For months now, the California health reform process has felt somewhat like the MA health reform process when it was stuck in conference committee between 11/05 and 4/06, except in CA, the deadlock is between Gov. Schwarzenegger and the Senate/Assembly Democratic leadership. This past week, the legislative leaders have publicly advanced a new proposal which may begin to break the deadlock. Check out the website of our friends at Health Access California for the most up-to-date information and analysis. Here are key details from the new plan:
PUBLIC PROGRAM EXPANSION: The proposal include a major expansion of public program and subsidized coverage to low- and moderate-income Californians, and not just to children and parents, but the adults without kids at home. It includes: All children, regardless of immigration status, up to 300 percent of poverty. Parents of those children who are citizens or legal residents (up to 300 percent of poverty) would also receive coverage. Single, childless adults below 250 percent of poverty – many of whom currently can’t afford coverage, but don’t qualify for public programs now at all – would now qualify for Medi-Cal. The proposal also includes streamlining of these programs so that those eligible for the program can more easily get on and stay on. Individuals with incomes between 250% to 450% of poverty would receive a new tax credit to assure that coverage through the purchasing pool would not exceed 6.5 percent of income for overall health care costs.
MINIMUM EMPLOYER CONTRIBUTION: A sliding scale up to 6.5% of payroll. Employers with a payroll higher than $250,000 annually would be required to pay 6.5 percent in health benefits. Businesses with smaller payrolls would contribute on a sliding scale (Less than $100,000 payroll would pay 2 percent for health benefits, between $100,000 and $250,000 would pay 4 percent for health benefits). Employers would have a two-pronged test to ensure that the benefit was being broadly shared among all workers. As part of this two-pronged test, they would have the option of providing private coverage or paying a fee into a statewide purchasing pool for those earning more than $25,000, AND for those earning less than $25,000.
INDIVIDUAL RESPONSIBILITY: All Californians would be required to have coverage as long as the premiums plus out-of-pocket costs do not exceed 6.5 percent of a person’s income. In addition, those within the requirement can apply for a hardship exemption. Those who do not comply would be automatically enrolled in the purchasing pool.
PROVIDER RATES: Would raise Medi-Cal rates, as part of the package with the hospital assessment and the drawing down of federal matching funds for California.
FINANCING: There is a multiplicity of eight different funding sources, including an individual contribution (capped at 6.5% of income), an employer contribution (sliding scale up to 6.5 of payroll), a hospital fee (roughly 4%); federal matching funds; reinvested state savings; better use of the “Section 125″ federal tax credit; a $2-per-pack tobacco tax increase; and potentially some contribution from counties as medically indigent adults are covered by the state.
COST CONTAINMENT: A combination of many (but not all) of the ideas from the legislature and the Governor. Requires prevention efforts, transparency so providers disclose cost and quality information, bulk purchasing of prescription drugs, health information technology and a public insurer to compete with private plans.
AFFORDABILITY: For Individuals/families: Assures that the cost of health care (premiums plus deductibles) does not exceed 6.5 percent of income for families up to 450% of poverty ($92,925 for a family of four) For employers: The requirement is scaled to go to 6.5 percent of payroll; many employers pay more now, and will continue to pay more, of their own choosing.
OVERALL COMMENT: While most organizations are waiting for legislative language to be released later this week, Health Access California and some other consumer groups are pleased with the framework as described. It would dramatically secure and expand public program coverage and group coverage for millions of Californians, making coverage more available and affordable in each of the ways that people get coverage-through public programs, on-the-job benefits, or buying it as individuals. The proposal include many elements–on public program reforms, insurance market consumer protections, and cost containment provisions–that if passed in any other year would be a major consumer victory in their own right.
Also, check out the California Health Foundation’s website, CalHealthReform.org, for more information. If something like this plan happens, this would be an extraordinary national breakthrough.
As a native Californian and new student in public health, it’s exciting to see that California legislators are working to reform the state’s health care system and drastically expand health care coverage to include more children and adults. At the same time, like the authors of previous postings, I am apprehensive towards the idea of enforcing an individual mandate. Although I have limited knowledge in this area, I don’t understand how the state would be able to absorb the costs in subsidizing so many premiums, especially if the state fails to enforce a cap on insurance companies. I’m also unsure of what kind of reception this new bill will receive from the voters. Though very different in many respects, Proposition 86 last year aimed to expand health care coverage to include more underserved children through raising cigarette taxes, but the measure failed to pass.
I am happy to hear that the new system will expand the Healthy Families Program to cover more children, regardless of their immigration status. However, I feel that the state must take drastic measures to ensure that eligible children benefit from this measure. During my undergraduate education, I volunteered at a free healthcare clinic that serves a large number of LA’s underserved population. Quite a few of the patients were undocumented individuals, who, for fear of any government backlash or reprisal, were very hesitant to provide the clinic with any personal information. Undocumented parents must be informed that signing their children up for state-funded health insurance will not compromise their family’s residence in the US. I also hope that the state makes Healthy Families more accessible. Some of the patients who qualified for any of the government-funded insurance programs weren’t enrolled because they were unaware of these resources or were intimidated by the complicated paperwork associated with them.
We still have a year until next November’s elections, and I am excited to see how the process to reform California’s healthcare system unwinds.
AnnS – Thank you for bringing much needed common sense and sanity, sobering as it is, to this issue. You are laying out the basis for why so many people in MA are feeling traumatized and angry about the mandate law that forces them to purchase expensive private insurance or else get fined and feel like a criminal.
And lest we forget there will still be ~200,000 uninsured; the “lucky ones”, who, under the “robust” and “humane” mandate exemptions of Chapter 58 will be able to grovel for state permission to remain uninsured. How nice.
I sure hope the citizens and politicians of CA have more common sense and foresight than certain persons in MA did to not go down this harmful and wasteful mandate road. AnnS, your number-crunching information is being shared with real deal consumer advocates, clinicians, and policymakers in CA and elsewhere. Thank you and please keep at it.
(1) “Alternatively, it might be appropriate to apply the 6.5% figure to the health insurance premium only with, ”
One of the worst ideas is to simply assume that how much a household can afford to pay can be determinedusing prcentages.
Food has a minimum cost. Housing has a minimum cost. Ditto car insurance, electric heat and phone. Below a certain real dollar number, if the household does not spend that amount, they do without.
If an individual’s income is 250% FPL or $25,525, allowing 33% of income for housing and utilities (the recommended number) in Boston or LA will NOT cover the cost as that only $701 for rent, electric, heat, water, sewer, trash and phone. Good luck – its not going to happen and they are not going to have housing.
(2) “I note that the IRS currently does not allow individuals to deduct healthcare and health insurance costs except to the extent that they exceed 7.5% of adjusted gross income (AGI). This suggests to me that the IRS believes that health related spending of less than 7.5% of AGI is ordinary and not particularly onerous.”
First, under the IRS rules, medical expenses are ONLY deductible IF such expenses (and/or things like mortgage interest) are done as itemized deductions. That means that that an individual has to have more than $5150 in itemizable deductions or a couple has to have more than $10,300. If you itemize, you lose the standard deduction. Therefore expenses which can be itemized must exceed that standard deduction. For medical expenses, if those are the only deduction being itmeized, that means they have to (a) exceed the amount of the standard deduction and (b) be more than 7 1/2% of income.
It is quite possible to have medical expenses that are far more than 7 1/2% of income but which do not exceed the standard deduction. In that case, they can not be taken as a deduction on the grounds that anything above 7 1/2% is catastrophic.
The IRS analogy is not very instructive.
You should be aware that the budget guidelines uses by the Federal Bankruptcy courts in a Chpt 13 individual reorganization only allow 5% of household income for premiums, copays, deductibles and non-covered expenses. Anything more will only be permitted in exceptional circumstances.
Bankrutpcy judges are much more aware of the real world than healthcare policy specialists like Gruber. They have to actually make the available money cover the real world costs.
(3) “Alternatively, it might be appropriate to apply the 6.5% figure to the health insurance premium only with, perhaps, additional relief targeted to the comparatively small percentage of the population that incur high out-of-pocket costs in any given year.”
Uh huh…… 6 1/2% can be a household budget breaker for nearly over 50% of the households in the US.
The median household income is $47,000+/-. In LA, the median rent for a 1 bedroom apartment is $1700-1800. The rent alone 44.68% of gross income or 56% of their net income – and they still have to pay utilities, car insurance, gasoline (to get to work), food and clothing which are all expenses which are NOT priced as a % of income.
What is a catastrophic expense for a household depends upon their income. A $2000 deductible would not be a problem for a household of 1-3 people with a $100,000 income. A $2000 deductible is a devastating cost to the median household with that $47,000 income. A $500 deductible is an enormous expense to that household with a $25,000 income.
DOing the ‘oh well, just don’t cost deductibles, copays and uncovered items’ in figuring out how much to require households to spend is
(a) counter-productive since those are real costs that the policymaker might choose to ignore but the person paying them will most certainly not ignore and the requirment will basically be political suicide for its proponents; and
(b) it is extremely cruel. The household is forced to hand over its limited $$$ to an insurer and yet receive nothing in return. If they have $2000 a year for healthcare and it is dictated that the money goes to an insurer but they don’t get coverage until they spend another $2000 (which they don’t have) for a deductible, they are locked out of healthcare. The only beneficiary is the insurer. That household is better off taking the $2000 and paying providers directly.
It has been repeatedly confirmed by studies that
(a) when deductibles exceed $500-1000 and/or
(b) premiums, deductibles and copays exceed %4 of income for those between 200-300% FPL, 5%- 6% for those between 300-400% FPL, ane 8% for those over 400% FPL, it becomes a financial burden which result in patients not getting necessary care,and having unpaid medical bills which result in poor credit ratings which means they have trouble getting housing and jobs.
Regarding the 6.5% cap on income that people with income up to 450% of the FPL would be required to spend for health insurance + OOP costs, I note that the IRS currently does not allow individuals to deduct healthcare and health insurance costs except to the extent that they exceed 7.5% of adjusted gross income (AGI). This suggests to me that the IRS believes that health related spending of less than 7.5% of AGI is ordinary and not particularly onerous. Since we, as a country, spend 16% of our GDP on healthcare, a spending cap of 7.5% for total healthcare spending strikes me as more reasonable than 6.5% Alternatively, it might be appropriate to apply the 6.5% figure to the health insurance premium only with, perhaps, additional relief targeted to the comparatively small percentage of the population that incur high out-of-pocket costs in any given year. To underscore my last point, even among the 65 and older population, which incurs much higher medical costs than those under 65, in any given year, the healthiest 50% of seniors (21 million people) account for only 4% of Medicare’s costs or less than $900 per person.
Do the math. Keep in mind the phrase “All Californians would be required to have coverage as long as the premiums plus out-of-pocket costs do not exceed 6.5 percent of a person’s income.”
Also remember that CA is not proposing to cap premiums by having such plans as offerred through Commonwealth Choice where the premiums are regulated.
Virtually none of the Commonwealth Choice plans could meet the criteria of not more than 6 1/2% of income for those who are uninsured.
YAP at about $125 per month with that $2000 deductible/total out-of-pocket of $5000. ($125 x 12) + $5000 = $6500 which is 6 1/2% of a $100,000 for 1 person.
Com. Choice for someone who is in their late 30s. ($175 x 12) + $2000 ded./5000 OOP = $7100 or 6 1/2% of $109,230
Com Choice for someone who is in their 50s. ($350 x 12) + 2000/5000 = $9200 or 6 1/2% of $141538.
Com Choice for a family where the parents are in their 30s-40s. About $650 a month with a $4000 ded/10000 OOP. ($650 x12) + 10,000 = $17800 or 6 1/2% of $273846.
To look at it in reverse, MA is requring a single individual who makes $50,001 and who is in their 50s to spend $350 on premiums a month with a $2000 deductible and OOPS up to $5000. ($350 x12) + 5000 = $9200 a year. That is 18.39% of their income!
Or the couple in their late 40s/early 50s who have an incomeof $80001. Premiums are around $500 a month with a $4000 deductible and OOPS up to $10,000. That is $16000 a year or 20% of their income.
Or the family of 3 with a $700 premium,$400 deductible up to $10000 OOP and a $110,001 income. That is $18400 a year or 16,72% of their income.
6 1/2%? Certainly not under the Mass Choice Plans.
Even if the 6 1/2% limitation is restricted to those between 250-450% FPL, CA is going to have to come up with whooping subsidies. Premiums will not be regulated. An individual paln will easily still be around $500 a month for someone in their 30s and those usually have a $1500 -2000 deductible. That is $6000 in premiums alone. An individual at 450% FPL has an income of $45,945 and 6 1/2% is $2986. That leaves $4514 – 5012 in premiums and deductibles that have to be subsidized.
Median household income in CA is around $47000. That is a LOT of subsidies.
Don’t see how they can do it.