Cover Story, Domestic, Healthcare, Issue — October 18, 2009 at 5:11 pm

Seeing Through the Fog

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We all know what’s going on in Washington: somehow health care, the driest of all dry political issues, has become the most incendiary topic in politics. Politicians are shrieking at the President, constituents are fired up about… something, and grown men are crying into their pillows at night.

Meanwhile, on the other side of the country, someone is paying his or her bill after a lovely meal and smiling at the fact that a surcharge is funding one of the most comprehensive and expansive health care plans in the nation.

That bill was handed to a customer in foggy San Francisco, the decidedly progressive city that has gone ahead on its own to become the first U.S. city to provide health care to all its low-income inhabitants. That’s right, everyone—even illegal immigrants and the homeless. Healthy San Francisco, as the program is known, has been up and running for two years now, and so far, it’s doing relatively well. But perhaps the most surprising part of the whole endeavor is the complete lack of hysterical opposition.

With all the political infighting and mass national hysteria that has accompanied the health care debate in Congress, it seems unbelievable that universal health care in San Francisco sparked almost no public outrage. San Francisco’s health care plan was the brainchild of then-Supervisor Tom Ammiano in 2006. It was based on the recommendations of Mayor Gavin Newsom’s Universal Health Care Council. They were a group of representatives from the health care, business, labor, philanthropy, and research communities, whom Newsom recruited to do identify and quantify the needs of the uninsured. Ammiano incorporated the plan into his Worker Health Care Security Ordinance, which the city’s Board of Supervisors unanimously passed in July 2006.

Healthy San Francisco (HSF) bypasses health insurance companies completely. Instead of offering insurance, HSF lets any San Franciscan who makes under 500% of the federal poverty level (about $52,000 per person) choose a “medical home” among a network of public health centers, community clinics, and private medical centers. After being assigned a physician at a clinic, participants have access to a wide range of medical services: everything from preventative care to substance abuse treatment is covered under HSF.
Payment for the program is based on a simple sliding scale. Participants pay a participant fee that is dependent on two factors—their income and source of health care (employer or personal). The highest fee is $450 for those participating individually and $150 for those signing up through an employer. In both individual and employer sign-up cases, participant fees are a healthy $0 for those making less than $10,800 a year. For some services, participants pay an additional copay depending on income.

All of this costs money, of course. The program is funded in two ways. First of all, the city and county of San Francisco channeled all health care subsidies that had previously funded its community clinics into this one centralized initiative. In addition, medium or large businesses that do not already provide health insurance to their employees are required to pay into the pot for each hour of labor. Small businesses of up to 20 employees are off the hook; larger businesses have to pay up to around two dollars an hour per employee.

This Employer Spending Requirement (ESR) is perhaps the most problematic part of the plan. The Golden Gate Restaurant Association, a coalition of San Francisco restaurants and HSF’s main critic, has sued the city, claiming the ESR violates a federal law, Employee Retirement Income Security Act (ERISA). ERISA forbids states and localities from mandating that employers pay for their employees’ health insurance. The discussion is very technical, and the suit is currently bouncing around various courts. It is scheduled to go before the Supreme Court some time soon.

However, while they opposed the mandatory business fees involved in the HSF plan, most businesses claim to support the idea of universal health care for workers. “Through the political process … our message was clear and consistent: make health care affordable,” states the web page of the Golden Gate Restaurant Association. The Golden Gate Restaurant Association has sued the city over its financial requirements of businesses, but it says it generally supports universal health care in San Francisco if it could be paid for by an increase in sales tax, which would tax consumers.

From a public health perspective, the plan has been a great success. Just looking at the numbers, the program meets expectations. Out of an estimated 60,000 uninsured San Franciscans eligible to be covered under the program, about 40,000 have signed up in the first two years. Even as the city expects to keep expanding the program into the near future, the Department of Health plans to be on budget for the upcoming fiscal year, even as the program has faced cuts.

In the public realm, the program has garnered widespread admiration from the majority of San Franciscans; recent studies have shown high levels of satisfaction with HSF. A study by Kaiser Permanente, an independent not-for-profit insurer, of HSF participants found that “ninety-four percent say they are satisfied with the program overall, and nine in ten say they would recommend the program to a friend.”

Much of the costs leveled against businesses—notably restaurants—have been offset by restaurants adding a surcharge to their bills. Restaurant patrons now receive a little note tagged at the end of their meal receipts stating, “We have added a 4% surcharge to your bill to provide health care to our wonderful servers.” Rather than disdain or resentment, these notes have inspired stereotypical San Franciscan warmth. A Zagat survey found that “61% [of San Franciscans] say they’re still willing to pay even higher tabs to support worker health care and wages” than restaurants are asking them to pay now.

Best of all, many of the fears of financial ruin have been largely dispelled—employment and profits have not been effected. According to a study by Ken Jacobs, the Chair of the Labor Center at the University of California, Berkeley quoted in the San Francisco Chronicle, businesses have seen no negative consequences since the implementation of the HSF’s employer mandate in 2008: “the city’s growth rate across all employment sectors was similar to or better than other Bay Area counties.” And though San Francisco faced a decline in employment due to the recent financial crisis, Jacobs demonstrates that it “shrank less than other counties.”

HSF’s minimal financial impact is huge victory for supporters who are hoping to expand the model, because it effectively counters restaurant owners’ claims that the program would hurt restaurant competitiveness and customer satisfaction.

A major problem with the program thus far is that there are too few doctors for too many patients. Nationwide there is a shortage of primary physicians, and the same holds true in San Francisco. Especially with the state of California cutting budgets and hospitals handing out pink slips due to the economic downturn, the strain on the system is getting intense. In an unfortunate coincidence, Healthy San Francisco experienced a large up-tick in participation at about the same time that the economy came crashing down on all of our heads.

In a discussion with Lisa Johnson, Medical Director for Quality Improvement Programs within the city health department’s community programs, she spoke of the difficulties facing Healthy San Francisco during this time of economic crisis. She told me that the program has been forced to make adjustments to deal with rising costs and falling funding, but that even so the city is dedicated to maintaining quality of care. It is constantly innovating how it provides care and thanks to the savings due to the streamlining of funding involved in Healthy San Francisco, it looks like quality of care is on track to remain stable even through these hard times. The Annual Report estimates that the program’s revenues will actually exceed expenditures by about $2 million.

Clinics are challenged to increase their capacity to absorb their newly enrolled patients and have been actively working to adopt innovative practices in order to maintain quality of care. Some of the innovations include disease registries to support good care for people with chronic illnesses like diabetes and asthma and group treatments. Though it may sound blasphemous to Americans accustomed to privacy, Healthy San Francisco believes certain medical procedures are appropriate for a group. Answers to routine questions like how to get care at clinics, preventative questions, and so on are now being offered by trained Medical Assistants and nurses. According to Johnson, they oftentimes have the cultural background and language skills to more effectively provide information.

Just how did San Francisco manage to dodge the heated debate overtaking Washington today? To get a plan like Healthy San Francisco off the ground, says Michael Sparer, a Professor of Health Care Policy at the Columbia Mailman School of Public Health, requires overcoming four potential obstacles: interest groups, institutional politics, basic culture, and political culture. Without the confluence of these four things, voters would be up in arms and progress would come to a resounding halt (sound familiar?). In San Francisco these four variables managed to converge in support of the initiative.

There are some cultural stereotypes about San Francisco that are a little bit exaggerated: not everyone is a pot-smoking hippie. That said, the notion that San Franciscans are generally more liberal than the average American is certainly true—in the last mayoral election, the top seven candidates belonged to the Democratic Party, the Republican Party, the Peace and Freedom Party, the Green Party, the Marijuana Party, and the Socialist Party. San Franciscans are also culturally more willing to “spread the wealth.” According to the National Center for Charitable Statistics, in 2006 the average charitable donation in San Francisco was $7,046, compared to a national average of $4,109.

That spirit of generosity contributed to the minimal backlash against the health care proposal. Danika Ingraham, assistant manager at The Ark, a San Francisco toy store, said she is unwaveringly supportive of paying extra for health care for other workers, including illegal immigrants. “I think everyone should have health care,” she said. “I think it’s really important. I don’t get upset about paying a certain percentage for it.”

Americans when considered as a whole tend to adhere to a more individualistic political ideology, according to Professor Sparer. They don’t want to feel like they’re being forced to give up their cash for someone else they don’t know, or who they don’t feel doesn’t deserve it. In fact, California—although not San Francisco—was the epicenter of the anti-tax revolt in the late-1970s, culminating in Proposition 13, which put a cap on property taxes and required a two-thirds majority in the state legislature for tax increases. That said, “the U.S. doesn’t have just one political culture. There is a strong sense of community-based service and of locals taking care of their own,” says Professor Sparer, “so who knows.” A model like San Francisco’s might appeal to those who shun federal interference and prefer to be cared for by local community-based providers.

San Francisco also managed to avoid the kind of political infighting going on in Congress right now due to its almost exclusively liberal political climate. The congressional Democrats, though they have a majority in Congress, are having a tough time keeping a handle on their own party members, especially over issues like the public option. Sen. Roland Burris, D-Ill., won’t vote for anything without a public option, while Sen. Kent Conrad, D-N.D., won’t vote for any bill with it. Representatives and senators alike are defecting. Meanwhile, congressional republicans have essentially vowed to resist any bill put before a vote.

In San Francisco, the main political struggle—if it can even be called that—was between Tom Ammiano, the very liberal Supervisor, and Gavin Newsom, the generally business-friendly mayor. Though Ammiano could have gotten the ordinance passed in its original form, he compromised and acquiesced to the mayor’s demands to make it a bit more business-friendly, including by making the minimum number of weekly hours worked 12 instead of 2 before employers had to pay for an employee’s health care.

Institutional politics were not a problem in San Francisco because there was a relative unanimity of thought on the project’s utility and little need to grandstand, since opposing health care would get no politician very far.

So, the only opposition came from businesses, in the form of the Golden Gate Restaurant Association’s lawsuit. Their lawsuit claims that the employer spending requirement violates ERISA. While as Sparer notes interest group issues are “basically the same everywhere,” in San Francisco businesses are to a large extent beholden to the dominant political culture. Even the Golden Gate Restaurant Association is careful to make the disclaimer that it basically supports the ideal of universal health care, although not the idea that business should have to pay for so much of it. A survey of owners and senior managers of companies with fewer than 100 employees in California by Small Business for Affordable Health Care found that “80% of those who expressed an opinion felt that employers should pay something to provide health care to their employees—four times as many as those who felt that employers should not have to contribute anything (20%).” In less progressive places, such a plan might face far more overt opposition from the private sector.
This sentiment does not necessarily hold true nationwide. Proposals based on “pay or play” models like San Francisco’s, which require employers to pay for health care, face stiff opposition in Congress. The bill currently under consideration by the Senate Health committee includes such a proposal, but the Senate Finance committee bill does not. It was over this sort of mandate that John McCain attacked Barack Obama during the campaign, claiming it would hurt businesses, and lose people their jobs. . Sen. Johnny Isakson, R-Ga., and many others have gone on record alleging that an employer mandate “would force many small businesses to eliminate jobs.”

The only advantageous aspect of initiating a similar plan on a federal level is that the potential ERISA limitations would not apply, as the act only says that states can’t impose employer mandates on their own. That would remove what may be the largest stumbling block for San Francisco’s plan.
Gavin Newsom, among others, has touted Healthy San Francisco and the Employment Spending Requirement as a model for a national health care system. Its simplicity and absolute universality are huge advantages over the models in Congress presently. However, some impressive roadblocks exist.

Professor Sparer admits, “This system is only replicable in communities with a robust safety net” like San Francisco, and the absence of this kind of safety net is a major hurdle to potential imitators. The plan requires that there be institutions and professionals willing to serve the new influx of patients already in place. Even before Healthy San Francisco was enacted, there was a very extensive network of community clinics that already served a large number of San Francisco’s poor.

San Francisco has long had a comprehensive network of clinics offering low-cost care to residents on a sliding scale basis, funded by a patchwork of county, state and federal funding. The 2008-9 HSF Annual Report estimates that of those signed up for Healthy San Francisco, about 70% had already been receiving care from community clinics. Many of these patients were able to continue with the same medical providers without any disruption of care.

For the most part, community clinics and community-based service can be found in most of the country, though rarely as extensively as in San Francisco. They also receive a large amount of federal aid, which could be channeled into a more streamlined plan, like they’ve done in San Francisco.

Still, plans as robust as San Francisco’s may be slow to appear. Business is generally good in San Francisco, and it may seem employers and patrons can “afford” to pay a little extra. Elsewhere, the potential cost of losing jobs and hurting business may be viewed as far too great a risk. Conventional wisdom tells us that if employers face a higher cost of labor, they will hire less, or give fewer hours, pay lower wages or fail to survive. If they pay lower wages, this means that those paid the minimum wage are likely to lose their jobs, since their wages can go no lower. However, that theory failed to play out in San Francisco, and there’s no saying for sure that the same wouldn’t happen in the nation as a whole.

For Healthy San Francisco to be expanded beyond the city limits, one path would be for the federal government to simply scale it nationally. All low-income Americans could sign into a single system and get a home hospital, physician, and individualized cost structure. They would then be able to go to any hospital in the United States and receive care. It is an attractive prospect: Americans would not be required to buy care, but private insurance would remain an option. Large employers would be required to subsidize insurance, and the rest would be paid for by rechanneling the existing federal expenditures. That would, of course, come with tremendous logistical challenges for the federal government—it would entail overseeing public hospitals and clinics, private hospitals and community clinics while administering costs fairly and assigning every American to a medical home and a physician. And the biggest hurdle to such a program would obviously be that it is completely politically implausible to dramatically overhaul the current health care system and so greatly expand the federal government.

The other path to expansion would be to “let 50 flowers bloom”—or, rather, some 3,000 flowers. If every state or city tried to follow the guidelines and lessons from Healthy San Francisco, and federal funding were allocated according to local needs, the Senate debate could be neutralized. However, not all local systems will work as smoothly as has Healthy San Francisco, and such a system of funding would be, inevitably, convoluted.

In the end, Professor Sparer says, “Do I think that local communities on their own can solve that national health care crisis? No. Do I think that local communities helping with the crisis can help? Absolutely.” San Francisco has helped not only its citizens, but also a nation in debate, by showing that universal health care can be achieved. Jobs don’t have to disappear, businesses don’t have to suffer, and politicians don’t have to scream. An experiment like HSF’s can be duplicated, given the right mix of conditions. But it requires a particular political structure that is capable of suppressing interest groups, and a particular ethos. San Francisco managed. Perhaps it is unique or chose a fortuitous time. Perhaps not. In either case, it is indeed a grand experiment, probably a bit crazy, but so far, surprisingly effective

Not bad for a bunch of pot-smoking hippies.

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