Reject Proposition 8, capping the profits from kidney dialysis

California has a long history of propositions gone awry. Proposition 8 provides a classic example of a ballot measure that has no business being decided by California voters.

The complex initiative designed to regulate the dialysis industry is better suited for the Legislature, where the wording of new laws can be thoroughly vetted and easily altered if problems arise.

Dialysis treatment is a matter of life and death for the 80,000 Californians who receive treatment three times a week in the state’s 588 licensed chronic dialysis clinics. Physicians warn that patients missing one treatment increase their risk of death by 30 percent.

But the union leaders who launched the initiative to put Prop. 8 on the Nov. 6 ballot wrote a ballot measure that could lead to fewer clinics providing dialysis for patients who critically need the service, according to the independent Legislative Analyst’s Office. Vote no on Proposition 8.

The origin of the measure is no surprise. The Service Employees International Union (SEIU) has been frustrated with its lack of success unionizing dialysis workers and increasing staffing ratios at clinics. That prompted the flawed strategy of using the threat of a ballot measure as leverage to win concessions from the two California for-profit dialysis firms — DaVita and Fresenius — that dominate the business, providing about 70 percent of the treatments for Californians experiencing kidney failure. The firms stood firm, and SEIU put the issue before voters, where it doesn’t belong.

SEIU representatives argue that the for-profit dialysis firms are engaging in pricegouging and that their profit margins approach 20 percent. Prop. 8 would cap their profits at 15 percent, forcing them to offer rebates to insurance companies at the end of every year if dialysis companies’ margins exceed the cap.

Price-setting for dialysis treatment — like practically all medical procedures in today’s health care world — is complicated. Medicare and Medi-Cal reimbursements for dialysis treatments don’t come close to covering the costs for firms. To offset the losses, dialysis firms charge patients with private insurance a higher rate. The alternative is operating at a loss, which is unsustainable.

The Legislative Analyst’s Office warns that how state regulators interpret Proposition 8 and how dialysis firms react creates a degree of uncertainty that we find unacceptable. “In some cases,” the LAO report says, “owner/operators might decide to open fewer new CDCs (chronic dialysis clinics) or close some CDCs if the amount of required rebates is large and reduced revenues do not provide sufficient return on investment to expand or remain in the market.”

This would be a devastating development for patients, who could be forced to travel longer distances to receive treatments.

The lack of competition in the dialysis treatment business is troubling, as is the potential for overcharging. But this is a matter that is better suited for the Legislature.

SEIU does not see it that way. Spokeswoman Joan Allen told our editorial board that it uses ballot measures to incentivize companies to change their ways. It sees large policy issues such as Proposition 8 as more appropriate for ballot measures than the Legislature.

We disagree. Ballot measures on policy issues should go before voters only after repeated efforts to pass legislation fail, and even then the wording of a measure often greatly benefits from reviews by supporters and opponents.

Vote no on Proposition 8.