The Affordable Care Act, never a particularly robust program, now appears headed for the ICU. But that isn’t to say the dream of universal health care is dead.
Many advocates say we can still get there from here; we just have to go through the states. Or more accurately, big, blue and economically powerful states. California, specifically.
Indeed, that’s what the awkwardly-worded California Healthcare Trust Fund Exempt from Revenue Restrictions Initiative (HCTF) is all about. Likely to appear on the November 2018 ballot as a so-called initiated amendment to the State Constitution, it would not establish a single-payer system to provide free health care for all California residents. It would, however, remove fiscal roadblocks that are inhibiting the creation of universal health care, including the Gann Limit, a 1979 proposition that restricts appropriations by state and local governments.
But does California really have the wherewithal to actually provide every woman, man, and child living within the state decent and affordable health insurance? It can be done, says Frank Neuhauser, a senior researcher for the UC Berkeley Institute for the Study of Societal Issues. But he also cautions that the possible shouldn’t be confused with the probable.
“I always start out thinking about the possible,” says Neuhauser. “Then I start thinking about the political forces that inevitably influence these issues, and I get discouraged.”
“Now that the federal government is trying to abandon Obamacare, it leaves some space for the states to get back into it.”
Neuhauser says he and like-minded experts had been working on state-level universal care for some time, but when Obamacare became law “it sucked up all the political force with it.
“Because in basic terms, universal health care is easier to implement on the national than the state level. But now that the federal government is trying to abandon [Obamacare], it leaves some space for the states to get back into it.”
The first thing needed for state-level universal health care is a champion, says Neuhauser: someone with enough political capital and charisma to actually push the thing through.
After that, we have to figure out how to pay for it and structure it. Neuhauser observes that medical insurance isn’t the only insurance around that actually deals with medical coverage. If you’re a physician, you likely have medical malpractice insurance. If you’re an independent businessperson, perhaps you have professional liability insurance. Both have medical components, says Neuhauser, as do automobile insurance, property insurance, and other types of what’s collectively called property and casualty insurance. That has to change.
“Say someone is hurt in a car crash and needs medical care,” says Neuhauser. “That’s covered by auto insurance. And the main difference between that coverage and the coverage provided by standard medical insurance is cost. The medical coverage provided by the auto insurance basically extends forever. If you need back surgery 20 years later and it can pegged to that crash, the insurer pays.”
And unlike true medical insurance, there’s typically no pre-contracting with property and casualty insurance: the insurer can’t specify the doctor you have to see. Also, everything is fee-for-service, and there’s no co-pay. That adds up. Plus, there can a lot of litigation involved in property and casualty claims, so the insurer’s legal expenditures have to be figured into the relative cost of the policy.
“The bottom line is that the administrative costs for property and casualty insurance are huge,” says Neuhauser. “It breaks down like this: if you want to buy a dollar of health care through Medicare, it costs four cents. With standard health insurance, it’s 14 cents. And with worker’s comp or auto insurance, it’s $1.25.”
The way to lower costs most easily and efficiently, says Neuhauser, is to take all the medical chunks out of property and casualty insurance and put them into true medical insurance products. That way you save more than 90 percent of the administrative costs related to medical treatment under property and casualty insurance. Further, you don’t have to think about paying out for 30 to 40 years on a claim.
“It’s a much simpler delivery and pricing model and that saves money,” Neuhauser says. “You’re changing from a pay-up-front model to a pay-as-you go model…Typically in health insurance policies, medical costs are a small percentage of total costs for the first three years. The majority of the pay-outs occur in following years. Your initial costs are thus less [than with typical property and casualty products].”
These represent accounting savings more than true cost cuts, Neuhauser acknowledges, meaning the costs are paid eventually— they’re just paid well down the road. But by slashing initial costs, we free up a lot of money that can be used here and now for cool stuff —like universal coverage.
“If we went this way in California, it’d save $30 billion a year, close to or more than enough to pay the additional cost to give all state residents universal health insurance,” says Neuhauser.
So why don’t we do it? The usual reasons, it turns out: special interests and lobbyists.
You’d think both labor and business would get behind Neuhauser’s program, but that isn’t the case.
“The difficulties aren’t technical,” says Neuahuser. “Unfortunately, powerful lobbies are either neutral or opposed to this kind of approach. Health insurers are neutral—they figure they’ll get paid either way. Property and casualty insurers don’t like it because it cuts into their revenues. And it gets lawyers apoplectic. This would reduce the cost of all property and casualty products, so it would also reduce the benefits paid out. Medical claims are a big part of a lot of settlements [and settlements are funded by benefit payouts], so lawyers would lose fees.”
Physicians, said Neuhauser, are largely neutral except for a subset of doctors involved in practices that touch on property and casualty insurance, such as occupational medicine.
“Property and casualty insurers can’t negotiate upfront rates so payments are high, and the physicians involved in the claims make more money that way,” Neuhauser says.
You’d think both labor and business would get behind Neuhauser’s program, but that isn’t the case. The unions tend to view any reduction in worker compensation insurance as employer giveaways at best and worker takeaways at worst.
“It’s that old labor-management antagonism,” Neuhauser sighs. “I was involved in an effort to get universal coverage instituted in Vermont some time ago and we were making headway, but we were having real trouble with the property and casualty insurers, and then labor balked, and that was that.”
Could we fare better in California? Maybe. But that gets back to the champion Neuhauser cites—the champion we don’t have yet. He hopes the issue will become a topic of debate in the 2018 elections, and some doughty gubernatorial candidate will make the issue his or her own.
“[HCTF] could help get us there, but we won’t be able to pay for it unless we move to something like my model,” Neuhauser says. “The strongest proponents of the initiative are the single-payer folks. But I just don’t see a Medicare-for-everyone program happening —a system where the government pays everyone’s bills. But if you have the state collect all the premiums and pay the insurers a set rate, and fund it through taxes, employer and employee contributions, and current transfers from the federal government, then you could provide health care along the lines of the ACA’s silver plan to everyone at free or minimal cost. And if you wanted more coverage, something along the lines of a platinum plan, you could get that directly through the insurers or your employer.”
