A Special Session AND An Initiative. Oh Joy!

I’ve been predicting that Governor Arnold Schwarzenegger would call a special session to push through a health care reform package for quite some time now. As the Legislature faces adjournment in less than a week, it looks like it’s now become all but a certainty. But it seems the special session is only a prelude. According to an article by Mike Zapler in the San Jose Mercury, the Governor will use the a special session to pass a framework for reform, but make much of it contingent on funding to be enacted by an initiative.  The Mercury reports an aide to the Governor predicting that “Schwarzenegger would assemble the ‘strongest, most robust health care coalition ever put together’ to push for the initiative.”

The aide is probably right. The Governor will be able to muster support among hospitals, insurers, consumer groups, and unions to create a unique and potent coalition. There’d still be opposition, including from some from hospitals, insurers, consumer groups and unions. But the mere fact that these stakeholders would be split on the issue is a huge win for the Governor.

How the split within these interest groups works itself out will depend in large part on how well the framework is designed and what funding mechanisms are included in the initiative. For example, the Democratic majority’s legislation, Assembly Bill 8 (Nunez) gives unprecedented power to the Managed Risk Medical Insurance Board to raise fees on every business in California without considering the impact of the fees on the state’s resources or economy.  If the Governor endorses this approach the framwork will be perceived as hopelessly flawed by a substantial portion of the business community which would otherwise have supported the Governor’s ballot measure.

The nature of the taxes and fees the Governor proposes will also impact the outcome. Broader taxes will be required to raise the billions of dollars required to achieve anything close to universal coverage. Some in the business community support a one-percent increase in the sales tax to raise the necessary funding. Others will argue this is a particularly regressive form of taxation which punishes low income families — albeit this population will no doubt benefit the most from the overall package.

In looking for more narrowly-targeted  taxes, the Adminstration may want to look at the list of potential financing mechanisms proposed by the California Association of Health Underwriters in its Healthy Solutions health care reform plan. CAHU recommends taxing activity which directly impacts health care costs. This includes common targets like smoking and alchohol, but CAHU goes further. It recommends imposing fees on handguns and ammuniation and on unhealthy foods. These would no doubt be controversial, but there’s no denying they target significant drivers of increasing medical expenses. (Full disclosure: I helped draft Healthy Solutions and pushed to have these targeted taxes included).

 What all this means is, the coming week will be devoted mostly to political theater. Act One will be symbolic passage of Democratic reform proposals followed quickly by vetos. Act Two will be the special session. If robust public debate flourishes at this point the result could be a framework for reform which is reasonable and effective. Act Three would be the funding initiative, most likely to be part of the November 2008 ballot.  What’s interesting is, while the script is finally becoming clear, no one is really certain yet if the play is a comedy or a tragedy.