Policy Today magazine cover
September 20, 2006
California Ed.

Few argue that health care—both obtaining it and affording it—is a challenge for many Californians today. PT talked with State Senator Sheila Kuehl, author of SB 840, immediately following the universal health care bill's passage in the Assembly.

PT: We have a good idea about why you drafted SB 840—many Californians are concerned about the rising cost of health care and the number of uninsured. Could you walk us through how it came together, how you structured it?

Kuehl: It was quite a long process. Beginning in 2002, a group called "Health Care for All," along with a number of other affiliated groups, approached me to see if I wanted to carry a bill creating a single payer health insurance program for California. I said, "You bet." We began work on the bill in the fall of 2002.

We started with the governance. Then we addressed coverage, because we wanted the coverage to be very comprehensive and we wanted it to include as much as we could possibly afford. That took us through 2003 and 2004, and we subsequently developed the bill called SB 921. Then we started hearing from the labor unions, because they wanted to hear how the bill was going to interface with their trust funds.

We further refined the governance structure, and then we started working on the reimbursement structure. How would providers be reimbursed? We heard from a lot of providers—not just organizations—on what they needed in order for the issues of coverage and reimbursement to be fairly treated.

This year we started working on the funding mechanism. An independent organization called the Lewin Group completed a study of the bill as proposed in terms of its cost in order to see how it might be financed. They released a comprehensive document on the subject at the beginning of last year, and that's when it became clear to us that it was a real possibility.

Several avenues of potential savings emerged: The savings from reduced administrative overhead and preventive care, negotiated prices on pharmaceuticals, the elimination of insurance company profits. These savings were more than adequate to finance the whole structure through premiums, which take the place of all premiums, co-pays and deductibles.

PT: Did you have a specific preexisting model in mind when you set out to develop the plan?

Kuehl: There were several models we looked at—none of which was perfect for California. The two main models we looked at for single payer in an American version were Medicare and the VA. Those are single payer models that are very familiar to Americans. We also looked at various kinds of universal health care plans in European countries. My staff was actually invited to visit France and Israel to talk to their officials about how they do it.

Some of the countries have a sort of hybrid system that we thought wouldn't work as well in the United States. So we were really looking at a totally fresh system that would be best for California by taking the best facets of the
other models.

PT: How did you answer critics of the bill who argued that it will create a new layer of inefficient bureaucracy and actually diminish the quality of care in the state?

Kuehl: I think there's no real basis for generalized criticism like that. I always appreciate opponents that point out something factual, but to claim that the bill will create a "bureaucracy" is ridiculous. What we have now is the most bloated bureaucracy we've ever seen. The health insurance companies in California provide about 30,000 kinds of health plans. It's so fragmented that it could use a little tighter administration. Of course it will still require people to work on figuring out who has insurance—that's the way it would be planned—but it would be so much more streamlined and much more transparent.
We have no idea what goes on inside those insurance companies. Under this plan, you'd have a commissioner appointed by the governor and everything would be open to public scrutiny.

PT: Let's say the governor had decided to go ahead and sign this bill. How practical would it be to switch over to a completely different system of health care in a state the size of California, and what would the biggest challenges be?

Kuehl: One of the biggest challenges would be the database. The insurance companies have never really synchronized their databases. Even Kaiser's north and south don't talk to one another. So, one of the main practical challenges would be to get the database up and running. The information is there, the software is there, but it would take some time.

Another practical challenge will be sorting out who has paid in, who has a card, who is a resident, etc. But there would be a long transition period—there would have to be.

PT: Have you confronted any of negative externalities that might be involved in the policy?

Kuehl: I wouldn't consider it a negative externality, but one of the things we hadn't considered at the beginning was how entities that were designing ways of coping with the current system's deficiencies were going to adapt. One example I've cited is organized labor. Workers' unions have created a relationship with trust funds so they can manage their own health care. But they've realized that it actually isn't in their best interest to be managing their own health insurance. The costs were going up and up, and they were unable to impact costs. So, last month at the labor federation conference, they unanimously endorsed this bill. That's old-line unions, new-line unions—everybody. The nurses' association was onboard, the teachers' association, people were visiting their assemblypersons to discuss it; it had a lot
of support.

Of course, as you hear about negative externalities, or unforeseen externalities, it gives us the opportunity to work to smooth it out. That's why I like the legislative process, because you have time, hearings, public input and the ability to amend—it's not like an initiative.

PT: Senator, thank you for your time.

Sheila Kuehl represents California's 23rd Senate District in Los Angeles and Ventura Counties. She serves as Chair of the Select Committee on the Health Insurance Crisis in California, and is the author of SB 840.