On January 8, 2007 Governor Schwarzenegger unveiled the most comprehensive health care reform initiative in the nation, which will bring accessible, efficient and affordable health care to every Californian. His plan addresses our broken health care system and the hidden tax that every insured Californian pays to subsidize the uninsured. Individuals, government, doctors and hospitals, insurers and employers all have equal responsibility for realizing these reforms. By promoting health and wellness, covering the uninsured and increasing affordability, California can create a model that the rest of the nation can follow. 

More than one in six Californians is uninsured at any given time—that’s 6.5 million people. Who are the uninsured? They are employed: Nearly 85 percent work, and two-thirds work full-time. They are young: Thirty percent are between 18 and 35. They are working poor: More than three in five earn less than 200 percent of the Federal Poverty Level (FPL, $33,200 for a family of three in 2006), while more than one in five uninsured are in families making more than 300 percent FPL ($49,800 for a family of three).

All Californians are hurt by our broken health care system. Every insured Californian pays a “hidden tax” in the form of higher premiums to subsidize health care for those who can’t, or won’t get health insurance. Individuals pay $455 annually, families pay $1,186. It is estimated that insured individuals and employers offering coverage pay 17 percent higher premiums to offset the uninsured and the effects of Medi-Cal under-funding. The majority of uninsured Californians go to emergency rooms to get basic health care, reducing access for all Californians. Providing uncompensated care to millions has strained hospital budgets to the breaking point, and in response, more than 65 emergency rooms have been forced to close within the past decade.

Health care costs are spiraling out of control, with devastating consequences. Chronic illnesses, like diabetes, and poor health choices, like smoking, drive up health care costs and the hidden tax. Medical errors also increase costs, at a rate of more than $4 billion annually and 23,000 lives each year. Fewer and fewer workers can get insurance through their jobs. Nationally the number of employers offering job-based coverage is declining, premium rates outpace inflation and job growth, and the annual increase in health insurance costs is 11 percent nationwide. The U.S. Senate Rules Committee estimates that nearly half of all personal bankruptcies in the U.S. are related to medical costs. Other estimates put this figure above 50 percent.

The Governor’s health care initiative will reduce the hidden tax, lower costs, support better care and make California healthier. Governor Schwarzenegger’s initiative is based on three building blocks: Prevention and wellness; coverage for all Californians; and affordability and cost containment. These building blocks rest solidly on shared responsibility by individuals, government, doctors and hospitals, insurers and employers. California cannot reduce costs, increase coverage, restore emergency care or achieve the long-term cost savings that greater statewide health can achieve without the equal participation of every player.
 
Under the Governor’s proposal:

• All Californians:
• Must have a minimum level of insurance to ensure that those with insurance no longer pay for the uninsured.Individuals will be responsible for securing health coverage for themselves and their children and contributing to paying for their coverage.
• Have a responsibility to purse good health. The Governor’s plan outlines a comprehensive prevention policy that encourages and rewards healthy behaviors; supports new efforts to fight diabetes, smoking and obesity; and reduces medical errors.
• Will benefit from the reduced hidden tax if all are insured. It is estimated that coverage for all will cut the hidden tax in half. 
• Government:
• Will return $10-15 billion doctors and hospitals by increasing federal reimbursement for Medi-Cal.
• Will provide subsidies for low-income families to buy health coverage through a new purchasing pool.
• Will expand Medi-Cal to poor adults and expand Healthy Families/Medi-Cal to all children in families earning less than $60,000 annually.
• Employers:
• Those with 10 or more employees who choose not to offer health coverage will contribute 4 percent of payroll toward the cost of employees’ health coverage. Companies with less than 10 employees—a full 80 percent of businesses in California—are exempt.
• The 4 percent fee will prevent employers of ten or more from dropping their health care coverage in light of the state’s program.
• Health Plans and Insurers:
• Must guarantee individuals access to coverage in the individual market, spend 85 percent of every premium dollar on patient care and make “Healthy Actions” benefits available to promote healthy behaviors. The Governor’s initiative will expand the state’s insurance pool by 4-5 million and give insurers fair compensation for their services.
• Doctors and Hospitals:
• Will be relieved of costs associated with caring for the uninsured and will receive significantly increased Medi-Cal rates—eliminating the need for any cost shifts or hidden tax. 
• Will receive $10-$15 billion—and in turn, will contribute a portion back to universal coverage. Physicians will contribute 2 percent of revenues and hospitals will contribute 4 percent, ensuring some of the savings stays in the system to support total coverage and increased Medi-Cal rates to providers.
• Have a responsibility to provide affordable, quality care, partner with patients to improve wellness and health outcomes; and share in cost savings.

By engaging individual Californians, businesses, the state and federal government, health care providers and insurers, the Governor’s plan will:

• Reduce the hidden tax by containing health-care costs and ensuring the insured no longer pay for the uninsured.
• Lower costs by fairly compensating hospitals, making health coverage available to every Californian and fighting chronic illnesses.
• Support better care by reducing medical errors, restoring emergency care, and developing innovative health information technology applications.
• Promote a healthier California by ensuring that everyone has access to health coverage, promoting affordability and rewarding good health choices. 
  

Just the Facts
The hidden tax costs $455 per individual or $1,186 per family each year. "This results in an approximate 10 percent increase in health insurance premiums for Californians. More specifically, the average California family with health insurance will pay an additional $1,186 in premiums for 2006. Individuals purchasing insurance will spend about $455 annually in additional premiums." Source: Peter Harbage and Len M. Nichols, Ph.D., "A Premium Price: The Hidden Costs All Californians Pay In Our Fragmented Health Care System," New America Foundation, December 2006.

Californians are denied coverage based solely on their jobs and the medicines they take. “Health insurers in California refuse to sell individual coverage to people simply because of their occupations or use of certain medicines, according to documents obtained by The Times. Entire categories of workers — including roofers, pro athletes, dockworkers, migrant workers and firefighters — are turned down for insurance even if they are in good health and can afford coverage, according to the confidential underwriting guidelines of four health plans.” Source: Lisa Girion, “Health Insurers Deny Policies In Some Jobs,” Los Angeles Times, January 8, 2006.

Californians Are Putting Off Medical Care Until They End Up In The ER. "Currently one in five Californians – roughly 7 million people – have absolutely no health insurance. Without it, many people simply put off medical care until they end up in the ER – much sicker and requiring more care than they would have had they been visiting a doctor on a regular basis." Source: Dr. Barry Simon, "Emergency Rooms On Front Line Of Health Care," Contra Costa Times, December 2006.

Health Care Providers Are Forced to Increase Costs To Compensate For Caring For The Uninsured. "Providers do not have unlimited pockets to secretly finance the health care provided to millions of uninsured (and underinsured) patients. Hospitals and physicians anticipate the fact that the uninsured will seek care each year. They prepare for this reality by: *Setting prices for the insured that are higher than expected costs. *Cultivating supplemental funding streams (e.g., charitable contributions, and state/Federal grants that partially compensate them for treating the uninsured, etc.). *Planning to accept lower revenues than they could otherwise earn. *Seeking redress in bankruptcy court for past unpaid bills." Source: Peter Harbage and Len M. Nichols, Ph.D., "A Premium Price: The Hidden Costs All Californians Pay In Our Fragmented Health Care System," New America Foundation, December 2006.

The Cost Of Employer-Based Health Care Continues To Outpace Both Inflation And Wage Growth. "But the costs of health care benefits continue to outpace inflation and wage growth, leading employers to cut back on benefits and eligibility while increasing employees’ shares of cost." Source: Jean Yoon, E. Richard Brown, Shana Alex Lavarreda and Sungching Glenn, Health Policy Research Brief: "One In Five Californians Were Uninsured In 2005 Despite Modest Gains In Coverage," UCLA Center for Health Policy Research, October 2006.

The State Spends Billions Each Year To Help Defray Health Care Costs. "This is based on national and California studies that show the full-year uninsured can spend 30 to 50 percent out of their own pockets for health care, depending on age and other factors. Assuming a midpoint of 40 percent for out-of-pocket spending, there is still 60 percent of spending (or $9.6 billion) to be financed in some other way. To help defray the remaining $9.6 billion, state, Federal and local governments spend several billion dollars annually." Source: Peter Harbage and Len M. Nichols, Ph.D., "A Premium Price: The Hidden Costs All Californians Pay In Our Fragmented Health Care System," New America Foundation, December 2006.

The Number Of Employees With Job-Based Coverage Has Declined. "The increase in the number of uninsured was largely the result of a decline in the percentage of Americans with job-based coverage. That figure fell from 60.4 percent in 2003 to 59.8 percent in 2004. The number of uninsured increased among both full-time workers (from 20.6 million to 21.1 million) and part-time workers (from 5.9 million to 6.3 million). Likewise, the percentage of both groups who were uninsured increased—from 17.5 to 17.8 among fulltime workers and from 23.8 to 25.0 among part-time workers." Source: "The Uninsured and Rising Health Costs," Alliance For Health Reform, January 2006.

Overall Health Care Spending Has Nearly Doubled In A Decade. Overall health care spending in California was nearly $170 billion in 2004, up from about $90 billion in 1993 and under $60 billion in 1988. Source: Centers for Medicare and Medicaid Services, Office of the Actuary, "2004 State Estimates," May 2006.

No One – Neither The Uninsured Nor Insured – Is Getting Top-Quality Medical Care. "RAND’s national study found deficits in quality of care across all types of care—chronic, preventive, and acute." Source: Dana P. Goldman, Elizabeth A. McGlynn, "U.S. Health Care: Facts About Cost, Access, And Quality, The Rand Corporation, 2005.

There Is Widespread Support for Reform. “There is widespread voter agreement that government should assure access to affordable health care insurance. Statewide, 81% of voters agree (59% strongly) with the statement “it should be public policy that government guarantee that all Californians have access to affordable health care insurance or other health care coverage.” In addition, 78% agree (44% strongly) that government has a responsibility for providing health care coverage for people who can’t afford to pay for it themselves.” Source: Field Poll, “California Voter Views of the Health Care System (Part 1 of 2),” January 3, 2007.