Generic Comprehensive SB 840 speech,
with integrated rebuttal to opposition positions.
(prepared by Nurse Judy Spelman, July 2005)
Good morning. Thank you for inviting me to talk with you about Senate Bill
840, the California Health Insurance Reliability Act introduced by Senator
Sheila Kuehl. SB 840 is a comprehensive health care reform. It is the only
reform before the state legislature that would provide health insurance,
(hi), for all residents, call for no new spending, include meaningful cost
controls and address problems with care quality.
This morning I'll talk about the problems facing the health care system,
(hcs), and what's causing them. Then I'll discuss SB 840: how it would work
and how it would solve the problems causing the health care crisis. (hcc).
When you talk about the hcc, most people think first about the 7 million
Californians who have no health insurance. But the problems go far beyond
lack of insurance. The problems reach into every home, every business, every
hospital, clinic and doctor's office, every state, city and county government
office. The problems affect all of us. What are these problems that people
are calling a "health care crisis"?
1. The first problem that affects all of us are problems with the quality
of care we receive, regardless of whether or not we have health insurance.
Four years ago the World Health Organization analyzed the health care systems
of 191 countries and found that the US ranks 37th in the world on the gold
standard of health care quality: population-based health outcomes, such as
infant mortality and immunization rates and life expectancy. All other
industrialized countries ranked above the US in this category.
WHO also found that the US ranks 55th for equity of health care financing,
a measure of whether people can afford the medical care they need and how
the society supports those who cannot. All industrialized countries ranked
above the US in this category.
Last year, on top of the WHO findings, the National Coalition on Health Care,
NCHC, which represents over 150 million Americans and whose honorary chairpersons
are former presidents Carter, Bush and Ford, issued a landmark report on
the state of the US health care system. NCHC concluded that the US is
experiencing an "epidemic of substandard care".
Let me read some of their conclusions directly from the report. (The source
for each quote can be seen in parentheses after the quote where not included
in the quote.)
"The dominant finding of our review is that for most care that has been
studied, there are large gaps between care that people should receive and
care that people do receive. This is true for all three types of care,
preventive, acute and chronic. It is true whether one looks at over-use or
under-use. It is true in different types of care facilities and for different
types of health insurance. It is true for all age groups, from children to
the elderly."(RAND), (fyi- Overuse is what typically occurs in the fee for
service sector where money is made for each service offered. The more you
do, the more money you make. Under-use is what typically occurs in the HMO
capitated sector, where more money is made when fewer services are
"Using 439 indicators of quality developed by multi-specialty expert panels,
the analysts found that participants received only 54.9% of recommended care---a
proportion that varied little across the categories of preventive, acute
and chronic care." (RAND)
"The Institute of Medicine has estimated that between 44,000 and 98,000
Americans die each year from preventable medical errors in hospitals. "
"According to the CDC, 88,000 Americans die because of infections contracted
"The IOM and CDC estimates do not include deaths due to preventable medical
errors in settings other than hospitals."
"126,000 die annually from failure of physicians to use evidence-based
standards of care for hypertension, heart attacks, pneumonia and colorectal
"29,000 Americans with diabetes experience kidney failure each year and
2600 go blind each year because of physician failure to monitor blood sugar
levels or to teach patients how to do it." (RAND)
"Mistakes in the use of medical technologies across all settings are
calculated to account for at least 400,000 deaths annually, of which about
two thirds can be attributed to preventable "health care accidents". These
numbers do not include the impact of failing to treat what we know how to
treat. They do not include the impact of overzealous use of the care. Were
fatalities from these additional sources added to those from "health care
accidents", the number of deaths would climb significantly." (Dr. David Lawrence,
former chairman and CEO of Kaiser Permanente)
"Improvements in American health care are both feasible and can contribute
to substantial, double-digit reductions in the total costs of care
nearly 30% below current levels." (Dr. Don Berwick, President of Harvard
University Institute for Healthcare Improvement)
"30% of all direct health care outlays today are the result of poor quality
care consisting primarily of overuse, under-use and waste."(Juran Institute
and Severyn Group for the Midwest Business Group on Health)
The lesson to be learned is that everyone is affected by these problems,
everyone would benefit if we solved them and a lot of money would be saved
2. Another problem that affects everyone who has health insurance is
"under-insurance", which refers to benefits your policy doesn't cover,
co-pays and deductibles you pay and the total benefit limit on your policy.
Under-insurance creates financial distress when you're sick.
Last year nearly 2 million Americans went bankrupt because of under-insured
illnesses and 3/4 of these people had health insurance when they became ill.
Many others didn't declare personal bankruptcy, but used up all their savings
and even sold their house to pay medical bills.
As I'll explain shortly, there is no need for this kind of financial distress.
3. Another problem we all share is the effect of the hcc on the state budget.
Health care costs are the second largest driver of the budget deficit.
We will all be paying the debt service costs for years to come. So will our
kids and probably also our grandkids.
We pay through taxes and fees and in roads not re-paved, in libraries closed,
in cutbacks in vital public health services, in decreased public support
for nursing education, etc. etc.
4. The rise in the price of health insurance premiums affects everyone.
Employee health insurance premiums increased 75% in the last 10 years.
Premiums are projected to rise to over $15,000 per employee in 2006. Insurance
in the individual market will be even more.
And remember, the premium is just the start of what you'll pay if you get
sick. You also have out of pocket costs for co-pays and deductibles, you
pay for the services your policy doesn't cover and you pay for everything
when you reach for policy limit.
For employers who provide health insurance, the rise in the cost of premiums
cut into funds that could have gone to wage increases. Wages have risen 1.7%
over while premiums have risen in double digits.
Rising premium costs have forced employers to eliminate retiree health care
benefits, to cut back benefits for current employees, to hire part-time rather
than full-time workers to avoid paying for health insurance and to pass hc
costs on to employees by increasing co-payments and deductibles and the employee
share of the premium.
5. Of course we cannot talk about the hcc without talking about the
82 million Americans will be without health insurance at some time this year.
45 million will be uninsured all year.
In California, nearly 7 million people are uninsured and 10 million have
no pharmaceutical coverage. This has been true through good and bad economic
People without hi are 25% more likely to die from an illness than someone
Lack of hi is the 7th leading cause of death in the US.
18,000 deaths each year are attributed directly to lack of hi..
Estimated economic losses attributable to un-insurance range from $65
billion-$130 billion a year.
Who is un-insured?
The vast majority, over 80%, are in working families, but their jobs don't
offer health benefits and don't pay well enough to make health insurance
We're all affected by un-insurance even if we have insurance ourselves.
Your emergency room may be overcrowded when you need it.
Your emergency room or even your local hospital may be closed when you need
it because it can no longer afford to take care of so many people without
insurance. 15% of the states emergency rooms have closed since 1994.
Your ambulance may be diverted from an over-crowded ER when you need it.
Your health insurance premiums, hospital and doctor bills are all being padded
to cover the costs of caring for the uninsured.
Your highways may not be repaired, your library may not get new books, your
local park may close because the money is going to pay for the care of the
Doctors are leaving medical practice and leaving California because they
don't get paid for a lot of the care they provide
and that includes
care to those with and without insurance
and because more often than
not, what they are paid doesn't cover the costs of giving care, much less
make them a fair profit.
The dilemma of the uninsured is not just about cost. A core American belief
is that all people are created equal. But Americans are not treated equally
in the hcs, Perhaps one day the Supreme Court will outlaw discrimination
in health care as they outlawed it in education
The irony is that we could save money if everyone were insured. People
without insurance put off getting care until they get sick. Sick care is
much more expensive than preventive care. It is estimated we would save $3.5
billion if everyone got preventive care.
I'll talk now about what is causing
and what is NOT causing these
Many people think large malpractice claims are the problem. But analyses
performed by the John's Hopkins School of Public Health show that
"malpractice claims have only a marginal effect on overall health care
spending and the US pays out less in malpractice claims than both Canada
Some say health care costs are high because Americans go to the doctor for
every little problem and demand too many services. The John's Hopkins study
found that Americans "actually have access to fewer health care
resources compared with people in many other countries. Americans pay more
for health care for the simple reason that prices for health services are
significantly higher in the US than they are anywhere else."
Some say it would simply cost too much for everyone to get the care they
need and we can't afford it. Consider this: Other industrialized countries
are able to insure everyone for half of what we're spending and get better
or equal health outcomes. Their average per person spending for hc is $3,000
a year. Ours is $6,000 a year. Lack of money for hc is not our problem. How
we're spending all that money is our problem. Which leads right into a discussion
of the underlying causes of the hcc.
There are six underlying problems causing the health care crisis.
1. The first is excessive expenditures on administration.
There are around 1500 private insurance companies, hundreds of government
insurance programs, thousands of private health care funding sources and
literally 10's of 1000's of different benefit plans.
Administering all these plans uses up 31% of what we spend on health care.
(Department of Medicine, Cambridge Hospital and Harvard Medical School and
Canadian Institute for Health Information)
No country or state can afford health care for everyone when they spend 30%
on administration. We just don't have enough resources.
2. The second underlying or foundational problem is the absence of a
comprehensive state or national purchasing policy that achieves fair pricing
for consumers and manufacturers of medical goods.
Because we lack a comprehensive purchasing policy, Americans pay up to twice
as much for drugs and medical equipment as people in other industrialized
Prices are so high that we find Americans choosing between filling prescriptions
and buying clothing or Christmas presents for their kids. We find Americans
cutting pills in half to stretch out a prescription. We find Americans not
filling prescriptions at all. We find Americans going to Canada to take advantage
of discounts negotiated by the Canadian health care system.
Pharmaceutical industry says we can't lower the price of drugs in US because
US prices support research. Excessive US prices primarily support marketing
and advertising, shareholder dividends and generous corporate manager
reimbursement packages, not research.
What further undermines their argument about research is that 40% of the
drug company research is "copy cat" research. It involves waiting for someone
else's patent to expire, producing the same drug and trying to get a share
of the market. It involves no improvements in the drugs. It involves no medical
advances. It involves a lot of new spending on advertising.
If the government used its purchasing power, we could cut drug prices by
30%-50% without hurting drug company profits. Why? Simple economics: The
increase in the sales of drugs to the 10 million who now have no drug coverage
would offset the price cuts under universal health insurance.
Also missing from the US non-purchasing policy are systematic cost-benefit
analyses of new medical technology and drugs. These analyses should guide
purchasing of new products. Instead, the driving force behind the sales of
new products is advertising, often directly to consumers who are not in a
position to evaluate the advertising claims. This kind of advertising is
restricted or prohibited in other countries.
Unlike the US, the governments of other industrialized countries use their
purchasing power to negotiate fair price structures. As a result, people
can afford these products, the market for them is enormous and profits are
substantial. Fair prices structures are a "win-win" situation for consumers
3. The third foundational problem is the absence of system wide planning
and budgeting for the health care needs of the population.
The US has no system wide health care budget and does no system wide planning.
Neither does California. We plan for our defense and have a defense budget,
we plan space exploration and have NASA budget, we plan our highway systems
and have a transportation budget, we have a school budget and a national
parks budget. But hc budget. And no health care planning.
Lack of planning unnecessarily increases health care costs. Once you build
or buy something, like a new MRI machine or a new wing on a hospital, you
have to staff it and maintain it and pay the debt service on it and you want
people to use it whether they need to or not. This leads to inappropriate
use of the health care services and you and I are paying for it.
No health care system can control costs if it doesn't plan and budget
4. The fourth foundational problem is excessive and preventable loss of
life and limb because of the absence of system-wide oversight of care
We talked about this earlier. The US is suffering from an "epidemic of sub
standard care". This is true for two main reasons.
One, no one has the authority to monitor and improve care quality and two,
a large majority of our doctors do not use evidence-based standards of care
to guide their decision making. All those frightening statistics about deaths
I gave you earlier are the direct result of the failure to oversee care quality
and to use standards.
The best performing health care system in the US today on 100's of quality
of care indicators is the Veteran's Health System. In the VA, doctors are
supported by standards of care, care quality is monitored on a system-wide
basis, doctors are rewarded for delivering high quality care, and someone
is responsible for care quality.
Some argue that the "market" will correct quality of care problems and that
the government shouldn't "interfere". But the market has not corrected quality
problems in spite of the fact that the tools to do so already exist.
Americans accept a government role in airline safety and the National
Transportation Safety Board has saved many lives by overseeing the airline
industry. Doesn't it make sense to have the same oversight for health care?
5. The fifth structural problem is the linkage of health insurance to
employment. Why is this a problem? The linkage of health insurance to
employment ties the financial fate of businesses to the financial fate of
the health care system. It hasn't worked well.
The linkage means that employers who offer health insurance find themselves
in the expensive business of negotiating and re-negotiating health benefit
contracts. This has become an enormous financial burden.
Health benefit disputes are the main cause of labor strife in the US.
High hc costs are driving jobs overseas.
Wages are depressed as employers pay for health benefits.
Employers are increasing the employee share of health care costs and decreasing
Job mobility is distorted as people stay at a jobs they don't like to protect
Employment is depressed as investment dollars that might have created jobs,
go instead to health care.
People lose health insurance if they lose their job.
Linking a constant need like health care to a constantly changing benchmark
like employment is a problem for employers and employees alike.
6. The sixth foundational problem is the structure of the health insurance
market. The market for hi is characterized by three features that are
the cause of un-insurance and under-insurance.
First, health insurance is a product. Those who can afford it can buy it.
Those that can't afford it, can't buy it. Health insurance companies have
priced millions of Americans and their employers out of the market for health
insurance, driving up the ranks of the uninsured. It's one thing to price
people out of the market for a Mercedes Benz or a diamond ring. It's quite
another to price people out of the market for health care.
Second, the health insurance market creates un-insurance by refusing to sell
insurance at any price to people who are sick or who have ever been sick,
or whose family history suggests they might get sick. This is the so called
"pre-existing condition" exclusion and it drives up the ranks of the
Third, the health insurance market creates "under-insurance" by offering
"catastrophic" policies to healthy people and to those who cannot afford
comprehensive coverage and by including hidden costs and complicated
benefit definitions and limitations in so-called comprehensive policies.
The health insurance market increases profits by systematically and
intentionally under-insuring illnesses.
Under-insurance of illnesses is the single greatest cause of personal bankruptcy
in the US. Nearly two million Americans were forced to declare bankruptcy
last year because of medical bills.
It's fair to say that the structure of the health insurance market creates
a crisis of values, not just costs. Americans believe in the market system
but also believe that everyone has an equal right to life, liberty and the
pursuit of happiness. No one can pursue life and happiness when they're sick
and they can't get medical care or have to spend all their savings or sell
their house to pay medical bills. Surely we can find a better balance
of beliefs, a better balance of the rights of the market and the rights of
man, like every other industrialized country has.
We've talked about the nature of the hcc and its underlying causes. Now
let's talk about a reform that can solve the underlying problems, because
if we don't solve the underlying problems, we will just continue to throw
good money at a broken system.
1. Under SB 840, the state of California would establish a health insurance
plan that covers all residents and a HC Fund into which all money to be spent
on hc would be deposited and from which all hc payments would be made. Analyses
show that these two changes could save around $20 billion dollars in the
first year, more than enough to insure everyone who is now un-insured.
These steps solve two of the six problems. They decrease administrative
costs and complexity and re-adjust the hi market by eliminating cost and
pre-existing condition exclusions.
2. Under 840, California would use its purchasing power to negotiate a fair
price structure for drugs and medical equipment and would conduct cost-benefit
analyses of new technology and drugs. Analyses show this would save $5 billion
3. The system would be administered by an elected health Commissioner who
would establish a statewide hc budget and to plan for the health needs of
There would be an Office of hc Planning, headed by a planning director, and
up to 10 regions would be established to plan for the health needs of the
population on a local basis. Local, rather than centralized planning,
is extremely important. No one is going to be comfortable if day-to-day decisions
about their care are made by the state government. SB 840 strongly supports
local planning and decision making.
There would be an Office of hc Quality headed by the Chief Medical Officer
to establish standards of care, monitor care quality and solve quality of
There would be a consumer advocate to protect consumer rights.
There would be a health policy board chaired by the commissioner to guide
overall health policy. There would be a public advisory board with a voting
member on the health policy board to advise on all policy matters.
This governance structure resolves problems related to lack of a budget
and planning and gives the commissioner the structural tools needed to control
health care costs.
4. Eligibility for the plan is based on residency rather than employment.
This de-links health insurance and employment.
If too many people come to the state to get medical care, we would implement
strict eligibility requirements, including higher charges for newcomers,
as the state university system does.
5. The benefits under SB 840 are comprehensive. They include dental and vision
care, prescription drugs and DME, hospitalization, outpatient and home care
and a lot more. This is the first step in solving the problem of
6. There are no co-pays or deductibles for at least the first two years.
This is the second step in solving the problem of under-insurance.
7. Everyone can choose their own primary doctor.
8. All licensed providers and accredited facilities would be part of the
9. Doctors would decide how they want to practice medicine: privately, in
clinics or in HMO's and would negotiate their reimbursement through their
chosen representatives. 10. Doctors would be paid for all covered services
they provide. If a patient turned out not to be eligible for the California
health plan, the hcs, not the doctor, would assume the costs of care.
11. Hospitals, clinics and integrated health care organizations would get
their operating funds from the state health fund, rather than having to file
claims with 1000's of insurance companies. They would negotiate a budget
and receive predictable funds on a regular basis.
12. The plan is paid for with money we already spend on hc. No new spending
is required to fund this program.
13. What each person pays would be in proportion to their income. What each
business pays would be in proportion to the wages they pay. This would make
the premiums affordable for everyone.
1/3 of the funding comes from federal and state dollars that are now spent
on health care.
2/3 comes from a hi premium that everyone pays except the very poor, who
would be subsidized, as required by law.
If your employer pays for your hi now under an employer-employee contract,
they must pay your hi premium under 840.
Senator Kuehl will announce the premiums in January.
These California premium completely replaces the premiums you or your
employer currently pay. They completely replace co-pays and deductibles you
currently pay as well.
And most important: once your premium is paid, your hc costs do not go
up if you get sick.
And this is another step in solving the problem of under-insurance.
Analysis of the plan show that all businesses that currently insure 80% or
more of their employees, would save money, a large majority of California
families would save money and the state and counties would save $44 billion
in the first decade. Overall the savings are predicts to be over $300 billion
in the first decade.
I'll conclude with these thoughts:
It is estimated that the current hc system wastes 50% of the money that's
put into it. Most of the waste is on administration, excess drug prices and
poor quality care. SB 840, as a single-insurer system would solves the underlying
mis-spending problems of the current system and would get 90%-95% of every
dollar we spend into hc.
By increasing the share of the our hc spending that goes to health care,
and by decreasing the share that goes to administration, drugs and poor quality
care, we could not only insure everyone, we could increase spending on research,
we could increase benefits, we could pay doctors bonuses for providing high
quality care, we could train more nurses and a lot more.
By putting a Chief Medical Officer in charge of care quality, by having a
statewide office for quality and by supporting doctors in providing high
quality care, we could decrease or even eliminate deaths from medical errors
and solve other important care quality problems
And save a lot of money,
perhaps as much as 30%. That money could go to benefits, salaries, research,
innovation and medical education
840 solves problems of the hcs without spending more money.
840 increases choice for patients and doctors.
840 takes a tremendous financial burden off the backs of our businesses.
And 840 gives us the opportunity to bring our core American beliefs to life
in the health care system.