Basic Health Plan numbers do not add up

One of the most hotly contested issues for the end-of-year special session called by Gov. Brown on healthcare is whether California should create a “Basic Health Plan.”  This proposal would take away subsidies for the purchase of private health insurance from an estimated 800,000 lower-income Californians.  It would require them to enroll instead in a program run by the state’s Medicaid department.

The proponents of the Basic Health Plan claim that it will be vastly more affordable for Californians.  But their numbers do not add up.

A recent opinion piece by Los Angeles County Health Services Department Director Mitchell Katz advocating for the creation of a Basic Health Plan used the example of a woman making $1,250 a month.  He argued that an Exchange plan would be too expensive for her because it would cost $123 per month or almost 10% of her income.

That’s incorrect.  For a woman making $1,250 per month, the Affordable Care Act limits the amount she will pay in premiums to 3% of her income.  That’s $38.  And her out-of-pocket expenses are also limited by law to 8% of her total bill.  This works out to about $22 per month for a person with average medical expenses.

So the total cost for private health coverage on the Exchange for this working Californian is $60, not $123.  That’s a big difference.

It is also important to point out that we have no idea whatsoever how expensive Basic Health Plan coverage would be.  Some projections put it at $15 per month for a Californian who earns $1,250 per month.  But in order for those numbers to add up, the state would have to use the limited group of hospitals and doctors that already provide services to the Medicaid population and would have to pay them little more than the microscopic rates that it pays them currently.

There are many problems with this approach.  For starters, the state Medicaid program pays, in some cases, as little as 8% of the total cost of providing healthcare.  These unpaid costs must be covered primarily by individuals insured through their employers who are already struggling with astronomical healthcare costs.

Low public program payments hurt the program beneficiaries as well.  The narrow networks that serve the safety net populations are already struggling to prepare for the 2 million more Californians who will be eligible for Medi-Cal under the ACA.  Trying to shove another 800,000 Californians enrolled in the Basic Health Plan through these same doors into rooms already jammed with people is a terrible way to start the implementation of health reform.

Realistically, the Basic Health Plan would have to spend more money to get more access, broader networks, and better specialty care.  But then its costs start to ratchet up and the prospects of providing more affordable coverage than the Exchange will quickly disappear.  And California actually gets, by law, 5% less in federal funding for the Basic Health Plan than it does for Exchange subsidies.  If the massive federal cuts slated to take effect beginning next year are not averted, this funding gap will be even greater since exchange subsidies are protected from the cuts while the Basic Health Plan is not.

It is particularly important to get the numbers right when we’re talking about coverage for working class people who are making their way up the income ladder.  Essential to the promise of the Affordable Care Act is that the health insurance plans will be affordable for them, affordable for us all.

But at the end of the day, the Affordable Care Act isn’t only about affordability.  It also aims to create a better, simpler, more universal healthcare system.  By creating an entirely new public program based on a narrow network of overworked, underpaid healthcare providers, the Basic Health Program belies the promise of healthcare reform.

We need to spend the special session bolstering healthcare reform, not pulling it apart.

Micah Weinberg, CEO Healthy Systems Project for Capitol Weekly