Business analyst Mark Lacter joins KPCC once a week for an in-depth look at economic issues in Southern California.
Hosted by Steve Julian and Mark Lacter
Airs Tuesday mornings

Pot dispensaries; Blue Shield of California

KPCC's business analyst Mark Lacter talks about federal efforts to close down every medical marijuana dispensary in California; he also talks about relief in health care coverage by Blue Shield of California.

Steve Julian: On Tuesdays we talk about the latest business stories with Mark Lacter. Mark, a lot of discussion lately on the federal effort to close down every medical marijuana dispensary -- questions remains as to whether medical pot is illegal.

Mark Lacter: Lots of questions Steve, and it makes you wonder what good was the vote 15 years ago that allowed for the possession and cultivation of marijuana for medical use. Certainly, federal authorities seem to be ignoring the vote - last week several U.S. Attorneys from California announced a big crackdown on the state's medical marijuana industry. They're not just focusing on growers or distributors, they're now including the landlords who rent space to the dispensaries. Up until now federal enforcement in California has been limited - kind of a live and let live policy. But now, owners of dispensaries are caught between state, federal and in some cases local regulations that often conflict with each other. Sometimes the conflicts occur between county government and the city governments within that county.

Julian: There was a ruling last week that affected Long Beach…

Lacter: Right, the city was told by an appellate court that it didn't have the authority to regulate marijuana collectives. It's just gotten to be a total mess – and it’s largely the result of the state lawmakers not willing to specify how medical marijuana was to be regulated.

Julian: The local dispensary owners can’t be very happy.

Lacter: Well, they’re not - and it's not just the threat of arrest. Did you know, for example, that dispensary owners are having their bank accounts closed out - even their personal accounts - because bankers worry about being accused by the feds of aiding in drug activity? Also, dispensaries are being denied tax deductions on the cost of expenses related to marijuana, and expense deductions can be a big deal if you're running any kind of small business.

Julian: So what happens at this point?

Lacter: What should happen is state lawmakers deciding how marijuana growing and distribution should be regulated. And then working with federal and local officials to develop a way to enforce the law. And then getting the courts to sign off on the whole thing. But it still comes down to the basic question of how you regulate usage for something that the federal government says is illegal? Not easy.

Julian: I see there may be some relief in health care coverage?

Lacter: Yeah, for a change. Blue Shield of California says it's going to reimburse more than $400 million to policyholders by the end of the year. A family of four could be credited several hundred dollars (the actual amounts depend on type of coverage and other factors). Which is all good news, I suppose, but for reasons that aren't necessarily so good.

Julian: How so?

Lacter:Well, Blue Shield is returning money because it's been spending less on claims - and it's spending less because people have been cutting back on their medical care. Household budgets are just too tight. And understand that Blue Shield isn't reimbursing folks because they're nice guys - under the president's health care overhaul insurers will have to spend at least 80 percent of consumer premiums on actual medical care, rather than administrative costs or profit. So other insurers might be joining Blue Shield in returning some of that money.

Julian: At least those folks are fortunate enough to have health insurance.

Lacter: That’s right. California has around 8 million people who are uninsured - that's roughly one out of four - and it's an increase from before the recession. It's also among the highest levels in the country. And no insurance often means that ailments are ignored until someone winds up in the emergency room ...and then, of course, the costs really start mounting. So this part of the picture is still looking bad. And because the state has been forced to make so many cuts to Medi-Cal – that’s California’s version of Medicaid – the concern is that there won't be nearly enough funding to go around. One more thing to worry about.

Julian: Mark Lacter is a contributing writer for Los Angeles Magazine and writes the business blog at LA