March 24, 2009
12:01 a.m. Eastern Time
Researchers Examine Lessons From California's Failed Health Reform Efforts
Leading Analysts Discuss What The California Policy Experience Implies For Today's Reform Debate
Bethesda, MD -- Key proposals to reform health care at the federal level rely on the foundation of "shared responsibility," the idea that individuals, employers, and government must all contribute to efforts to expand coverage. Shared responsibility also formed the foundation of the compromise health reform plan agreed to in December 2007 by California Governor Arnold Schwarzenegger (R) and the Democratic leaders of the state Assembly.
Health reform efforts in California ultimately failed. However, the approaches taken in this compromise plan -- and the differences between the California plan and landmark health reform legislation enacted by Massachusetts in 2006 -- can provide important lessons for future state reform efforts and for President Obama and congressional leaders as they pursue federal health reform, say three papers based on research supported by the California HealthCare Foundation (CHCF) and published today on the Health Affairs Web site. The papers provide a comprehensive look at the California experience; highlights of the papers are presented below. http://content.healthaffairs.org/cgi/content/full/hlthaff.28.3.w417/DC2
"No other state has Massachusetts' combination of high incomes, low uninsurance rate, sizable existing federal waiver funds, and high health care and coverage costs," Rick Curtis and Ed Neuschler point out in "Affording Shared Responsibility for Universal Coverage: Insights from California," one of two papers by Curtis and Neuschler published 24 March. "California, on the other hand, has a large low-income population and high uninsurance rate," say Curtis, president of the Institute for Health Policy Solutions (IHPS) in Washington, D.C., and Neuschler, a senior program officer there. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.3.w417
Reaching Working People: Tax Credits Versus "Affordability Waivers"
Curtis and Neuschler discuss the differences between Massachusetts' and California's approaches to providing affordable health coverage to working people and their families. First, while both states undertook the difficult question of determining what constitutes "affordable" insurance, and both state plans opted to subsidize coverage for low-income residents, Massachusetts decided to allow some of its working people to remain uninsured. The Bay State denied public subsidies to state residents with access to employer-sponsored coverage and granted "affordability waivers" to those who could not obtain affordable insurance, relieving them of the obligation to purchase coverage.
In contrast, to achieve near-universal coverage, California's plan included tax credits for workers and others with incomes above the threshold for subsidized comprehensive coverage who faced high premiums relative to their incomes. Golden State leaders held down costs and incentives for employers to drop coverage by tying tax-credit amounts to premiums for a health plan with a sizable deductible, and by phasing out the credit as incomes rose. California's plan also provided public assistance to workers with access to employer-sponsored coverage, although it deferred the final decision on how that assistance would be structured.
Dealing With The Problem Of Adverse Selection
In a second paper, "Designing Health Insurance Market Constructs for Shared Responsibility: Insights from California," Curtis and Neuschler examine the framework through which California's plan provided coverage to those without access to employer-sponsored coverage. They elaborate on how the California plan attempted to safeguard against "adverse selection," the tendency of insurers to seek out relatively healthy, low-risk customers, and the tendency of consumers to purchase minimal coverage when they are healthy and more extensive coverage after they get sick. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.3.w431
To preclude carriers from offering only low-benefit policies that would attract low-risk people, the California plan required all carriers in the individual market to offer at least one plan in each of five coverage "tiers," ranging from the lowest-cost, highest-deductible plans to the most comprehensive benefit packages. On the flip side, individuals were guaranteed access to plans in any of the five tiers, but they were prohibited from moving up or down more than one tier per year.
To protect plans against the danger of attracting relatively higher-cost people, the California plan included risk-adjustment triggers to increase payments to plans for sicker people. The plan also included government-sponsored reinsurance for insurers in the event that the individual market as a whole attracted disproportionately sicker people in significant numbers.
Policy Lessons From California
In the third paper published today by Health Affairs, "The Long and Winding Road: Reflections on California's ‘Year of Health Reform'," the CHCF's Marian Mulkey and Mark Smith examine lessons from the California policy experience. Reform attempts are most likely to succeed if they have bipartisan buy-in; address the needs of both insured and uninsured people; deliver short-term progress within the context of longer-term goals; rely on broad and sustainable financing; strike a balance between specificity and flexibility; and occur within a clear framework of state and federal responsibilities, say Mulkey, a senior program officer at the CHCF, and Smith, the foundation's president and chief executive officer. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.3.w446
Mulkey and Smith also stress the magnitude of the task that successful health reform will entail: "The political energy and media attention that fuel the health reform debate focus on 'coverage' and (often only by implication) access to care. In contrast, the obstacles center on cost and value: assuring that costs can be contained and that increased spending will improve access to high-quality care for the uninsured without undermining access and affordability for those who are insured. . . . Long-term success will require that the focus be expanded from finding revenues that allow broader participation in existing coverage and care arrangements to a fundamental reorganization of financing and delivery systems."
After the embargo lifts, you can read "Affording Shared Responsibility" by Curtis and Neuschler at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.3.w417
You can read "Designing Health Insurance Market Constructs"by Curtis and Neuschler at
You can read "The Long And Winding Road" by Mulkey and Smith at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.3.w446
ABOUT HEALTH AFFAIRS:
Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org. The full text of each Health Affairs Web Exclusive is available free of charge to all Web site visitors for a two-week period following posting, after which it will switch to pay-per-view for nonsubscribers. Web Exclusives are supported in part by a grant from the California HealthCare Foundation.
©2009 Project HOPEThe People-to-People Health Foundation, Inc.