Santa Monica, CA — Assembly Speaker Fabian Núñez’s today joined the leader of the state Senate and Gov. Arnold Schwarzenegger in favoring health care reforms that promise “affordability,” but decline to take on the fastest increasing cost driver in health care: insurance company overhead and excessive profits, said the nonprofit Foundation for Taxpayer and Consumer Rights. 

“It is amazing that legislators chiming in on health care are unwilling to challenge the prescription drug and insurance industries,” said Jerry Flanagan, health director of FTCR.  “How can you make health care affordable without taking on the biggest money pit? The answer is, you can’t. The bloated administrative costs, excessive CEO salaries and profiteering of private insurers and HMOs are among the chief drivers of health care inflation, yet Núñez, Senate pro tem Don Perata and others in the Legislature decline to point fingers at one of the most wealthy, powerful lobbies in Sacramento. Health care reform could turn out to be a cruel joke on the public if it doesn’t put the real sources of affordability front and center in the debate.  Some of the plans talk tough about health insurer waste, but none contain the kind of kind of comprehensive oversight that is necessary.”

FTCR and others estimate that at least 25% of private health insurance premiums are eaten up by bureaucratic administration, excessive salaries and “reserve funds” as well as overblown profits. Federal Medicare, by contrast, administers its vast plan with about 3% of total spending.

Consumer advocates contend that the political contributions and clout of insurers and drug companies have bought these industries a nearly free pass among elected officials in Sacramento. At a Núñez news conference today, officials of the large biotech drug maker Genentech joined Nunez in making his announcement. The company has contributed $209,000 to legislators and the Governor in just the last two years.

Nunez’s plan is only an outline and Schwarzenegger’s proposal won’t be fully revealed until his state of the state speech Jan. 9. But so far, the only groups that would bear the cost of the reforms discussed by political leaders are consumers, employers and probably taxpayers who will have to fund government subsidies.

Health insurers have contributed $3.7 million to members of the Assembly, Senate, Governor Schwarzenegger and affiliated political campaigns since 2005. Since taking office, Schwarzenegger alone has received $775,000 from health insurers, HMOs, and their executives.  To view a list of political contributions from major insurers and top company executives, go to: http://www.consumerwatchdog.org/resources/HealthInsurance05-06.xls. 

“While we welcome the debate on health care reform, and agree with Nunez, Perata and Schwarzenegger that all Californians should be covered, we believe that any reform failing to change the way insurers do business has no chance of succeeding,” said Judy Dugan, research director of FTCR. 

FTCR believes that, to succeed and be affordable, health care reform must:

– Cap insurance company overhead and regulate rates in the proven way that California regulates auto insurance rates under Prop 103;
– Curtail executive bonuses, which reached $240 million for one executive in recent years;
– Prevent shifting of excess profits to out-of-state parent companies;
– End insurers’ practice of courting the healthiest prospects and rejecting or “pricing out” anyone who is ill or could become ill;
– Establish a state-wide prescription purchasing pool to leverage the buying power of all Californians to achieve affordable medications.

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The Foundation for Taxpayer and Consumer Rights (FTCR) is California’s leading public interest advocacy organization. Visit our website at: http://www.consumerwatchdog.org.