community Makeover Grants. However, these efforts to create healthy food alternatives, recreational opportunities, etc., are ALREADY available outside both the state general fund and this income stream. It would be an unnecessary drain on scarce resources.

Funding

Another big issue is funding. No analysis has been done to see if the costs of this program would actually be covered by an increase in tobacco tax, employer and hospital contributions, etc. The plan claims to cost the state $14 billion with income derived from new taxes. Initiatives will circulate to put these taxes on the November ballot, but Senate leader Don Perata has wisely asked Liz Hill, the Legislative Analyst, to determine if this bill is fiscally viable and what impact it might have on future General Fund budgets. We already have projected $14 billion shortfall for this coming and future years.

Therefore voters will be asked to create new taxes while at the same time possibly being asked to pay for their own health care costs. This won't 'double dip' on most people, but we don't know yet what other tax issues might arise if the funding streams prove inadequate.

Overall - this bill tries to do three totally incompatible things: preserve profits for the insurance corporations, maintain adequate funding for the hospital system, mandate coverage for all people. This bill attempts this by putting the entire burden on the individual. Vague language on 'affordability' and 'standards' is simply no substitute for specificity. We cannot pass a measure that puts off these decisions until after the bill in singed and put into law. That is terribly dangerous.

Finally - it is not clear if the tax initiatives fail whether California residents will be saddled with the individual mandate to have health insurance anyway.

Since this is very similar to the Massachusetts plan, it may be useful to you all to see an outstanding report done by the Greater Boston Interfaith Organization this past summer. It is deeply troubling that half of the Massachusetts uninsured have not enrolled in their state's plan, even though they are so mandated, because they absolutely cannot afford it. The PDF files for both the full report and the one-page Executive Summary are both at: http://www.gbio.org/healthcare2.html

We have formally opposed ABX1 1 as of Monday December 17 prior to the Assembly vote. Unless there are massive changes for the good, we will oppose it if and when it comes before the Senate. It is a very poorly constructed bill. While there are times to bite the bullet over things you don't totally like but that move us forward, there are times when it is SO bad you can't swallow it. This is one of the bad times.

We do subscribe to the belief that you "don't let the perfect be the enemy of the good". We supported SB 2 because it was simple and straightforward, offered to extend health care to millions without undue burdens on them or employers financially, and made a significant step toward universality.

ABX1 1 does not do that. It does not provide universal health care but creates the burden of mandates with potential continued destruction of people's finances through high out of pocket costs. Unless and until these details are absolutely worked out in the bill - not at some obscure future date by an unspecified group of people - we have no choice but to oppose it and to do so strongly.

We urge you to contact your state Senator and make your own moral position clear. Health care is a human right, and any bill must be morally, fiscally, and programmatically clear. We cannot repeat the mistakes of energy deregulation and other hastily-pursued plans; do not pass ABX1 1 unless and until we have absolute guarantees of what it offers, what it costs, and whom it benefits. To pass this bill as it stands is morally offensive.

To contact your state Senator who will be in your district until January 7 2008, please look in the blue pages of your phone book. To contact him or her at the Capitol, go to the new IMPACT "Take Action" page: http://capwiz.com/cachurches/home/

This is our new website, so you probably will have to re-enter your address to get your representatives, but once you do, clicking on your senator's name will take you to his or her page where you may write an email.

Thank you for your long-standing concern about health care. We will continue to keep you informed of developments on this and other issues.

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