The HMO Tax

Published on

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.

Consumer Watchdog
Consumer Watchdog
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