First Do No Harm. Then Do Something.

"First, do no harm" is the foundation of modern medicine.  But for sick patients to benefit, illness must then be actively treated.  Avoiding harm by simply ignoring a problem is rarely the best way to solve it.

Governor Schwarzenegger's healthcare proposal is an easy target for critics.  But criticism alone, however necessary for healthy debate, accomplishes little besides "doing no harm."  A broken healthcare system merits treatment, not benign neglect that may prove anything but benign in the long term.

Below is an outline of both criticisms of the Governor's proposal and workable solutions for a system that does not currently serve Californians fairly and efficiently. 


The Governor's proposal would be funded in ways that violate Federal statutes. The Medicaid program was established in 1965 under Title XIX of the Social Security Act.  Its purpose was to provide Federal reimbursement to states that subsidized medical care for the needy.

Federal matching of State expenditures, however, is not unconditional.  Title XIX specifically prohibits states from using "provider-related donations" to fund the state portion of Medicaid payments.  Taxing hospitals and doctors, as proposed by the Governor's plan, would automatically disqualify the State of California from receiving Federal matching funds.

This was reinforced on January 18, 2007-three days after the Governor announced his proposal-by the Centers for Medicare and Medicaid Services (CMS), which placed on the Federal Register a clarification of this exact issue.  The clarification reviews "agency concerns about questionable methods of State Medicaid funding."

Another violation of Title XIX is found when examining the Governor's intent to raise Medi-Cal's (California's Medicaid) dismal reimbursement to doctors and hospitals. 

To offset the planned $2.2 Billion in increased payments, doctors will be taxed 2% and hospitals 4%, thereby generating $3.5 Billion. 

This new tax will not hold up under Title XIX regulations.  For states to receive Federal matching funds for Medicaid payments, Section 1903 of the Social Security Act requires that "the provider retains the full Medicaid payment and...does not repay, all or any portion of the Medicaid payment to the State or local tax revenue account."

The Governor's plan therefore relies on Federal subsidies that, by law, will reduce the Federal burden by increasing the State's.

Under ERISA, the Employee Retirement Income Security Act, instituting a 4% payroll tax on every California employer with ten or more employees exceeds State authority and violates Federal Labor law.  This concept was upheld as recently as January 18, 2007 in the ruling against the State of Maryland's attempt to tax employers in order to fund healthcare.


Managed Care" is not quality care.

"Managed Care" creates an expensive bureaucracy that siphons off more than 20% of all healthcare dollars.  By eliminating Medi-Cal's "Treatment Authorization Referral" requirement-a cumbersome way of putting treatment decisions in the hands of Sacramento state workers-administrative costs are lowered and healthcare decisions return to where they belong...between a patient and his or her doctor.

Combat fraud through computer-generated oversight rather than bureaucracy.

Identifying and rectifying fraud is a critical component of any plan involving the business of medicine.  But assuming fraud on the part of every doctor, imposing administrative delays on patient care by demanding preauthorization and using routine denials to cut costs is inefficient and dangerous.  Medi-Cal now requires Breast Cancer Surgeons, for example, to routinely submit a preauthorization request prior to treatment for every patient with biopsy-proven breast cancer.  This is an added burden for the patient who must wait while Sacramento employees review the request.  It threatens access to care when frustrated Surgeons, struggling to keep their offices open, reconsider accepting the cut-rate fee Medi-Cal pays along with the bureaucratic hassles.

There is a better way.

Currently, all healthcare-related payments are made based on submitted codes for diagnoses and services provided.  Data has already been generated outlining the frequency and ratio of each code used by physicians and hospitals in every specialty and location in the U.S.

Computer modeling can be used to identify and audit outliers, i.e., those providers using a statistically greater percentage of codes than others in the same category. 

If, for example, a provider consistently bills Medicare using the highest acuity/best-paying code for office visits, the electronic "red flag" would warrant investigation.  At that point, if the provider's documentation supports the frequent use of the code, no fraud has been committed.  But if it fails to do so, Medicare can recoup improper payments and issue sanctions if indicated.

Eliminate "Rental Networks."

The existence of "Physician Rental Networks" or "Silent PPOs" is an abomination to those who seek high quality, cost-effective care.  These serve as middlemen, driving up costs by charging health insurance companies for access to doctors.  In turn, they force discounted rates on doctors who never contracted with the "Rental Network" charging the fees to the insurers, thus skimming dollars off every patient unwittingly put in the middle of this scheme.

If we eliminate phantom Rental Networks, money now diverted for administrative profits could be spent on patient care.

Promote competition with deregulation to allow health plans to sell their products nationwide.

Barring plans from being purchased across state lines limits consumer choice, creating the same problems as any monopoly.  When insurers have to compete for our dollars, they will respond by offering better products-or else face elimination in the marketplace.

Uncouple health insurance from employment.

This is no longer a society in which a worker chooses his job at age 18 and remains with the company until retirement.  Portability is essential.  Remove the employer from the healthcare equation by making community-rated, risk-adjusted plans available to every Californian, not just the employed.

Health insurance premiums and HSA (Health Savings Account) contributions should be exempt from taxation by the State.

Californians who purchase their own coverage are part of the solution, and don't deserve to be punished for it every April 15th.

Review Medi-Cal and all State-funded programs for coverage of unnecessary care.

Funding cosmetic dentistry and weight-loss surgery should not be the responsibility of California taxpayers.

Tax foreign remittances to recover lost revenue.

Foreign remittances sent by California's undocumented immigrants constituted over $9.6 Billion in 2004, and this amount is expected to reach $25 Billion by 2010.  This disposable income generates revenue for the home country to which it is sent.  However, California's economy is penalized when this income leaves the State without helping fund the services utilized by those who send it.

Assessing these remittances at the time they are sent could replace some of the revenue spent by the State on healthcare for undocumented immigrants.

Accountability must be achieved.

When California taxpayers foot the bill, accountability is critical.  State funding should focus on cost-effective, evidence-based measures that best serve public health needs.

For example, vaccination programs for school-aged children have proven effective in reducing illnesses that would require time off work for parents, not to mention the lifetime disability (and societal burden) created by devastating childhood infectious diseases.

Early detection programs for breast and cervical cancer do more than reduce mortality rates.  They allow for intervention at earlier, more easily treatable stages of malignancies that-if advanced at the time of diagnosis-require far more expensive treatments with lower chances for cure.

Using healthcare dollars to fund community obesity education programs (as suggested in the Governor's plan) may sound logical, but a more cost-effective approach would be to educate children where they are most easily school.

Returning physical activity to the school day allows habits to develop which have a lifetime impact.  Rates of obesity, diabetes, hypertension and heart disease are lower among the physically fit.  These are high-cost conditions to treat, a cost inevitably transmitted to society in the form of lost productivity and increased healthcare expenditures.

Including solutions in any healthcare debate is not simply a "feel good" measure that mitigates the pain of criticism.  It is a practical way to help sick patients who need more than to simply not be harmed.

Dr. Halderman is a Board-Certified General Surgeon practicing in rural south Fresno County, California
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