San Diego Business Journal

When San Diego-area business owners made their New Year's toast to health, wealth and happiness, you can bet they closed their eyes and wished real hard on the health part.

Local and national health care industry leaders expect the cost of health care to rise in the new year , both for businesses and consumers.

San Diego's health officials say 2006 will bring continued concern about access to care for San Diegans and the cost of health insurance premiums.

"It's gonna get worse and it's not going to get better," said Tom Gehring, the chief executive officer of the San Diego County Medical Society "Businesses are going to be frantic because costs are not going down."

In the big picture, officials say the continued increase in health care costs is a vicious circle with numerous factors that include everything from the fact that Americans increase insurance companies' costs by going to the doctor for even the simplest ailments, to the high cost of technology and the large number of uninsured who end up in emergency rooms , visits for which hospitals may never see payment.

Less Reimbursement

San Diego County has one of the highest uninsured rates in the country. About 27 percent of people under age 65 here are uninsured, according to San Diego's Council of Community Clinics. That's nearly 10 percent higher than the national average, which is 17.6 percent according to UCLA's Center for Health Policy Research. California's statewide rate is 20.3 percent, still higher than the national average, according to the center.

Local leaders are focusing on the threat of less reimbursement from the federal government for caring for Medicare and Medi-Cal patients.

Although the Bush administration threatened a 4.4 percent reduction in Medicare reimbursement in November, the U.S. House of Representatives voted in late December to hold the 2006 rate steady, and instead shift some of the burden to beneficiaries through higher premiums.

Gehring believes the only solution to America's health care disarray would be to require every person to carry a catastrophic health plan, but says that only the federal government could put something like that into place.

"I think that model will definitely catch on," he said, admitting, "It's not going to happen in 2006."

If passed as is by the Senate, where Democrats and moderate Republicans threaten to completely rework it, the entitlement programs bill would allow states to charge premiums and higher co-payments for a wide range of Medicaid benefits, including doctor and hospital visits and prescription drugs. It would also place restrictions on Medicaid coverage of nursing home care based on an elderly person's assets.

If reimbursement rates continue to fall, said Mike Murphy, the CEO of Sharp HealthCare, one of San Diego's largest health systems with four hospitals, it would follow that fewer doctors will accept Medicare and Medi-Cal patients.

"It will be an access to care issue," Murphy said.

In San Diego, one in six families are enrolled in Medi-Cal, according to the Alliance Healthcare Foundation.

Seeking Professionals

The county's high cost of living that continues to drive away medical professionals will continue to pose obstacles to access to care in 2006, leaders say. Murphy said there are still vacancies for nurses at every hospital in the system.

"We are still bringing nurses in through traveler contracts from all over the country," he said.

If the local health care outlook seems less grim for anyone in 2006, it will be so for illegal immigrant children, said Steven Escoboza, the chief executive officer of the Hospital Association of San Diego and Imperial Counties.

In San Diego County, there are an estimated 93,000 uninsured children, 23,000 of whom are not eligible for Medi-Cal or Healthy Families, according to the 2003 California Health Interview Survey. Healthy Families is an insurance program for families with children whose incomes are too high to qualify for Medi-Cal, but less than $38,600 for a family of three.

Recently, the San Diego-based Alliance Healthcare Foundation, a health care advocacy and grant making organization, has stepped up efforts to create a children's health initiative for the uninsured. The group has asked the San Diego Regional Chamber of Commerce to endorse such a program.

Escoboza's hospital association and several health care activist groups including the Coalition for a Healthy California and the California Association of Emergency Nurses, will work this spring to gather signatures to place a statewide tobacco tax on an the November ballot. The proposal would mean an extra $2.60 on each pack of cigarettes sold, and it could raise an estimated $2.27 billion a year for 10 years to aid in public health including an insurance program for illegal immigrant and extremely poor children.

Marion Mulkey, a senior program specialist for health care insurance at the California Healthcare Foundation, a health care research nonprofit based in Oakland, said the trend of finding county money to provide care for illegal immigrant children is growing across the state, and will be an issue to watch in 2006. But she has doubts about San Diego's ability to pull off such a program, unless the statewide tax is passed.

"There needs to be a local commitment from communities," Mulkey said. "San Diego has not yet been able to develop a program like that."

The San Diego County Board of Supervisors' legislative policy on illegal immigration includes a provision that does not support mandates that make illegal immigrants eligible for health, education or other benefits.

Avian Flu Preparedness

Sharp HealthCare's Murphy said he and other health care officials , from the private and public sectors , will continue in 2006 to have meetings to prepare for a mass casualty public health crisis, whether it be a terrorist attack or an outbreak of the much discussed avian flu.

Gehring maintains that businesses play a crucial role because the economy could come to a dead stop if such an event occurred.

"The business community should be terrified of a pandemic. In a worse case scenario, it will shut the county down like it hasn't been shut down , ever," Gehring said. "You're not going to be able to go to your office. Airlines will be shut down because the fastest way to transport a virus from one continent to the other is through a 747."

Leaders agree that consumer-directed health care will become more popular in San Diego in 2006. National policy experts have argued that this type of health insurance program, where the consumers pay large deductibles, would help slow the growth of health care costs because they might spend more wisely if they took ownership over the money in a health savings account, to which both the employer and patient could contribute. The theory is that fewer doctor visits means lower costs to the insurance company, and therefore insurance premiums stay lower, some experts say.

"It's still too new to know about the economic impact," Murphy said. "If (businesses) are passing along a $2,000 deductible to employees, will employees really have the money to pay?"

Pay For Performance

Leaders also say that in the next year, the way that health insurance companies, including federal insurance such as Medicare and Medi-Cal, reimburse hospitals and doctors could revolutionize the service aspect of health care as policy-makers define standards for "quality" health care.

"Health plans have tried to get an agreement on what is truly measurable," Escoboza said.

He said a group called the California Hospital Assessment Reporting Task Force is gathering stakeholders to survey on this topic.

"2006 is going to be a milestone in quality for hospitals," Escoboza said. "Patients could eventually see which hospitals are better in which procedures. Over time, all hospitals are going to have to provide a certain quality of care. If a hospital can't meet that standard, they'll be losing business."

Some insurance companies are already using the mechanism, said Mulkey.

Going Electronic , Slowly

Lack of support for a $3 million electronic medical records sharing system has meant that a group of local health care leaders, including Escoboza, Murphy, Medical Society leaders and many others, have "suspended" meetings to plan for the system.

Escoboza said the San Diego County Medical Society Foundation could not garner enough support from hospitals to meet a mid-December contract deadline with Santa Clara-based Sun Microsystems, Inc., a potential contractor for the project, which would link the area's 33 hospitals with doctors offices, pharmacies, emergency rooms and clinics.

The San Diego County Medical Society Foundation is leading the local effort to create what is nationally known as a Regional Health Information Organization.

SDMine would allow doctors to share relevant data about a patient and offer an easier way to reroute uninsured patients who use the emergency room for primary care to a local clinic, leaders have said.

Gehring, Murphy and Escoboza said efforts to pursue some kind of streamline electronic medical records system will continue in 2006, but might have to wait for federal standards.

The U.S. House of Representatives last month included $111.7 million in a Labor, Education and Health and Human Services appropriations bill to support information technology health care efforts , indicating a continued federal interest in high-tech health care.

Gehring said he doesn't think many doctors are willing to make investments in such technology until there are standards.

"It has great promise, but is the return on investment there?" he said.