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March 06, 2008

Taking the LAO in Context on California Health Reform

THE LAO'S INFLUENCE: While some have seen the LAO report as a factor in the stalling of AB x1 1 and the California health reform this year, I think the evidence shows that it was the easy excuse--rather than the actual reason--for the Senate to stop the bill. (For example, one Senator said that the LAO report was determinative in deciding how to vote, even though that Senator had announced opposition to the proposal months earlier.)

In other words, the LAO report, along with other factors, helped create an environment where a "no" vote was acceptable and even easy. The LAO has no formal decision-making power, but it does have influence, and its decisions do have political consequences.

PLACING REFORM AT A DISADVANTAGE: But the issue as we look forward is the approach used by the LAO, and the context of how that report is used by legislators. Health Access put out a full analysis of the LAO's take on AB x1 1. Basically, the LAO gave a report on AB x1 1 that indicated that the plan could pencil out for about five years, but that also:

• indicated and quantified all the costs and potential risks, but did little to put those risks in context, to indicate how real those risks were (which ended up overstating several risks);

• did not quantify a single cent of savings or upside potential;

• did not evaluate the risks of the status quo, or propose alternatives to the proposal.

To be fair, the LAO had very little time for its analysis, and many analysts are more oriented to warning you about potential risks than potential benefits.

But that's when it is important for the Legislature to place such a report in context. Legislators routinely pick-and-choose what they like and do not like about the LAO says about the budget and other policy proposals, and this should have been no exception. The Legislature should have placed this LAO analysis alongside the voluminous analyses done by various independent experts throughout the year.

WHY DOES THIS MATTER? This matters for the future of health reform. Under the approach used by the LAO, given the certainty that some legislators seemed to seek, then no health reform would ever pass in California.

Budgets fluctuate over time: if legislators seek certainty that health care will be adequately funded in perpetuity, then health reform is not possible. This is not a standard that is met in Canada or Great Britain, or indeed in Medicare or Medicaid. The LAO failed to book a single cent of savings, even though we have ample evidence that the power of group purchasing is effective, both in public and private health care purchasing.

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Posted by healthinsurance at March 6, 2008 11:18 PM