If the budget permits, the commissioner may add benefits above those required by the bill.(140502)

Is abortion covered?

Yes.Abortion is not excluded, so it is covered if determined to be medically appropriate by the woman’s health care provider.(140501)

The sponsors of SB840 understand that abortion is a controversial matter.Abortion is currently covered under state programs such as Medi-Cal.SB840 is designed to have coverage at least as comprehensive as current state programs.Most Californians support making abortion available to women of all income levels.

What religious healing is covered?

“Prayer or spiritual means” by a practitioner of a “bona fide church, sect, denomination, or organization” is covered.This is understood to refer to Christian Science practitioners.This religious healing is covered by Medicare and required by federal and state statutes (140501z)

What is not covered? (140503)

long-term care over 100 days

cosmetic procedures with no medical indication

private hospital rooms with no medical indication

care by unlicensed providers

procedures or medications with no proven medical value.

What will happen to private health insurance?

Private companies will be allowed to sell insurance policies only for health care procedures that are not covered by the California Universal Healthcare System.This means they will not be covering much, and probably will not be worthwhile.

Governance

Public accountability

The California Universal Healthcare Agency, headed by the Universal Healthcare Commissioner, will administer the California Universal Healthcare System.The Commissioner is appointed by the governor, subject to Senate confirmation. (140100)The commissioner cannot be an employee of a for-profit insurance, pharmaceutical, or medical equipment company for two years before and two years after serving.

The commissioner appoints regional directors and officers of the system including the Deputy Commissioner, the Director of the Universal Healthcare Fund, the Patient Advocate, the Chief Medical Officer, the Director of Health Planning, the Director of the Partnerships for Health, and the Director of the Payments Board. (140101c)

These officers and directors, along with the state public health officer, constitute the Universal Healthcare Policy Board. (140103) The Governor, the Senate Committee on Rules, and the Speaker of the Assembly appoint a Public Advisory Committee, to give expert input to the policy board, with members representing physicians, psychiatrists, nurses, public and private hospitals, integrated health care systems, dentists, health practitioners, pharmacists, mental health providers, consumers, large and small businesses, and labor. (140104)Meetings are open to the public.One member of the Public Advisory Committee shall serve on the Universal Healthcare Policy Board.

An Inspector General from the Attorney General’s office ferrets out fraud, mismanagement, and other illegal or improper activity. (140106)

The Patient Advocate responds to complaints and advocates for the public who use the health care system. (140105, 140608) An Independent Medical Review System provides examinations of disputed health care services. (140609)

Quality health care and health care planning

SB840 is designed to provide Californians with excellent health care and to plan for future needs and technological advancements.

The Chief Medical Officer heads the Office of Health Care Quality, with the job of helping doctors and other health care providers deliver the most appropriate and effective medicines and procedures. (140606) This office sets standards of best medical practice, recommends a formulary for pharmaceuticals and durable equipment, identifies treatments and medications that are safe and effective, and recommends means to achieve an appropriate ratio of general practitioners to specialists.

The Office of Health Planning makes sure our health care system prepares for the future. (140602) The director and staff plan for the health needs of the population, establish system performance criteria, identify health outcome disparities and service shortages and recommend corrective steps, establish statewide health care databases to support planning and performance review, plan for system capital investments, and link state and private research to health system goals.

Responsible fiscal management

SB840 provides for responsible management of the money contributed by California’s taxpayers to provide them with quality health care.Total growth in spending is limited proportionate to growth of our economy and our population (see “Cost Management” below).

The Universal Healthcare Fund, with its own director, receives and disburses all monies to be expended on health care. (140200)An appropriate amount of money is held in a reserve account. (140201a2)The director is responsible for notifying the commissioner if expenditures threaten to exceed revenues, so that the commissioner can take corrective measures. (140203) (see details below in “Temporary cost-management measures”)

The Payments Board is responsible for establishing levels of compensation, after negotiation, with managers and providers in the health care system, following guidelines set by the commissioner.(140208)This board consists of experts in health care finance and insurance, along with representatives of the commissioner, the Health Insurance Fund, and the regional planning directors.The board plans compensation for upper level managers in private facilities, elected and appointed health insurance system employees who are exempt from civil service requirements, physicians, nurses, and other health care providers.

Regional tailoring

Various regions in California differ in cost-of-living, the needs of their population, the proportion of children or the elderly, existing health facilities and providers, and other features.To meet the needs of these differing populations, the commissioner will establish up to ten Health Care Regions, each with its own director. (140112)Each director will appoint a regional medical officer. (140112d)Using a budget provided by the commissioner,the directors will administer the health insurance system for each region, including appointment of regional planning boards, prioritizing healthcare goals, implementing capital management plans, and preparing three-year budget requests. (140113)

Patients are not limited to their home regions for health care. (140113c9)

Funding

The California Health Insurance System will be funded by a combination of monies already collected and used by government health agencies such as Medicare and Medi-Cal, and new revenues.Government monies already pay for about half of all health expenditures.The use of Medicare and Medicaid funds will require waivers negotiated with the federal government.(140240)

The specific new revenues for CUHA have not yet been included in the bill.A Premium Commission will recommend additional new revenues to pay for the remaining cost of the program.These will likely include health premiums based on a percentage of wages, paid partly by employers and partly by employees.The Lewin Group (2004) studied a proposal for approximately 12% of wages along with some other taxes, and found it adequate.

The Premium Commission will include health economists, legislators, and representatives of business, labor, non-profit organizations advocating sustainable funding and universal health care, and state officers for the Franchise Tax Board, Board of Equalization, the Employment Development Department, the Health and Human Services Agency, the Department of Finance, the Legislative Analyst, the Controller, the Treasurer, and the Lieutenant Governor. (140230)

The Commission is mandated to recommend a premium structure that is adequate for the system, varies with income, is affordable for all, does not greatly increase the monies paid by any particular segment of the economy (such as employers, individuals, and government),and complies with state and federal laws and regulations. (140232).

The Premium Commission will have two years to make a recommendation.The Legislature and the Governor will then approve or modify the recommendations.The system will become operative when the Secretary of Health and Human Services determines that the Health Insurance Fund has sufficient monies for implementation. (140700)

The overall cost will be lower than the current system, so we can be confident that most businesses and most individuals will save money.

Some of the initial costs of the system will come from monies subrogated from insurance companies and other entities which have collected premiums and saved the monies in reserve accounts (140302-140306)

Cost Management

Provisions for managing costs

Everyone agrees that medical costs are rising too fast.Private health insurance is rapidly becoming too expensive for employers, employees, and individual buyers, and government programs including Medicare and Medi-Cal are running short of money.To keep the California Universal Healthcare System financially healthy, delivering quality coverage without more tax increases, SB840 includes a number of important cost management provisions, such as planning for capital improvements, and reliance on primary physicians to make referrals.

Statutory spending limit - The bill mandates that spending will grow no faster than the average growth in state GDP and population growth. (140206b) Regional spending limits also depend on costs of living, advances in technology and improvements in quality of care. (140206b)

Administration costs limited – The bill mandates that after a 5-year transition period administrative costs will be no more than 10% of system costs.After10 years, administrative costs must be no more than 5%. (140224)This low number is similar to the administrative costs of Medicare and of public health insurance systems in other countries, such as Canada.It is much lower than administrative costs for private insurance, which typically amount to 15-25% or more.

Pharmaceuticals and medical equipment - Bulk purchasing will give California market power to reduce purchasing prices. (140220b)The Lewin Group report (2004)estimates savings of 19-35% on drug purchases.

Capital improvements -This includes additions to hospitals and facilities and expensive machinery such as MRI machines.Some regions have overlap and duplication.Analysts agree that this is an important factor in pushing up the cost of health care.Other regions are underserved and need more new facilities.

Under SB840, capital improvements to health care facilities will be in accordance with plans made by the commissioner and regional directors. (140216) All capital investments including facility improvements, land and office space purchases and large medical equipment purchases are subject to the capital planning guidelines. Facilities may earn autonomy from capital management oversight by a positive performance record. (140216d) The commissioner will establish standards for small capital expenditures funded through operating budgets. (140216f)

SB840 requires that the commissioner’s plans for capital improvements shall correct health care disparities (140206f9) and minimize unneeded expansion of facilities and services. (140216a)

The system will not pay for mandatory earthquake retrofits. (140217a6)

Fair management compensation –Fair compensation for upper-level management in private health care facilities will be negotiated with the Payments Board. (140210)

Referrals for specialists - Visits to medical specialists in most cases will require a referral by a primary care physician or health practitioner, or from an emergency care provider. (140601b1)Requiring primary care referrals will keep unneeded specialist visits to a minimum, and help reduce fraud.Experience in countries such as France has shown this to be an important component of managing system costs. (See more detail below in “Helping Patients”)

Eligibility waiting period – This bill intends that people arriving in the state with the intent to reside will become eligible immediately.However, if the commissioner determines that large numbers of people are moving into the state for the purpose of receiving medical care, the commissioner shall establish a waiting period and other criteria to ensure the financial stability of the system. (140406e)

Temporary cost-management measures - If trends indicate that expenditures will exceed revenues, the commissioner will implement cost control measures which may include any of the following:  improving efficiency of administration and delivery of care, postponement of new benefits, temporary decrease in benefits (with approval of Legislature), postponement of planned capital expenditures, correction of inappropriate utilization, limitations on reimbursement of CHIS managers and upper level managers in health facilities, limitations on health provider aggregate reimbursements, limitations on aggregate reimbursements to manufacturers of pharmaceuticals and medical equipment, deferred funding of reserve account, and imposition of co-payments or deductibles. (140203c)

Improving Delivery of Care

SB840 is designed to not only efficiently manage health care costs and save money, but also to improve health care in California.

Office of Health Care Quality: The chief medical officer is responsible for making sure doctors and other health care practitioners have the best information about medical practice.(140606) Recommendations for use of drugs and procedures will be based on clinical efficacy.

Office of Health Planning: This office looks to the future. (140602)The director and staff plan so that every area of the state has enough health care services.They monitor the system using databases and health service reports, and look for methods of improving delivery of care. This office is also charged with ensuring that the state train and attract enough general practitioners and specialists. (140602c5G1)

Electronic reporting: SB840 provides for electronic reporting, databases, and software to enable researchers and the public to look for methods of improving health care delivery. (140603)

Administered by the Office of Health Care Planning, these databases and programs include mandatory reports by doctors, hospitals, and other health services (c), and anonymous reporting of medical errors (m).

Doctors and other health care practitioners will be able to quickly look up best medical practices (h, i) and information for continuing education (l).

Patients will find guidance on medical and health information (j) and performance indicators of health service professionals (k).

Cultural and linguistic standards: SB840 provides for standards of caring for residents with various languages and cultural backgrounds. (140604). The Office of Health Care Planning is responsible for seeing that these needs are met, in coordination with other state agencies.

Partnerships for Health:SB840 aims to involve not only health care workers, but communities and patients, in the effort to improve the health of California residents.To help accomplish this goal, the state agency and each region will have a Partnership for Health. (140607)Coordinated by the state and regional consumer advocates, in collaboration with the medical officers, regional directors, and the Offices of Health Care Planning and Health Care Quality, the Partnerships for Health will foster community health initiatives, support development of innovative means to improve care quality, and promote efficient care delivery.

The partnerships will also educate the public about personal maintenance of health, prevention of disease, and communication with their providers.

Research:To continually improve the delivery of health care, the commissioner will budget for research and innovation that is recommended by the Technical Advisory Committee and the offices of the state and regional agencies (140221)

A Technology Advisory Committee will make recommendations on including new technology, including electronic technology, in the benefits package.(140102ii)

Helping Doctors and Hospitals

SB840 will simplify and improve the practice of medicine for doctors, hospitals, and other health care professionals.With only one payment agency and electronic billing, administrative costs and hassle will be greatly reduced. (140209f)

Doctors will have more freedom to treat their patients as they think best.Doctors will no longer need to spend valuable time on the telephone arguing with insurance company representatives over coverage of procedures.

SB840 will guarantee payment for every patient treated.There will no longer be uncompensated costs for treating the uninsured that presently need to be passed on to insured or self-paying patients.There will be no need to resort to collection agencies to collect bills.Patients will not be forced into bankruptcy by medical bills, at a loss to hospitals.

Emergency rooms will no longer be crowded with uninsured patients who should be with primary care doctors, at a much lower cost.Rural and inner-city hospitals and trauma centers will no longer be closing because of high proportions of non-paying patients.

All Californians will have access to preventive medical and dental care and be encouraged to maintain good health.This will not only improve health but save money now spent on treating preventable diseases.

Doctors and other health care professionals will have more information readily available on best practices and drug formularies, in databases and software established by the state agency.Diagnosis and prescription will be faster and more accurate.

There will be a need for more primary care and family practice physicians, because every California resident will have one.The primary care professionals will make referrals to specialists.Incentive payments will be available to increase the supply of primary care physicians. (140208g3C)Some medical specialists may see a decrease in their income.

Doctors may earn bonuses and incentives for meeting measurable performance standards, or for working in underserved areas.

Doctors who participate in the system will still be allowed to take private patients who pay directly. (140208d4) Although it seems odd that patients would pay for medical care that the state agency would cover, experience in other countries shows that as much as 10% of the population could choose that option.The United States Constitution protects the right of doctors to take private patients.

Doctors, hospitals, and other health care professionals will not be allowed to “balance bill”.In other words, if the doctors bill the state agency, they cannot also bill the patients for extra money. (140208d7)

Helping Patients

Eligibility

Every resident of California will be issued a health access card according to procedures determined by the commissioner. (140400, 140401)

Procedures will be developed to cover residents traveling out of state (140402), and for retirees or employees covered by contracts with California employers but living out-of-state (140404).

Undocumented residents will be covered. (140400)Excluding undocumented residents would defeat the purposes of this statute- streamlining administration, reimbursing medical providers for all patients, containing communicable diseases, and improving the general health of the population.

Patients arriving at a medical facility shall be presumed eligible if they are unable to document eligibility because they are unconscious, or mentally unfit, or a minor, or in an extreme emergency situation. (140406)

Visitors receiving medical care in California will be billed by the system.(140403)The commissioner is empowered to negotiate arrangements with other countries and states whereby California will cover their people visiting here, and they will cover our residents visiting them.(140403)

Choosing medical providers

Patients will have more freedom to choose their health care providers.They will not need to check a “provider list” to make sure a doctor is acceptable to their insurance plan.Patients will be able to choose pay-per-visit physicians, or capitated payment health providers such as Kaiser.

Every patient will have a primary care provider who knows their history and can make referrals to specialists. (140601)In most cases, care by specialists will require referral from the primary care or emergency provider. (140601b)Primary care providers may be family practitioners, general practitioners, internists, pediatricians, nurse practitioners and physician assistants practicing under supervision. (140600f1)Women may choose an obstetrician-gynecologist in addition to a primary provider.(f1B)A specialist may agree to also serve as a primary care provider (140601b6)

Patients under a specialist’s care before the system initiates will not require a referral for the first six months. (140601b4)Dental care also will not require a referral. (b1)

Patients may choose to pay for their own specialist visits without referrals. (b1)

Security and convenience

All California residents will be safe from the fear of losing their health insurance, or being unable to find affordable health insurance. There will be no more bankruptcies from medical costs (although there still could be bankruptcies from the cost of long-term care after 100 days).

Low-income workers will no longer need to worry about losing Medi-Cal coverage if they start earning too much.Welfare rolls may decrease, because low-income families will be more encouraged to find work.There will be no more wasted time filling out eligibility forms, and the state will save money on administration.

Workers who lose their jobs due to illness, or any other cause, will not also lose their health insurance.There will be no exclusions due to “pre-existing conditions”.Young people will not lose their family insurance when they reach adulthood.

Workers will be able to choose employment based on job satisfaction and salary, without worrying about health insurance.  Contract negotiations will no longer stall over the health insurance issue.  Entrepreneurs will be able to start new businesses rather than staying with another company just for the health insurance.  Part-time and temporary workers will have the same health coverage as full-time workers.  This will encourage businesses to hire full-time workers.

Advantages over Medicare

Seniors will find that the new system is better than Medicare.Coverage of pharmaceuticals is complete and simple: no “doughnut hole” of non-reimbursed costs, and no need to choose confusing Part D plans.For doctors, there will be no difference between reimbursement for seniors and for other patients, so all doctors will accept all patients, and seniors can choose any doctor.Also, seniors will not longer need to pay extra Part B premiums to get complete coverage. (140244)

Transition Plan

SB840 includes provisions for transitioning from our present system of multiple insurance payers to the single public agency (140110).The commissioner supervises the transition from the existing system.

The transition will be funded by a loan from the General Fund and from private sources. (140110b)Moneys held by health plans and insurers with contracts still in effect when the new system begins, will be assessed for use in starting the new system.(140110c) The commissioner will also establish equitable contributions from counties and other local government agencies. (140240 c)

The commissioner will seek waivers or legislation from the federal and state governments to allow all current government health care monies to be used by the California agency. (140240)Medicare Part B payments will be paid by the agency.

If waivers cannot be obtained, the commissioner will formulate state rules to conform to federal laws that preempt the provisions of SB840. (140300)

Private insurance agreements will remain in effect until the termination of their contracts (140302).The commissioner will seek reimbursement from such private insurers for services provided by the system (140303).

The transition commissioner will have the same responsibilities as the commissioner, including appointment of officers and budgeting.

The transition plan will include assistance to persons displaced from employment by the new system, such as employees of private health insurance companies. Support in retraining and job placement will be provided for up to five years.(140102hh, 140110d, 14022b)This will be included in the budget for training and continuing education of health care providers (140222)

Workers Compensation and Veterans Hospitals

Why is workers compensation not included?

State and federal law require that workers’ compensation claims be paid out of money collected from employers.Keeping track of this in the publicly-funded state agency under SB840 would be complex.Workers comp is more than medical care.It also includes “indemnities” claims such as work time lost, disability, and survivor’s benefits.The legislature recently passed a major overhaul of workers’ comp.The authors of SB840 decided that the political battle over another change in workers’ comp would increase the difficulty of reaching a consensus on the basic healthcare issues in SB840.

However, it would be possible to add workers’ comp to the single-payer system if businesses and the public tell their legislators to do that.

One approach would be to add workers’ comp to the CHIS but track the workers’ comp cases so that some required special rules would be met.These rules would probably include making sure that the patients paid no deductibles or copayments, and keeping records of the workplace safety records of employers.Employers would also need to pay more into the system, in lieu of their workers’ comp insurance, but it would probably be a savings because of the efficiency of single-payer.The indemnities segment of workers’ comp would remain separate, either by using our present system of private workers’ comp insurance, or creating a new single-payer state agency.

            A second approach would be to create a separate single-payer agency that would handle both the medical and the indemnity segments of workers comp.  The medical portion could be integrated with CHIS as much as possible.  Overall, this approach might save employers more money.

Will veterans benefits be included?

No.Veterans hospitals will continue operating under the Federal budget.Of course, veterans will be covered under the CUHA system when they are not using the Veterans hospital system.

References:

Cost and Coverage Analysis of Nine Proposals to expand Health Insurance Coverage in California. Final Report.Prepared for: The California Health and Human Services (CHHS) Agency. by The Lewin Group.April 22, 2002.

The Health Care For All Californians Act: Cost and Economic Impacts Analysis. Prepared for: Health Care for All Education Fund.by John F. Sheils & Randall A. Haught, The Lewin Group.January 19, 2005.

prepared by Devin Carroll (Health Care for All – Central California) 2-23 -2007

More resources:

The OneCareNow.org resources on SB 840.

The 2005 Lewin Report, an independent consulting firm, estimated a savings of $350 billion over 10 years under SB 840.

The official website of SB 840, from the California legislative info center, showing the most current version, status, analyses, and voting history of the bill.

The official website of SB 1014, the companion finance bill for SB 840. Start with the Senate Analysis. The 1-sentence digest: employees earning between $7,000-$200,000 per year will pay ~3% of payroll tax and employers will pay ~8% of payroll tax.

Want to know more about our healthcare system and other proposals for healthcare reform in general? Check out our resources & presentations pages.