John Garamendi, Lieutenant Govenor of California

People over profitsJohn Garamendi, Lieutenant Governor of California, believes health insurance is a racket overdue for reform. But, as he tells Martin Ashcroft, he might have to become Governor to achieve his ambition. The healthcare system in the United States is a national scandal. Although currently overshadowed by foreign affairs and a global financial crisis, it is nevertheless an issue that needs urgent attention at the national and state level, says John Garamendi, Lieutenant Governor of California.┬áÔÇ£Our healthcare system is in a death spiral, with nearly seven million Californians uninsured and millions more priced out of the system. It is time we create a healthcare system that provides access to high-quality, affordable healthcare for every Californian, that values people over profits.ÔÇØ Strong words, but letÔÇÖs be clearÔÇöGaramendi is not attacking the provision of healthcare by hospitals, health authorities or any of the excellent facilities we feature regularly in this magazine. ItÔÇÖs the way itÔÇÖs paid for that he is campaigning to change. ÔÇ£It is a racket,ÔÇØ he agrees. ÔÇ£The notion of insurance is that everybody is in the pool and we all share the risk. With good fortune youÔÇÖll never need it, but if you have misfortune for whatever reasons, insurance should take care of it. But the private insurance system is now operating on a different model. Their model is to make a profit and in order to make a profit you donÔÇÖt want to insure people who are going to get sick.ÔÇØItÔÇÖs a forthright condemnation of an industry that has lost sight of its purpose to such an extent that the people who need healthcare most are increasingly unable to obtain it. Not only is the system unfair and discriminatory, itÔÇÖs outrageously inefficient and expensive to run. ÔÇ£America spends a third of its healthcare money on administrative costs because there are thousands of different policies covering different circumstances, with different co-pays and deductibles, and the end result is administrative chaos of the first order,ÔÇØ he says. ÔÇ£The administrative cost of healthcare in America is twice that of any other industrialized country.ÔÇØVarious solutions are being debated, but the one Garamendi favors is known as the single payer system, which is better described as a single collector of the money to pay for healthcare, he explains. Such a system would allow individuals to continue to choose their healthcare provider but eliminate the role of the insurance industry in collecting the money and paying the bills. You could call it universal Medicare, without age limits.ÔÇ£The advantage of a single collector system is that itÔÇÖs very efficient in collecting the money and paying for services. It has a standard benefit package available to everyone, and it also eliminates the very real problem of avoidance of risk by the private insurance system.ÔÇØ As with Medicare, private insurance would still be available for anyone who wanted coverage over and above the basic standard, but the crucial point is that the basic standard would be available to everyone. Garamendi has a history of opposition to malpractice by ÔÇ£big insurance.ÔÇØ In 1991, he was elected as CaliforniaÔÇÖs first Insurance Commissioner, implementing Proposition 103, a major reform of the auto and homeowner insurance industry. He subsequently delivered nearly $1 billion in rebates to insurance consumers. After a period of service in the Clinton administration as a Deputy Secretary at the US Department of the Interior, he was reelected Insurance Commissioner in California in 2002, going on to reach settlements with large insurance firms that resulted in the return of $36 million in refunds to homeowners, fining the nationÔÇÖs largest disability insurer $8 million, and fundamentally changing the way all disability insurers handle claims.The issue of healthcare has been a central plank of GaramendiÔÇÖs 30-plus years of public service, and health insurance is his next target. The insurance industry is legendary for its approach to reducing risk, an admirable strategy in any other business, but in the field of public health the profit motive is inconsistent with providing standard services on a level playing field to those who need them most. ÔÇ£As long as you rely on private insurance you have to install costly regulatory mandates to avoid the problem of selectivity,ÔÇØ he says. ÔÇ£These are very difficult to achieve, and the insurance industry is constantly motivated to select and deselect individuals, so you have a very difficult enforcement situation.ÔÇØIn 2005 Garamendi issued a landmark report entitled ÔÇ£Priced Out: Healthcare in California, a comprehensive review of CaliforniaÔÇÖs healthcare delivery systems.ÔÇØ The report included 45 specific recommendations and concluded that the ultimate solution to the healthcare crisis was a universal healthcare system.The single collector system eliminates insurance premiums at a stroke, which makes the money easier and far less expensive to collect. Insurance companies advertise their policies, offer commission to agents and carry a bundle of other overheads that are all reflected in the premium. ÔÇ£With a single collector, the acquisition cost of the money is a fraction of what it is in the private insurance marketplace,ÔÇØ he says, citing Medicare as an example, which spends less than 2 percent to collect the money and another 10 percent to pay the bills. The current system, with thousands of insurance policies provided by hundreds of companies with their own administration costs and coverage terms is a monumental waste of resources, as well as being unfair to the disadvantaged.The single collector he refers to is, of course, taxation, and thatÔÇÖs where the issue becomes politically sensitive in the United States. But no one is talking socialized medicine here. ÔÇ£When we discuss healthcare in the United States there are words tossed around that are not appropriate,ÔÇØ says Garamendi. ÔÇ£There are two parts to the medical system: one is collection of money and the other is provision of services, and we shouldnÔÇÖt confuse the two. Nobody would suggest for a moment that Medicare is a nationalized system. ItÔÇÖs a government-run system, but you can get your medical services wherever you want. The problem in discussing this is that people will mix the collection of money with the delivery of services.ÔÇØ But there is opposition to his proposals, however, most notably in the form of a rival plan by California Governor Arnold Schwarzenegger, based on universal coverage using the existing public and private insurance systems. Although there is widespread support for the Garamendi plan, the Governor is a stumbling block. ÔÇ£I do not believe anything will happen in 2009 at the state level,ÔÇØ says Garamendi. ÔÇ£I think the legislature could pass a single collector bill again, as they have over the last three years [itÔÇÖs a majority vote bill], but Governor Schwarzenegger would veto it. If the Governor steps down and I become Governor, I think something will happenÔÇöbut thatÔÇÖs not very likely.ÔÇØ The two rival campaigns have been competing with each other for five or six years, but the budget crisis in California has put almost every other issue on hold for the time being. ÔÇ£The budget situation and the economy are dominating the discussion, and my feeling is that most of 2009 will be spent working on the budget,ÔÇØ says Garamendi. ÔÇ£Healthcare issues are likely to take second, third or even fourth place.ÔÇØThat would not be the case, he insists, if he were Governor now. ÔÇ£If we were to carefully analyze the situation, which of course isnÔÇÖt done, we would conclude that healthcare is a major problem, not only because there are six and a half million people uninsured in California, but also because a lot of governmental expenses are a direct result of the uninsured. WeÔÇÖre now spending 18 percent of our total GDP on a system that is very inefficient.ÔÇ£For me healthcare is a key budget issue,ÔÇØ he continues. ÔÇ£ItÔÇÖs one of the largest expenditures in the state mix, and it affects everything in the California economy. It has to be dealt with, and if I were Governor, healthcare would be a major issue. But IÔÇÖm not Governor right now.ÔÇØBarring an early retirement by the current incumbent, the earliest Garamendi can be elected Governor is 2010, to take office in January 2011. He feels something might happen on a national level before then. ÔÇ£President Obama is faced with huge issues with the economy, but a large part of the American economy is troubled by healthcare,ÔÇØ he says. ÔÇ£Our major industries are saddled with extraordinary healthcare costs, the auto industry being the prime example, as well as the aircraft industry.ÔÇØ He also points out that reform is more complex at the state level, because the states have to coordinate all the federal healthcare programs into their ownÔÇöMedicare, Medicaid, veterans programs, etc. There is also a federal law that prevents states from mandating specific healthcare standards for employers, which is an element of the Schwarzenegger plan that he opposes. ÔÇ£Most lawyers who look at the GovernorÔÇÖs proposal agree that it would not survive a federal lawsuit.ÔÇ£I think President Obama intends healthcare to be a major focus,ÔÇØ he concludes, ÔÇ£but there are two wars going on, and thereÔÇÖs the economy. But healthcare is a big issue, and I think that the Democratic majorities in Congress will put something in place at the national level that will move us toward a universal system.ÔÇØ ÔÇô Editorial research by Vincent Kielty┬á