Doctors Cool to Gov. Arnold's Health Plan

Dr. Anmol Mahal felt torn. Earlier this month, the California Medical Association (CMA) president sat on a Sacramento stage with other dignitaries as Gov. Arnold Schwarzenegger, speaking by satellite hookup, laid out details of his ambitious $12 billion plan to provide Californians with universal health care. The Fremont, Calif., gastroenterologist admired Schwarzenegger's goals—coverage for all of the state's 36 million residents and improving health care for kids. "It's in some ways very visionary," Mahal said later. But Mahal's admiration soured when Schwarzenegger revealed that his plan would force doctors to give up 2 percent of their gross incomes to help fund coverage. "We are very discouraged and disappointed," Mahal complained. "We had no warning."

California doctors are giving Schwarzenegger's latest blockbuster very mixed reviews. Physicians in the Golden State agree that the state's delivery system is "disastrous"—while medical costs skyrocket, emergency rooms are closing, the uninsured go untreated and the state's Medi-Cal reimbursements rank among the nation's lowest. But docs wonder whether the Schwarzenegger plan can work, and they strenuously oppose the governor's proposal to cover nearly 30 percent of the plan's costs by levying a $3.5 billion "coverage dividend" on doctors' (and hospitals') gross revenues. "Why not tax teachers to provide money for better schools?" complains Dr. Samuel Fink, a Los Angeles internist.

Whatever the complaints, Schwarzenegger's plan aims high. He proposes to make California only the fourth state (the others are Vermont, Maine and Massachusetts) to mandate universal coverage—and by far the largest. The proposals, which require legislative approval, mix subsidized insurance with expanded free coverage for the state's poorest residents. Families with incomes between 100 and 300 percent of the poverty line would be required to purchase subsidized insurance after they paid between 3 and 6 percent of gross income. In addition, the plan adds $4 billion to the state's Medi-Cal program of free coverage for people under the poverty line—in part by increasing rates paid to doctors an average of 37 percent, according to a Schwarzenegger spokeswoman. The plan, which would cover illegal aliens, would also increase spending on preventive medicine and require insurers to offer coverage to everyone and to pump at least 85 percent of premiums into patient care. The goal, says Schwarzenegger, is "to fix this broken system once and for all."

Doctors complain that Schwarzenegger's "coverage dividend" really amounts to an unfair tax on them. "This stems from the false notion that doctors across California are making a hell of a lot of money," says Jeffrey Dysart, a family practitioner in San Diego. Schwarzenegger counters by saying that doctors, freed from eating the costs of treating the uninsured and bolstered by bigger Medi-Cal payments, will actually end up with higher incomes. "When you look at the math, [doctors] actually in the end benefit more than what has been taken away," Schwarzenegger said at the plan's unveiling. Not so, says Los Angeles orthopedic surgeon Ralph DiLibero, head of the Los Angeles County Medical Association. "(Schwarzenegger's) rationale is that docs will make it up by seeing more patients," he says. "It's a fallacy. Physicians are seeing all the patients they can already."

Some medical practices would suffer more than others, doctors complain. Assessed on gross revenues rather than net income, the 2 percent fee hits doctors with high overheads harder, including oncologists, pediatricians and general practitioners—whose overhead costs may amount to 50 to 60 percent of their revenues. "I buy $120,000 worth of vaccines out of pocket each year," says Culver City pediatrician Jeffrey Penso. "I'd have to pay a fee on that." Oncologists who buy and sell hugely expensive drugs to patients at no cost would suffer, too.

Even doctors in training are figuring out how the plan might affect them. Some physicians believe Schwarzenegger's plan might drive doctors out of state, but University of Southern California medical student Julia Cormano says she would stay in California—but reconsider her choice of specialties. Cormano, co-president of the med school's students' association, says the talk on campus is whether students, who can carry as much as $200,000 in loans, would be forced out of general medicine with the additional drain on future income. "(The plan) would make it that much more difficult to go into fields that aren't well-compensated," says Cormano.

Some California practitioners wonder whether there are enough facilities to handle the new patients. More than 60 emergency rooms have shuttered in the state in the past several years. Dr. David Goldstein, chief of geriatric and internal medicine at USC's Keck School of Medicine, notes that bad economics have driven G.P.s away from just the sort of office-based practices that would be needed under the new system. "The backlog for appointments for Medi-Cal ambulatory (office-based) care is very long," worries Goldstein, who has treated indigent patients for 36 years. Calling the strategy "somewhat ill-conceived," he worries that unless Schwarzenegger is careful, waiting times "will just be that much longer."

Negotiations have only just started. Dr. Mahal promises that the CMA will lobby hard to cut the provision that docs help pay for the plan. Schwarzenegger has signaled that almost everything is open for discussion—"I look forward to everyone having those debates," he said on the day he unveiled his plan. That's a good thing, because the docs' own prescription seems to include a lot of talk therapy.