Recall's Side Effects

Insurance-rate increases are threatening to drive businesses out of state or out of business entirely. Nor do employee benefits match those in some other states, say analysts. But for many employees, worker’s comp is their only insurance; thus, there’s incentive for workers to blame injuries on the workplace to get treatment. Part of the system’s cost is consumed by this misuse, as well as by challenges to coverage either by the worker or by the employer. A whole industry of lawyers has sprung up to service a so-called lawyer-free, no-fault system in which workers are supposed to receive all necessary care and compensation in exchange for a ban on litigation.

So this week, a committee of six legislators is looking at dozens of proposals from a score of bills to deal with workers’ comp, even as another group of six tackles health-care reform.

On the workers’-comp side, the driving goal is to cut costs — by the billions. The morass has engendered uncharacteristic recent cooperation between Democrats and Republicans, despite broad differences in approach. In general, Republicans are more inclined to cut costs by limiting benefits. But both sides talk of reducing waste and fraud and of limiting fees that doctors and clinics can charge. Many Democrats also lean toward giving the state authority to control insurance rates.

“What good is it if we achieve $5 billion in cost savings for the system if the insurance companies don’t reduce rates?” said state Senator Richard Alarcon (D-Van Nuys), a key member of the worker’s-comp committee. Alarcon said it’s vital to head off a 12 percent increase in already exorbitant rates that is scheduled to take effect in January.

For the most part, the twin disasters of health insurance and workers’ comp have been handled as though they have nothing to do with each other. In fact, both systems are essentially health plans funded through payments to an insurer, with costs out of control in both places.

“The first problem is the high cost of medical care,” said Alarcon, “and our constant battle to keep prices down in the medical system. If we could reduce the cost of medical care, both health-care costs and workers’-comp costs would go down.”

State Senate leader Jim Burton (D-San Francisco) has his hand in both the health-care and worker’s-comp negotiations. He’s been trying to make sense of the nexus between the systems in ways that could cut costs and improve benefits. But he’s running out of time in this legislative session.

A more radical solution for the future is a single-payer system — a Canadian-style government-provided insurance. Voters in Oregon recently rejected single payer after a blitz of negative ads from the insurance industry. Single payer would mean higher taxes, but supporters contend the total cost would be lower than what people are, in essence, already paying for health care. To state Senator Sheila Kuehl, who has introduced a single-payer bill, the proposals currently in the running fall short of real change.

“Expansion of coverage is a large step forward,” she said. “It is not a reform of the system. You still have the same high administration costs, the same 9,000 health plans to choose from, and the same problems with those who remain uninsured.”

Single payer has an impressively long list of supporters, even at this early stage, but also substantial philosophical and corporate opposition. Burton’s “pay or play” compromise, by contrast, has the backing of powerful business interests that would oppose single payer. And it has support from many employers who already provide health insurance. The combination could prove an irresistible and momentous consonance of forces for Gray Davis, if legislators don’t stumble on the home stretch.