"This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning." — Winston Churchill

Two weeks after announcing his support for implementing health care reform in California, Governor Schwarzenegger proposed another round of cuts in health care services for the poor, elderly, and underserved in an effort to close a $19 billion budget gap.

While his first announcement put the state on the road to providing health care coverage to millions of uninsured Californians, his second announcement last week in the "May revise" revealed the paradox facing our state. These newly insured Californians will be seeking care from a health care system that we increasingly cannot afford.

This contradiction underscores the urgency of implementing the new law in a way that not only increases access but also improves quality of care and lowers costs. Neither of these crucial goals is a certainty today. And while it is almost certain that some of the proposed cuts will be modified, the health care system's strain on the state budget is mirrored at every level of government, among employers, and in most households.

The Affordable Care Act has many positive provisions, including new coverage for two million low-income Californians under Medi-Cal and other public coverage programs, and for another two to three million who would be eligible for subsidies to purchase private coverage.

Also, people with health problems ("pre-existing conditions") will not be denied the ability to purchase private coverage based on their health status. And it will be much less likely that a serious illness will be followed by bankruptcy.

But these and other advances in the law are certain to fail if we do not recognize one stark fact about our health care system and move expeditiously to fix it: It is too expensive. I do not mean that the cost of care is growing too fast; I mean it is just plain too expensive, and we must find ways to reduce costs while maintaining and improving quality if we are to avoid bankrupting our society. The law has only a few elements to help reduce costs, and none that will work as quickly as we need.

To make matters more complicated, the state is limited in its ability to implement the reforms because of the budgetary crisis. And significant implementation issues will likely be caught between the end of the Schwarzenegger administration and the ramp-up time needed for the new administration, whatever its political stripe, to understand the issues and settle on its implementation priorities.

Alas, many of those who work in the health care system are keenly aware of its dysfunctions but are deeply invested in the way it works now. Because of the way we pay for health care, it is in the interests of hospitals to keep beds full; for doctors to do more, not less; and since the true cost of health care is hidden to most people who have health insurance, consumers are free to assume that more care is better care at any price (which it decidedly is not). As long as the economic incentive is to provide more care, more care will be provided, whether it improves health or not.

So despite the fact that health reform will provide some much-needed relief for individuals and some small businesses, even its most ardent supporters — including President Obama — acknowledge that we are buying people into a system that is financially unsustainable. Indeed, we should all expect that pressures to reduce costs throughout the system — in Medicaid, Medicare, and private insurance — will not abate; they will only increase.

So what is to be done?

• Change the way we pay for health care. Paying health care providers to do more things with more expensive equipment will bankrupt California. Today one of every six dollars is spent on health care; in 10 years, one of every five dollars spent will be on health care. So we must find better ways to pay providers for performance rather than just volume: for keeping us healthy and getting us back on our feet efficiently when we are sick, and not just seeing us more often and ordering more tests and procedures.
• Squeeze inefficiency out of the system. We can argue how much inefficiency there is in health care, but no one argues there aren't huge efficiencies to gain through the proper use of modern information technology to improve patient safety and coordination of care, and to make it easier to screen and enroll the millions of new people who will be eligible for coverage.
• Give consumers real power to choose. We know more about the cost and quality of our dishwashers than our surgeons or hospitals. If we are to have a functioning health care system, consumers, employers, and payers must have more access to cost and quality information, so they can understand the value of what they are buying and, where necessary, motivate providers to improve.
• Innovate, innovate, and innovate some more. Innovation should be focused on providing quality medical care at a lower cost, not just building the next expensive diagnostic tool. Innovations should allow consumers to participate in their own care, promote use of telemedicine and other cost-reducing technologies, and allow well-trained, lower-cost health professionals to provide care when a doctor's expertise is not required.
• Coordinate the hand-off. Decisions on implementing reform must be made soon by the current administration and legislature. Yet successful implementation, culminating in major changes to public and private coverage programs in 2014, will fall on a new set of leaders. Today's leaders should focus on establishing effective governance, defining private and public sector roles, and assuring that consumers are well-served by new coverage systems. We need a durable foundation to allow a smooth hand-off to a new administration in 2011.

The health care reform law itself will not solve our health care problems. It is how we react to it, interpret it, and implement it that could begin the end of our dysfunctional health care system and remake it for ourselves and our future generations.

A version of this column ran in the Sacramento Bee on June 2, 2010.