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Jan 14, 2005 - 03:50 PM

The HMO Tax

by Jerry Flanagan
Governor Schwarzenegger's budget plan will force 816,000 seniors, disabled Californians and their family members currently enrolled in the state's Medi-Cal program into HMOs. Forget for the moment that we shouldn't be leaving seniors and the disabled in the hands of HMOs; this plan is a budgetary disaster that will cost California more money than it saves.

First of all, the budgeted cost to privatize Medi-Cal -- which serves the state's most vulnerable populations -- is $200 million over the next three years, while the projected 2008-09 "savings" is only $170 million, for a net loss of $30 million.

But that's not the worst of it. Everybody knows, HMOs will stop at nothing to make a profit: they limit access to specialized care, limit which hospitals and physicians a patient can visit, and override physician recommendations. While these limitations are onerous for any patient, such restrictions on the ill and disabled could significantly undermine their health and quality of life. That means less healthy, more expensive patients -- and guess who picks up the tab for them. These public health burdens will cost even more in the long run when Arnold punts patients to the profiteers.

In addition to the extra costs of HMO-izing Medi-Cal, taxpayers will get less bang for their buck. That's because HMOs providing Medi-Cal coverage will be allowed to spend up to 15% of every taxpayer dollar they collect on overhead, administration, advertising, executive salaries and profit. In comparison, overhead costs for the Medi-Cal program are a fraction of the private market.

HMOs have been waiting for years for the governor to hand over this lucrative state contract. That's why they've contributed $396,800 to Arnold. And Arnold has returned the favor by privatizing Medi-Cal and prescribing a new HMO tax -- that's bad medicine for California.

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