Brian Iv works in a factory in Orange County, earning around $26 per hour. He suffers chronic pain from a lifetime of manual labor jobs and previous workplace injuries, but often treats the pain with home remedies or traditional Cambodian practices. Going to the doctor is too expensive, he said.
Iv recently got a raise and was able to purchase health insurance through his company, but for a long time he had a Covered California Silver Plan, a mid-tier plan under the state’s version of the federal Affordable Care Act marketplace. A visit to a primary care doctor cost nearly $50, and every time Iv picked up a prescription it was an additional $10 to $15. It was a lot for someone living paycheck-to-paycheck with little wiggle room in the budget.
“Right now, after COVID-19, everything is expensive,” Iv said. “Sometimes when you get sick you avoid that (expense). You have to keep the money to pay the rent, pay the bills, pay the car.”
Mid-tier health coverage like Iv’s Silver Plan is widely considered the best value for people who have insurance through Covered California. But in the past nine years, deductibles for the Silver Plan have grown nearly 88% after adjusting for inflation, increasing out-of-pocket costs for enrollees. In raw numbers, last year deductibles grew from $3,700 for an individual and $7,400 for a family with a Silver Plan to $4,750 and $9,500, respectively.
That’s why health care advocates are miffed that Gov. Gavin Newsom’s budget proposal would sweep away $333.4 million set aside a couple of years ago for the state to defray health care costs for middle-income residents, transferring the money to the general fund. The proposal to move money out of the Health Care Affordability Reserve Fund is temporary, with plans to restore it in 2025 when current federal subsidies expire. But advocates say inflationary pressures and rising health care costs are reasons to use that money right now to help Californians struggling to pay the bills.
“We recognize there’s not a lot of room for new spending in the current budget situation, but we don’t see this as new spending. We see this as the existing commitment,” said Diana Douglas, policy director for Health Access California, which sponsored legislation to create the reserve fund.
The budget transfer idea is part of Newsom’s strategy to address a projected $22.5 billion deficit this year, a deficit that the nonpartisan Legislative Analyst’s Office predicts may be even worse come May when the budget will be revised based on actual state revenue.
Newsom’s spokespeople ignored multiple requests for comment.
Given the inflationary pressure people like Iv face, the governor’s proposal to transfer the money into the general fund is “mystifying,” said Scott Graves, director of research at the California Budget and Policy Center, a nonprofit policy research group.
“Why is the governor borrowing from a special fund that was set up specifically to help make health coverage through Covered California more affordable, right?” Graves said. “This is money for which every penny in the account could right now be used to bring down the cost of health care for Californians, but instead the governor is choosing to sweep that money out of the account.”
Stories like Iv’s are common, said Jaquelinne Molina, a caseworker at The Cambodian Family, a social services center where Iv receives case management for health care and financial aid issues. Most of the people she serves work in warehouses and factories for low pay and no benefits.
“It’s three years after COVID, but people are still behind on their light bills, their water bills from 2020 because they weren’t able to work due to COVID,” Molina said. “Right now everything is tight and it gets harder and harder every year.”
Health care advocates say Newsom’s latest budget proposal follows a pattern of missed opportunities to make insurance more affordable under Covered California.
In 2020, the Legislature voted to reinstate a tax penalty on residents without health insurance in an effort to bring costs down. The economic theory goes: The penalty incentivizes people to buy health insurance, and the more people who participate in the health care marketplace, the lower the costs because risk is spread out among a mix of healthy and less-healthy consumers.
But that measure passed despite concern from advocates and legislators about forcing people who can’t afford insurance to purchase it. Most people who forego insurance cite high cost as the primary barrier.
“Advocates, including ourselves, clearly stated that we do not support the reinstatement of the penalty without additional assistance,” said Linda Nguy, a lobbyist for the Western Center for Law and Poverty.
Early on, that was the plan. In fact, on his first day in office, Newsom proposed using the money to bring down prices for people with Covered California.
“The governor, to his credit, proposed this idea of providing state subsidies in Covered California, augmenting the federal dollars, and proposed the individual mandate as a funding source for it,” Health Access Executive Director Anthony Wright said.
Influential advocacy groups supported reinstating the health insurance penalty, and the 2019-2020 budget included more than $1.4 billion over three years to bring down out-of-pocket costs for Covered California enrollees.
So far, the state has only kept that promise once, spending approximately $355 million in 2020 to enhance Covered California subsidies for middle-income residents. This meant an individual making up to $74,940 and a family of four earning up to $154,500 qualified for additional financial assistance. But when the federal government increased health care subsidies in 2021 as part of its COVID-19 pandemic relief package, the state stopped funneling penalty money toward cost reduction.
Kaiser Health News reported in November that the state has generated roughly $1.3 billion in penalty money from uninsured state residents. By statute, that money has always gone directly into the general fund, and from there could be moved into the reserve fund.
“There’s an argument to be made that those fines really should be plowed back into the system, especially for people who are low-income,” said former state Sen. Richard Pan, a doctor who chaired the health committee at the time the penalty was reinstated.
The remaining $1 billion originally budgeted for subsidies in 2021 and 2022 — roughly the same amount generated by the penalty — has never been spent on bringing down health care costs. Instead, it has stayed in the general fund.
“What we think has been happening, and there truly is not a lot of transparency on this, is that as money is put into the reserve, it is taken out the following year,” Douglas with Health Access said.
Who relies on Covered California?
Most people who purchase insurance through Covered California are low- to middle-income Californians, meaning individuals who earn roughly between $21,000 and $87,000 a year or families of four earning $45,000 to $180,000 per year.
At that income level, enrollees make too much money to qualify for Medi-Cal, the state’s public insurance for very low-income residents, but for a variety of reasons don’t have employer-based health insurance. They may be self-employed, a gig or part-time worker, or work for a small business. They may even opt to purchase insurance independently because it’s cheaper than what their employer offers.
Although more stable than the national insurance marketplace, Covered California has not been immune to the rising health care costs that plague the industry. Health insurance premiums have grown every year since the state first offered Covered California. That growth is less obvious than deductibles to enrollees because federal subsidies keep out-of-pocket premiums relatively stable for most enrollees. But federal subsidies are based on federal income limits and poverty levels, which don’t take into account California’s high cost of living.
Iv and his family rent a single room in a house in Garden Grove for $900 a month. In the past year, he said, expenses have tripled with inflation, with gas alone costing around $300 per month.
“At home, sometimes we don’t know what to cook and we don’t have food. Then we eat Cup Noodles,” Iv said.
Molina, the case worker from The Cambodian Family, said her clients who have deductibles and co-pays use their insurance less than clients with Medi-Cal, who typically don’t have to pay anything out-of-pocket.
“I’ve known families with kids who break or sprain their fingers and feet, and they don’t know for months because they can’t go to the doctor,” Molina said.
The federal government’s relief plan helped people afford Covered California. It lowered monthly premiums by 20%, and more than 90% of enrollees were eligible for financial help. The result was a record number of people signing up for health insurance last year: 1.8 million, a 9% bump from the previous year.
But when the American Rescue Plan was at risk of expiring in 2022, legislators and regulators saw an opportunity to lessen the staggering health insurance costs enrollees would face — double what they paid the year before. They proposed reinjecting penalty money back into the Covered California marketplace, as promised, for the first time since 2020.
In June, the Covered California board approved a $300-million cost-reduction plan: If the federal subsidies were not renewed, the money would be used to help alleviate the resulting out-of-pocket premium spikes. If subsidies were extended, the money would be used to eliminate deductibles for all Silver Plans.
Either way, the money would make health care more affordable. When the federal government opted to extend premium assistance until 2025, affordability advocates were excited by the chance to remove other cost barriers.
“Let’s get rid of deductibles,” Pan said. “Because what is a deductible? It’s just really a barrier to people being able to get care.”
To enforce the plan, Pan carried and Health Access sponsored a bill that would have required the state to bring down costs for Covered California enrollees. Newsom vetoed the bill, citing a “downturn in revenues” despite the state budget already including more than $300 million to implement the plan.
When the bill died, Covered California lost the ability to implement the plan, said James Scullary, spokesperson for the program. Instead, Silver Plan deductibles that would have been eliminated jumped about 20%.
“Covered California’s position is we are always looking for ways to make health care more affordable,” Scullary said. While deductibles have climbed, pharmacy costs decreased and out-of-pocket maximums remained relatively stable.
Some advocacy groups say they’re dismayed that increased cost-sharing is “not a priority for Gov. Newsom.” The majority of small business owners are middle-income Californians who often have trouble affording health insurance and find it too expensive to offer to their employees, said Bianca Blomquist, California policy and outreach director for the Small Business Majority.
“We are super disappointed,” Blomquist said. “If we’re talking about small businesses’ ability to recover from the pandemic, these are the kinds of programs that might not be obvious, but really help.”
Kristen Hwang is a reporter with CalMatters.
Those co-pays don’t sound all that bad really. Things were a lot worse prior to Obamacare when you had to be on a waiting list for insurance if you had a pre-existing condition. Seems we should be more thankful for what we have. That said, I don’t see big increases in CA expenditures on anything. The state already saw its expected revenue drop by $120 billion in 1 year alone. All the pie in the sky woke ideas we had about single-payer, etc. have been pushed out because of crumbling stock and housing markets. Plus, we’ve all learned our lesson about just printing money to make us momentarily feel good. We’re going to be fighting inflation for a decade or more and the more “inflation reduction acts” we have that print even more money will only make the problem worse.
Newsom has to go. This guy is awful, maybe even the worst Gov. in U.S. history.
Part I: The Basics of Private Health Insurance
The key to understanding this report–something Kristen Hwang has completely ignored–is that health care in California and the U.S. is largely channeled through hundreds of private insurance plans. Patients make payments called “premiums” to private insurers who in turn pay the health care service providers who treat patients. In other words, the payments to health care service providers for actual care come from hundreds of entities that profit from their role as intermediaries between care givers and patients.
For the vast majority of insured patients, however, which health care providers they can see is circumscribed by their private insurance plans and, in addition to the premiums they pay, they will pay additional fees called “deductibles,” “co-payments” and/or “co-insurance” to health care providers when they seek care. From the patients’ point of view, the total costs of health care are the sum of the premium and the additional fees they pay when they seek care (in addition to prescription drug costs, etc.)
Thus, private insurers can increase patient costs by increasing premiums and/or increasing the additional fees and/or by reducing the quantity or quality of health care services they will pay for under the insurance plans. Increasing patient costs and/or limiting patient care boost private health insurance corporations’ profits. Given that such corporations seek to maximize profits, profit-seeking behavior of health insurance corporations constitutes a built-in, inborn danger to the physical health and financial well-being of tens of millions of people in the U.S.
Ms. Hwang concerns herself here with the class of private insurance plans purchased by individuals through the so-called Covered California insurance marketplace, the state’s name for the Affordable Care Act (Obamacare) insurance exchanges established in 2014. The premiums and/or the additional fees (deductibles, co-payments and/or co-insurance) for private plans sold through Covered California are subsidized (i.e. discounted) by the federal and state governments based on the income levels of the patients purchasing the insurance.
Keep in mind that the insurance companies receive the full premium that they alone set each year; the subsidies to help patients pay those premiums come from taxpayer money, i.e. public funds. The debate as to what the level of those public subsidies should be is the subject of Ms. Hwang report. The “affordability” referred to in this report is limited to the share of premium and additional costs that patients are required to pay from their own money excluding the public subsidies they would receive from federal or state sources. Affordability here does not address the level of the premiums set by private insurance companies and how to reduce those premiums or how to reduce the levels of deductibles, co-payments and co-insurance that patients pay to providers.
The federal or state governments, rather than using their considerable power to negotiate premiums with these insurance companies on behalf of the buyers in the Covered California marketplace, just allow the insurance companies to set prices. In paying for an increasing share of the monopoly-priced premiums, governments, in effect, encourage the private insurance companies to raise premiums, something they have done consistently since 2014. In general, this is the most costly and wasteful type of health insurance in the entire U.S. healthcare system. Private insurance companies add a layer of needles costs and unnecessary bureaucracy for patients and governments with which to contend.
Such promises or related expectations are silly, anyway. The interesting part was that money was diverted to the general fund. Heh, heh
The Progressive Promise to get elected – or the Black Hole of over-spending for sub-standard care.
“We have to pass the bill before we find out what is in it”
This Karma is well deserved for destroying to health care system.
“It is amazing that people who think we cannot afford to pay for doctors,
hospitals, and medication,
somehow think that we Can Afford to pay for doctors,
hospitals, medication AND
a GOVERNMENT BUREAUCRACY to administer it.”
― Thomas Sowell, Knowledge And Decisions
———-Rhetoric Vs. Reality: Americans Oppose Medicare For All Tax Hikes————-
Polls show that most Americans Oppose Medicare for all once they learn
it would force Americans to pay Higher Taxes.
A national poll by the Kaiser Family Foundation revealed that:
-60% of Americans Oppose it when they learn it would require most Americans to pay higher taxes,
-70% Oppose Medicare for all when they learn it would “lead to DELAYS getting some medical tests and treatments”
-60% Oppose it when they learn it would Threaten the already at-risk Medicare program,
-58% Oppose it when they learn it would ELIMINATE Employer-Provided and other private coverage.
Polling also shows that a Majority of Americans are SATISFIED with their
CURRENT Coverage & Care – and they don’t want their choices taken away.
Part II: The Single Best Solution is Single Payer
The obvious alternative to fighting about who will pay what portion of private health insurance premiums and/or out-of-pocket expenses to providers is a single payer system along the lines of the nearly half-century old Medicare system. For those with doubts about this, have a look at Exhibit 4 of a recent Commonwealth Fund report. That picture will tell how much of an outlier the U.S. is in terms of health care costs as compared to health care system performance, i.e. the impact of the health care system on improving people’s health (or not) (https://www.commonwealthfund.org/publications/fund-reports/2021/aug/mirror-mirror-2021-reflecting-poorly).
California and U.S. residents generally pay–and have been paying for decades–more than any country in the world for health care and we have the worst health outcomes relative to the 10 other wealthy countries in the Commonwealth Fund surveys. It’s as though Californians have been grocery shopping at 7-11, paying inflated prices for junk food while the rest of the world has been shopping at COSTCO where they get more food of higher nutritional value and pay a much lower price per unit. Anyone who is not on the payroll, or under the influence of the health care mafia (private insurers, hospitals, drug companies) or ideologically-motivated neoliberals (like California’s deep blue political echelon) or backlash libertarians, will tell you that a single payer system is the least costly and most effective health care solution for the tens of millions of Californians (and hundreds of millions of Americans) struggling with inadequate health care coverage and its grinding human and financial costs. Even the U.S. Congressional Budget Office confirmed the overall cost savings to society associated with the total coverage of a single payer system (https://www.cbo.gov/system/files/2020-12/56811-Single-Payer.pdf).
A single payer system would establish a public health care insurance system (an improved and expanded version of existing Medicare) that would allow every Californian to choose the health care provider(s) they want (including those they have presently) anywhere in the state. No more “in-network” or “out-of-network.” The “network” becomes the sum total of all California providers that will be available to all. It would eliminate all premiums, deductibles, co-pays, co-insurance and other out-of-pocket costs, as well as enrollment periods (everyone would be permanently enrolled). It would expand health coverage to all necessary medical care and procedures including vision, hearing, prescription drug and devices, mental health and long-term care.
For the 3.2 million Californians who have no health care coverage at present, it means complete coverage. For the 5 million underinsured Californians (for whom out of pocket costs account for more than one-tenth of household income) it means massive financial and health care access relief. For the 31 million insured Californians (including 6.5 million Medicare beneficiaries and 14 million MediCal beneficiaries) it would mean an expansion of benefits and the elimination of premiums and co-payments and a fundamental simplification of access and administration.
For everyone, it means less costly, less complicated and more readily accessible health care. In other words, it means we would all be relieved of bureaucratic burdens and costs imposed by the government-sanctioned profit models of private insurance, private hospital and drug corporations. This would allow patients and health care providers to focus on improving health, what should be the only task of the health care system.
(See https://a27.asmdc.org/ab-1400-ca-guaranteed-health-care-all-act; https://laborcenter.berkeley.edu/undocumented-californians-projected-to-remain-the-largest-group-of-uninsured-in-the-state-in-2022/; https://www.goodrx.com/insurance/health-insurance/insured-vs-underinsured; https://www.kff.org/medicare/state-indicator/total-medicare-beneficiaries/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D; https://www.dhcs.ca.gov/dataandstats/Pages/Medi-Cal-Eligibility-Statistics.aspx; https://www.chcf.org/publication/2021-edition-medi-cal-facts-figures/#related-links-and-downloads.)
Part III: The Single Payer Will Have the Receipts
If California’s share of total U.S. healthcare expenditures in 2021 is 12%, as it was in 2020, then such expenditures can be estimated at about $510.6 billion in 2021 (https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet; https://khn.org/news/article/new-single-payer-bill-intensifies-newsoms-political-peril/). That’s more than a half-trillion dollars annually and includes all payments by private businesses, households and non-profit institutions for private health insurance premiums, deductibles, co-payments, co-insurance plus direct, out-of-pocket payments to hospitals, medical professionals, pharmaceutical and medical device companies and other providers. To this must be added all public expenditures on behalf of Medicare and Medicaid beneficiaries (including the Children’s Health Insurance Program); the federal and state subsidies paid for private business employee health plans and the Obamacare private insurance plans; and the funds directly expended by the state, the counties, the municipalities and the public universities, colleges and school districts on providing health care services and to insuring the health of their employees.
Federal, state and local government healthcare expenditures–that is public sector healthcare expenditures–on behalf of Californians accounts for about 70% of all healthcare expenditures in and for the state’s residents (https://pubmed.ncbi.nlm.nih.gov/27845515/), the remainder being born by private businesses, households and non-profits. By consolidating insurance funding sources and vastly reducing and simplifying administration, a single publicly-administered health trust fund can unify and standardize fees and prices paid to providers and streamline the payments system generally. It would be akin to a combined, improved and expanded Medicare and MediCal fund able to pay healthcare providers on behalf of all Californians. That would result in tens of billions in savings each year while expanding coverage to the more than 3 million Californians who are currently uninsured.
Pooling all the public sector funds spent on healthcare in California, as noted, would cover about 70% of healthcare expenses. The remainder would come from a set of new payroll, sales and income taxes, all progressively structured, such that the burden would be distributed according to ability to pay. Revenues from those new taxes would be added to the pooled public funds in a single publicly administered fund (this was the proposal that California Democrats defeated in January 2022 https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml? bill_id=202120220ACA11).
But the key to understanding healthcare financing under a single payer system is that all private insurance premiums and the vast bulk of all out-of-pocket medical expenses would be eliminated, resulting in massive savings to businesses, households, governments and non-profits across the board. These savings–-purposely overlooked by neoliberal Democrats and libertarian bots alike–are actually larger than the new taxes required by a single payer system.
To repeat, a single payer system of health care financing reduces expenses for businesses, households, governments and non-profits in excess of what those entities will pay in new, progressively structured and dedicated taxes. The health expense savings are greater than the new taxes that will be paid, resulting in a net reduction in total healthcare spending for everyone, except for the wealthiest households and the largest businesses and corporations. For 90% of households and businesses, there is a real reduction in what they spend on healthcare–they will experience higher savings rates from current income all other things being equal.
These savings are derived from the massive buying power–referred to as “monopsony” power in economics–of the publicly-administered and unified health care fund. As that fund will be paying for all necessary healthcare for all Californians, the fund’s buying power counterbalances the entrenched selling power–“monopoly” power–of the consolidated for-profit hospital systems who charge patients an average 400% of the actual costs of providing care (https://www.nationalnursesunited.org/press/new-study-hospitals-hike-charges-18-times-cost); counterbalances the monopoly power of prescription drug companies who charge Americans about 256% more than what they charge people in other countries for the same drugs (https://pharmanewsintel.com/news/us-prescription-drug-prices-256-higher-than-other-countries); and counterbalances the pricing power of nursing homes and assisted living facilities who charge exorbitant fees in this state (https://www.medicaidplanningassistance.org/nursing-home-costs/). Bargaining power allows a single payer to eliminate pricing inefficiencies, over-treatment of patients, fraud and abuse.
The other source of savings stems from the elimination of insurance company bureaucracies and human resource department bureaucracies of businesses, governments and other institutions that are presently needed to administer complex health plans and to interact with insurance companies (including in doctors’ offices). Those bureaucracies are dead weight–they add no value whatsoever. Households, businesses (including doctors and other individual health providers), governments and non-profits who now spend an inordinate amount of time, and endure the stress, of dealing with insurance company adjusters, will be able to save time and money from a greatly simplified system. They can focus on keeping people healthier or taking care of their core businesses.
Researchers estimate that at least one-fifth of total health care spending in the U.S. is unnecessary or wasted (https://www.chcf.org/wp-content/uploads/2020/01/GettingAffordabilitySpendingTrendsWaste.pdf; https://laborcenter.berkeley.edu/high-health-care-prices-are-the-primary-driver-of-california-workers-health-care-cost-problems/). Applying this ratio to California suggests there are more than $100 billion in unnecessary expenditures each year. A single payer system would radically and permanently reduce such waste. As the single payer, it will hold all the receipts needed to contain costs and optimize healthcare delivery performance.