Letter To A Student

Dear Mary Ellen,

Thank you for your email and the very good questions you ask.  I have certainly had to do a lot of thinking about your research paper on “local health funding” and I will try to answer your questions as best I can. However you should be aware that some of the facts and figures are very much guesses, and the figures change, according to one’s politics, one’s point of view, and whatever definitions one chooses to use for “local” or “health” or “funding.”

Let’s take “local” first.  I work for a countywide non-profit organization, so I tend to think of “local” as Orange County, and our population of three million or so.  On the other hand, someone living in the Barrio of Santa Ana, or in Little Saigon, may have a different view of “local” and come up with very different levels of health funding.  People in city government would think of the city as “local” and would come up with different levels again, and they would be quite a bit different, say, for Newport Beach compared to Stanton.

When we consider the crisis in health care, of course it is national, statewide and local, as witness the furious debate among the Presidential candidates, the Sacramento debates over five competing “Health Care Reform” proposals, and the many uninsured, under-served people right here in wealthy, prosperous Orange County.

Then there’s the word “health.”  Should we include cosmetic surgery and hair restoration (or baldness prevention) and “male enhancement”?  What about the multi-billion dollar diet industry? How about fitness instructors, private trainers and L.A. Fitness? Then there’s StairMaster, Bowflex and NordicTrack, not to mention Nautilus.  How about acupuncture, acupressure, over-the-counter remedies and health food supplements, mega-vitamin therapy and aromatherapy?  It’s not just doctors and hospitals and medications, but where do you draw the line?

The most difficult thing to define may be “funding.”  Are we going to count the money wasted on needless paperwork, obscene executive salaries and huge profits raked in by corporations in the insurance industry, hospital chains like Tenet and Columbia, and big pharma?  What about the “hidden tax” that we pay for goods and services charged by companies to pay for part of their employees’ health insurance premiums? (Just one example, the “big three” auto manufacturers charge about $2,000 extra for every vehicle they sell to pay for health insurance for auto workers But do we count that as “health funding”?) Then there’s the tax bite.  The only identified health funding in the tax structure is the Medicare payroll tax.

But besides this, lots of tax dollars go to pay for uncompensated care for the millions of uninsured, and for a variety of government health care programs.  In fact, only about a third of health funding is made up of premiums, deductibles, co-payments, co-insurance and out-of-pocket costs which represent the covered (and not covered) costs through private insurance.  Two thirds is from Medicare, Medi-Cal, SCHIP, (States Children’s Health Insurance Program), V.A. (Veterans’ Health Administration,) military health care, U.S. Public Health Service, Centers for Disease Control, Indian Health Service, Public Hospitals, Health Departments, public clinics, public employees’ insurance programs such as FEHBP and CalPERS, tax subsidies for employer sponsored coverage, and federal subsidies for private insurance companies and drug manufacturers through Medicare Plus plans and so-called Medicare Reform.

It seems to me, the term “local health funding” is pretty complicated and difficult to define, and when I start to answer your questions, I’m not too confident in my answers, but I’ll do my best.

Question 1.  How much money is spent on local health financing?

Answer:  One estimate of health spending in the United States is $7,500 per person, per year.  For Orange County, that works out to be $22.5 billion per year (when you multiply by 3 million).

Question 2.   Is there a separation between rural and urban funding or is it distributed according to population and/or ethnic diversity?

Answer:   There are many streams of funding for health care programs.  Some are federal and come through the state, some come directly from Washington, some come from private foundations, some funds are generated in the County, some in cities.  At any given time, you may be standing in six or seven overlapping jurisdictions or special districts, many with taxing authority.  Each source of funding uses different formulae or methods of determining each local area’s share, and most are unfair to Orange County.  Many programs in O.C. are under-funded because of historical reasons (i.e. you don’t get funds unless you provide services, and you can’t provide services if you don’t get funds).  Others are under-funded for political reasons. (For example, O.C. gets much less than its share of property tax revenues while Bay Area counties get much more.)  Unfortunately, funding is not on a per capita basis, and certainly not based on ethnic diversity! Since Prop.13, the counties and cities have been more dependent on Sacramento for health care funding, and that has been a huge problem, especially for Orange County, since the 1995 county bankruptcy.

Question 3.  Where does local funding come from (State, local, private, taxes, other)?

Answer:   Most of health funding of public health is from the state, most of Medi-Cal is from federal Medicaid.  The feds get it from our income tax and send a small part of what they collect back to the states which, in turn, dole it out to the counties and cities.  Law Enforcement, Probation, the Courts, the District Attorney, and fire departments all are considered “Public Safety” and get the lion’s share.  Health is not considered part of Public Safety, although I am convinced that it should be, and therefore gets less.  Hospitals get paid by Medicare and Medi-Cal, private insurance, HMO contracts, and they get money for uncompensated care from the feds for seeing uninsured folks, mostly in the E.R. Some also do quite well through private fund-raising.  Clinics take Medi-Cal and struggle to survive.  Large private foundations in California give only 2% of their grants to Orange County programs, while we have 8% of the population and more than 9% of the uninsured in the state.  This is just another example of O.C. getting the sticky end.

Question 4.  Who provides health care funds and who authorizes their allocation?

Answer:   State legislature, and sometimes propositions, decide some of the funding streams.  Private foundations employ program officers who make recommendations to Boards of Directors on grants.  In many cases, allocations were set years ago (when O.C. was a rural county) and can’t be changed because increasing one county’s allocation would mean decreasing another county’s; O.C. legislators are not very powerful in Sacramento or in Washington, so they can’t get the votes to bring home the bacon.  A huge problem in health funding is the total fear legislators have of raising taxes, no matter how badly taxes need to be raised.  Politicians of all parties are convinced that they will never be elected again if they increase taxes. Ironically, politicians would not even need to raise taxes at all, if they would only stop trying to “reform” the health care system while still preserving the status quo for the benefit of the health insurance industry and the pharmaceutical manufacturers.  Until the health care system is freed from the waste and excessive profits of these industries, no meaningful reform of the health care funding system can be designed or implemented.

Question 5.   What types of funding are there, and what can they provide?

Answer:   It’s important to note that State and Federal funding is more than fifty times as much or more, than private foundation grants.  I think endowments and gifts are of great importance to universities, orchestras and other performing arts, but don’t seem to be available for health care.  More than two thirds of health care is paid for by the government one way or another, which makes the insurance companies’ bleating about “socialized medicine” all the more specious and ridiculous. 

Question 6.   What types of grants are there, and what can they provide?

Answer.    Generally, foundations like to give grants for hands-on projects so that they can see immediate results for their money.  Very few foundations will provide funds for necessary operating expenses, or for continuation of an existing successful program.  Usually they are looking for new, innovative programs, so organizations keep having to re-invent the wheel, and then they only fund it for two, at most three years.  Most foundations ask grantees how they plan to sustain their program after the grant runs out.  The problem is: if they could answer that, they wouldn’t need the grant, would they?  Most private health care foundations came into existence when previously non-profit organizations changed to become for-profit.  The law required the organization (which had not been paying taxes while operating as a non-profit) to set aside money (some of them in the millions) to compensate the public for becoming a for-profit entity.  The money they provide in grants is supposed to improve the public’s access to health care.  It’s really our money, but some foundations act as if it was their own, and they are doing grantees a big favor!

Question 7.   What tax brackets provide health care money?

Answer:  The biggest source of health funding is federal income tax, which is supposed to be a progressive tax system. That means the poorest people are in the lowest bracket and pay the least tax, and the richest are supposed to pay the most.  Unfortunately, particularly since the Bush administration’s tax cuts, middle-class people now pay more than their share, and the very wealthy pay little, or, in some cases, no tax at all.  The result is that very rich people, who can afford any kind of health care they want, have ready access to care. Very poor people are eligible for government health programs (although Medi-Cal only covers poor kids up to age 18, people with disabilities and pregnant women, provided they are citizens). But middle-class people, who are not eligible for tax relief or government programs, end up paying for the government programs, and sometimes lose their savings, their homes, and their jobs if they get sick.

Question 8.  What types of programs do these funds/grants facilitate?

Answer:   One example would be Medi-Cal.  The feds send money to the state; the state matches some of the money and sends some to each county, based on how many people (legal residents) the county social services agency can identify with incomes at or just above the federal poverty level.  Then there are very complicated rules as to how much money Medi-Cal will pay, under what circumstances, to get health care needed by those people.  In Orange County, there is an organization called CalOptima which manages Medi-Cal and recruits doctors and health plans that will accept the very low Medi-Cal payments, and the recipients are recruited as members of CalOptima. A second example is Prop. 63.  This proposition passed in the election in 2004, and charges people with annual incomes of one million dollars or more with a 2% surcharge on their state income tax.  This is a very rare example of the very wealthy being singled out, and it was done for a specific purpose, namely to provide for services for the mentally ill for whom insufficient funds had been received by counties for many years. 

I could give you more examples, but the fact is that there are thousands of different kinds of programs, funded in many ways, and unfortunately, like Topsy, the health care system “jest growed” without any coherent plan.  Too many people fall through the cracks. That’s why we need health care reform.

Question 9.   Are there time limitations/sanctions associated with these health care programs?

Answer:   Some government programs, such as Healthy Families and Medi-Cal, not only require people to complete burdensome paperwork to obtain coverage, but require people to renew their “membership” periodically.  One set of new regulations was obviously designed to cause people to throw up their hands and give up when required to re-register every three months.  Private insurance programs use other means to prevent people from accessing health care services; anything from losing applications, to accusations of fraud and simply dumping people who thought they had coverage if they get sick.

Question 10.  What is the process for accessing them?

Answer:   For Medi-Cal, there are usually eligibility workers in hospitals and clinics who will help individuals to apply for coverage.  The County Social Services Agency has a staff of people who screen people and assist them in completing applications.  If they are ineligible for Medi-Cal because their income is slightly too high, their children may be eligible for the California version of SCHIP, called Healthy Families.  For mental health services, the county Health Care Agency conducts programs, and also contracts with the Mental Health Association for day treatment. Other programs, for older adults and for persons with disabilities, are offered by the Council on Aging, the County Office on Aging, the Dayle McIntosh Center for the disabled, and many other organizations, but once again, many people fall through the cracks in this complex non-system.

Question 11.  How does the general public find out this information?

Answer:   Information and referral are conducted by a number of non-profit organizations such as Info Link Orange County (just dial 2-1-1), the Red Cross, Senior Centers, the Coalition of Community Clinics, Office on Aging, Hospital Association of Southern California, the Council on Aging, the Mental Health Association, Legal Aid, Jewish Family Services of Orange County, Catholic Charities, Lutheran Family Services, the county Social Services Agency, the County Health Care Agency, and dozens more. Still, many people rely on the telephone book, and since the Health Care Council is listed in the white pages, we receive a great many calls, mostly from people who really want the County HCA. 

Incidentally, one of the best-kept secrets in the county is the MSI (Medical Services for Indigents) program conducted by the Health Care Agency. Under the California Welfare and Institutions Code (Section 17000 et seq.) the county is responsible for providing health care for people who have no other recourse.  The county has no public county hospital, so the MSI program pays for the care of individuals who are uninsured and destitute, at contracting facilities; however, since very few people know about this program, it is accessed by perhaps one tenth of the people who need these services.

I hope these answers are helpful as you struggle to understand our very complicated “local” health care landscape.  I know you are enrolled in an excellent nursing education program, which we have had a small part in supporting over the past ten years. You have excellent teachers, some of whom may disagree with some of the answers above, but I know you will make your own judgments, and become a valuable health professional.  Best wishes for your future success.

Yours sincerely,

The Health Care Council of Orange County

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