can tell when the substantive arguments run out of gas – the name-calling
happening now in the debate over the California Health Benefit Exchange,
proposed by SB
900 and AB
1602, which would create a brand new bureaucracy with extraordinary powers
to implement a new entitlement program.
from spreading "fear-mongering falsehoods," the California Chamber of
Commerce and former state Director of Finance Michael Genest are flagging
legitimate concerns about how this Exchange will function: its
accountability to the Legislature and the Governor, and its ability to obligate
new state spending without any recourse by elected officials.
revealing potentially new and unnecessary spending and unaccountable government
are "scare tactics," then the marketplace of ideas certainly has
been further cramped. But for you brave souls:
legislation provides that the Exchange is "an independent entity not
affiliated with any agency or department … governed by an executive board
consisting of five members who are residents of California" (SB 900, Sec.
2). It may adopt regulations without abiding by the usual rulemaking process (AB
1602, Sec. 8(a)(6)). It may set all the salaries of its top management without
the usual oversight from the state’s personnel agency (Sec. 7(m)). And
its budget is exempt from the usual financial review required of all other
state agencies (Sec. 13(a)). Together these privileges and exemptions amount to
an agency with powers unto itself, answerable only to itself, with the
exception that it must occasionally furnish a report to the Legislature (Sec.
7(q)). California could create a Health Exchange – yet still make it
accountable with the same rules required of other state agencies.
law and this legislation require the Exchange to determine whether an
individual is eligible for Medi-Cal, Healthy Families, or other state or local
health programs and, if so, to "enroll that individual in the program"
(AB 1602, Sec. 6(f)). But because the Exchange is "not affiliated with
any agency or department," this means it does not share the resources
- or mission – of the state’s aggressive anti-fraud
activities. Indeed, all the incentives for the Exchange are to enroll new
persons into these programs, and the incentives for persons who must now
purchase health care are to lowball their income in order to gain subsidies.
The separation of the Exchange from the state’s anti-fraud programs
creates enormous potential for mushrooming public programs without normal
accountability systems. It does not have to be this way.
central finding by Mr. Genest is that the authority of the Exchange to
determine "the extent and scope of coverage" (AB 1602, Sec. 7(g)) for
enrollees could expose the state to massive new costs. Federal law requires
states to pick up the premium costs of any benefits that the state requires in
excess of the "essential health benefits" mandated by the feds. But
in these measures, the Legislature chose to not prevent the Exchange from
requiring extra benefits, thereby opening up the state Treasury to potential
new costs to support the new health care entitlement.
that the Exchange would harness the "power of the private market." Well,
not exactly. The measures give the Exchange complete authority over how many
health plans may compete in this new marketplace (AB 1602, Sec. 8(c)). There is
no requirement that the Exchange allow all or even most qualified plans to
compete for this market.
state-run health Exchange may be in the best interests of California, but the
agency cobbled together by SB 900 and AB 1602 is certainly not the right
direction. It is bad governance larded with unintended consequences like potentially
wasteful of scarce taxpayer dollars. The Governor should blow up this box
before it’s built.