Interview with California State Assemblyman Jim Cunneen

With the recent United States Supreme Court decision upholding the constitutionality of the Patient Protection and Affordable Care Act, healthcare reform has become a prominent subject of both discussion and derision in the media and the political world. The topic of healthcare reform has engendered passionate debates and divisiveness across America. The Affordable Care Act, widely known as Obamacare, will continue to dominate the political discourse in the run-up to the United States presidential election this November. For more insight into American healthcare policy, MedCrunch was able to sit down and interview former California State Assemblyman Jim Cunneen to discuss the Affordable Care Act and healthcare reform in the United States. Mr. Cunneen represented the Silicon Valley in the California legislature from 1994 to 2000, serving on the Insurance, Budget, Education, and Public Safety Legislative Committees. He subsequently served as the President and CEO of the San Jose Silicon Valley Chamber of Commerce and is presently a Principal of California Strategies, LLC, a bipartisan, public affairs consulting firm.

MedCrunch: What do you think the long-term impact of the Affordable Care Act will be on the US health care system?

Jim Cunneen: I’m not completely qualified to say, but from a policy point of view I think that it is going to drive costs for certain consumers higher. I think it is going to run some people out of the healthcare profession. And, I think it is also going to benefit a lot of people that are going to have insurance that didn’t have insurance before. Over the long-term it is going to be a mixed result. It’s really, from a policy perspective, more philosophical. Everyone agrees that the healthcare industry needed reform. Conservatives believe it too, regardless of the media positioning that says liberals care about reform and conservatives want it to say the same. I don’t think conservatives do want it to stay the same. I think that they realize it’s a flawed market right now.  It’s the approach to fixing it that really is the divide in the country. I think that more people are going to get health insurance. I think there are going to be impacts on health care providers and consumers that are mostly deleterious, but it will be a mixed bag. This solution is a government one as opposed to a free market one.

MedCrunch: One point of criticism of the healthcare law was related to the lack of a tort reform component. What do you think of that criticism specifically?

Jim Cunneen: I think tort reform should have been included if it were going to be comprehensive health reform. It just shows how partisan it was in passing. This passed with all Democratic votes and no Republican votes. The “No” side was bipartisan with some Democrats opposing the healthcare law. I think you could have potentially gotten some conservatives if there had been elements like tort reform and if there wasn’t this expansion of Medicaid on top of the other reforms. That is one of the key quarrels – this major expansion of the entitlement of healthcare and then imposing it on the states to fund it. That creates a huge fiscal problem for the states. The federal government really only covers costs for a few years, and then states are kind of on their own. So, do you take that obligation and take that money from the federal government knowing that you have a long-term obligation as a result? Tort reform could have been an element that could have brought more bipartisan support. How critical is [tort reform]? It is one of the cost drivers, but it is silly for conservatives to overstate the case that only tort reform will bring healthcare costs in line. There are so many things that drive healthcare costs that need reform – the introduction of new technologies, more and more people getting their healthcare in emergency rooms. Tort reform was one of those. We have entered this era where the incentives are such that to cover potential downsides a doctor better order the extra tests, even though in their professional medical judgment it is probably not necessary. A physician is going to go ahead and test for everything and do everything because of the specter of potential big damages. I also think it is important for conservatives not to overstate the case. We do have things like MICRA (The Medical Injury Compensation Reform Act) in place in California which caps jury rewards on providers. It’s a crucial element to a better healthcare system where you are not incentivized to do things that are unnecessary. I also think that it helps on the margins in terms of healthcare costs; it’s just not a panacea.

MedCrunch: What do you think should have been done with the healthcare reform legislation? What would you have liked to see taken out?

Jim Cunneen: I think tort reform would have been really good. What should have been done in health care reform were some of the insurance reforms, so things like covering preexisting conditions should stay in healthcare reform. I think there is universal consensus around it. Even the individual mandate could have potentially received bipartisan support. It was really the big government specter of the expansion of Medicaid and the burdens that places on states that I think really drove a lot of the partisanship in this. The individual mandate was an idea shopped around by the Heritage Foundation and other conservative think tanks. Many of us thought that the individual mandate was just fine for states to do but not for the federal government to do; the philosophical opinions on the individual mandate and personal responsibility weren’t that foreign. I would have liked to have NOT seen the expansion of Medicaid as part of the reform.

MedCrunch: Didn’t the Supreme Court strike down that Medicaid provision from the law?

Jim Cunneen: No, states can still opt in to take that money, so you have the lure and the incentive, but they don’t have to take the money. And, the Supreme Court upheld the individual mandate and just called it a tax. If this were more of a bipartisan bill, the philosophy would have been that they could have done a reform that encouraged states to do the individual mandate; there could be financial incentives if the state does do an individual mandate. Instead, it has turned out where we are going to expand Medicaid, and there will be financial incentives behind that. That kind of incentive is deleterious because it is only for a short period of time; once you start the expansion of the right it goes on forever, however the funding doesn’t go on forever. If I were a governor of a state, I would say I couldn’t accept that money because of the long-term obligation. If I have that extra money I’m obviously going to do the best I can for the poor people of my state to get as many people possible covered. The key is deciding how far up the income scale you go before you suck everyone onto a government program.

MedCrunch: You briefly mentioned how individuals will be discouraged from entering healthcare professions. What do you think would persuade more people to enter or stay in the healthcare field?

Jim Cunneen: I think you have to have doctors at the center of patient care again. Right now, the doctor is the bastard stepchild of the healthcare system. The important players are hospitals, insurance companies, and government. And the doctors are just out there, yet they are the ones that have all of the expertise. They are the ones that have to perform this science and art. They are the ones who have to make these appropriate decisions that are best for their patients, and right now the incentives are to send them to specialists, which creates new markets for specialists. That is one of the problems with dwindling primary care physicians is that all the incentives are to specialize; we have created this market where you have to cover your butt, and you’ve got to test for this and test for that, and do all these things that may be unnecessary. You have all of these perverse incentives in the market right now. I think the fundamental thing to do is to empower doctors to be the center again and to have more power. I proposed a bill in Congress on this, and then I wasn’t elected so I could never follow through. It really ticked off a lot of insurance companies because I felt like doctors didn’t have any power in negotiating rates. Big hospitals could collude, insurance companies really could collude to a large degree, but there were really strong antitrust laws among doctors that said they couldn’t get together and negotiate with insurance companies and hospitals together as a group. I thought there could have been reforms in the antitrust laws that allowed doctors, for the purpose of negotiating reimbursements, to organize and pool their negotiating power with these other large entities. You have these massive insurance companies and massive hospital systems, and then you have a lonely doctor. It seems to me that allowing them to be empowered to negotiate could have huge positive effects on the healthcare system and the efficiency of the dollars spent.

MedCrunch: You have discussed many reforms already, but are there any others you would like to see? How about the ability to purchase insurance across state lines?

Jim Cunneen: I think nationalizing the market instead of having the market totally controlled and regulated by states could be useful in spreading the costs over a wider group of people.  It wouldn’t change much in California because we are already such a large state already, but it could change things for a lot for middle America; that is where there are a lot of the physician shortages and health care access issues. The ability to negotiate rates in a small state has got to be harder, so some of those things could help the country as a whole.

MedCrunch: Much depends on the outcome of the Presidential election outcome in November, but do you think that parts of the healthcare reform will be repealed?

Jim Cunneen: I don’t think that it will be repealed, and I think that particularly after the Supreme Court decision there is less momentum to have it repealed. I think the most that a potential President Romney can do is through executive order. He could further exempt states from some of the Medicaid expansion requirements. With whatever is in the power of a President to do he can certainly slow down the momentum. I think Republicans would be wiser to look at mending it instead of ending it, so to speak. I think the Medicaid expansion is a big problem for Republicans. Philosophically, an individual mandate from the federal government is different from an individual mandate from the state perspective. So you could keep the individual mandate provision in the law but turn it more into an incentive for states to adopt such laws.

One of the problems with the individual mandate is that it is phased in over time. What is going to happen is that you’ve got a lot of young people that are pretty healthy, and they will roll the dice and not get any insurance. Then you’ve got people that will be phased in on the individual mandate. And, then you have these provisions in the law, which I thought were quirky. For instance, the cost of healthcare for a senior can only be three times that of a young person. I forget how they define senior or the young person, but I remember reading about something in there that said that the rate an insurance company offers to a senior can only be three times that of a younger person. Because you have a bunch of younger people that aren’t entering the market and because you have a phased in individual mandate, it means that when those of us who own our own small businesses try and buy an individual policy for ourselves, it is going to cost a fortune because not everyone is insured. The individual mandate hasn’t kicked in fully to have everyone in the pool to lower costs. You have an artificial cap of three to one, and it’s just an unsustainable model. The President is stating things that are true about the law but in some ways they are half-truths; they are true in the moment of perfection, but as the market takes hold, there is absolutely no truth to it because rates are going to increase dramatically. I’m not going to be able to keep the insurance plan that I have because my employer is going to drop it.  The company that I work for may say that our group health insurance policy will no longer be offered because now you can go and get an insurance offer in the market place through government. You are going to have a perfect storm – the crowding of the insurance market by the government, a mandate that is phased in, and an artificial cap on what you can charge. That means that for guys like me, the costs are going to go through the roof. I think what they need to get aggressive in is making it work in a way that involves more market oriented reforms. Obama may, in retrospect, have done the country a huge favor by forcing our hand on healthcare reform. Remember when Republicans were in control of the Presidency and Congress they didn’t do anything, expect for expanding the mandate on the pharmaceutical industry for prescription drugs. That was the big Republican achievement with Republicans in total control; they did nothing to really reform the process or empower doctors. They did nothing to address preexisting conditions, which is the height of discrimination because it is something a human being can’t control. Both parties have to understand that the American people are saying that they are tired of people not working on solutions. Republicans have to step up along with the President in conceding some things – that government isn’t the solution, but also that markets aren’t perfect. There are some centrist policies that could kick in that could make the healthcare system a whole lot better and cover a lot more people.

MedCrunch: Do you think the reforms that you have talked about will help with physician shortages facing the United States?

Jim Cunneen: The primary care physician shortage is the issue. I think a lot of those problems are occurring because we have created perverse incentives in health care. The incentive is for the primary care doctor to tell patients to go to a bunch of different specialists and have this and that test run. You have created these markets as a result of this, and potential doctors decide to specialize. You have to have incentives to empower primary care doctors to be the quarterback of a person’s healthcare. There are some things you can do as a country such as forgiving of student loans and having some financial tax incentives for people who are primary care physicians. We need reforms that don’t pervert the market, that don’t provide government programs, but that do influence the market to get a desired result. I am not ideologically opposed to that at all, but there are probably a lot of other smarter ideas out there.

It is really difficult though to establish your own practice as a family doctor. You can be a family doctor, but you’re going to end up working for Kaiser or another big healthcare system. What drove a lot of people into healthcare was the feeling of being empowered and getting to own your own business. There is appeal in getting to control your own life and not just being somebody getting a paycheck.  This has fallen by the wayside. There could be room for reforms that could keep those individual doctors still out there. And, it would continue to create more independence for that doctor to really call the shots that they think are right, as opposed to worrying about what your boss at a big healthcare system will think about your decisions.