What if California Had Passed Health Care Reform?

California lawmakers recently passed a budget that, at least on paper, may, perhaps close the $42 billion shortfall the state faces in this and the next fiscal year. The budget was due before July 2008. So it was a bit less than eight months overdue. One of the methods required to close the gap was to reduce funding to some of the state’s neediest citizens.

Lawmakers inability to find a budget compromise in a timely fashion and in such a cruel fashion speaks volumes about a dangerous and dysfunctional political system. It brings into question whether California lawmakers can be trusted with something as critical to its citizens as the nature of its health care system, which would have happened had California enacted Assembly Bill X1-1 last year. Given the state’s current economic and political problems, what would have happened had health care reform passed in early 2009?

ABX1-1, you may recall, passed the Assembly, was supported by the Governor, but was defeated in the Senate early last year. A major reason for its demise was a Legislative Analyst’s Office Report on ABX1-1 that raised serious concerns about the state’s ability to implement the reform package within the $14 billion price tag touted by its supporters, primarily Governor Arnold Schwarzenegger. then Assembly Speaker Fabian Nunez and then President Pro Tem Don Perata. Using what it considered to be optimistic assumptions of the bill’s sponsors, the LAO concluded the plan would be running a deficit of $300 million. Using more conservative (and what the LAO called, more realistic assumptions), it estimated the health care plan would be running a deficit of $1.5 billion in it’s fifth year and have run up a cumulative deficit of $4 billion during it’s first half-decade of operation.

Supporters of the health care reform bill protested that the LAO report underestimated savings from fixing the state’s broken health care system. They relied on a study conducted by professor Jonathan Gruber of the Massachusetts Institute of Technology that demonstrated the reform package was a net financial plus for the state.

Yet the Gruber report made some questionable assumptions. The LAO report noted, for example, that the Gruber model “is not designed to estimate the effects of an economic slowdown on population responses” to the various elements of the reform.”  Translation:  if the economy tanks the Gruber analysis doesn’t work. That’s because, according to the LAO report, ABX1-1’s proponents assumed then current growth rates would continue over time. “For example, the cost of expanding Medi-Cal to adults was grown at the projected growth rate for current Medi-Cal expenses, while the wage-based employer fee was projected to grow at the projected growth rate for wages.”

But tank the economy did (and has). Time and again, the LAO report, delivered to the Legislature on January 22, 2008, warned against the danger of mis-predicting the future. “California is subject periodically to slowdowns in economic activity. During these times, unemployment often increases. This reduces the number of Californians with access to employer-provided healthcare. A recession similar to the one California experienced in the early 1990s could result in hundreds of thousands of Californians losing access to employer-provided health care, thereby increasing the costs for the [health care reform] plan.”

Statistics published by the California Economic Development Department puts this into context. In January 2008, when the LAO report was published, the state’s unemployment rate had been below six percent for three years, dipping below five percent in 2006. This compares to the state’s unemployment rate during the 1990s recession of more than nine percent during most of 1992 and 1993, peaking during several months at 9.9 percent. California’s current unemployment, at least during January 2009, was 10.1 percent. The worst case scenario the LAO warned against has arrived.

I don’t bring all this up to deny the need for substantial health care reform. For the state and national economies to recover sooner-than-later, substantial changes to the health care system are necessary. In times of economic dislocation like we are experiencing now, the human need for change in health care is especially acute and poignant. Unemployment is about more than data and statistics, it’s about neighbors and families in pain.

Nor am I raising this issue to gloat over the failure of ABX1-1. A number of the reforms contained in that legislation would have significantly improved California’s health care system.

These statistics, however, point to several truths:

  1. Predicting the future is hard, if not impossible. Any reform package has to make assumptions about the economic environment years from now. And most likely, those estimates will be wrong.
  2. Meaningful health care reform must come from the federal government — state’s simply aren’t equipped to deal with it. This isn’t to say there aren’t good ideas emerging from the states. But they lack the tools needed to deal with unexpected problems. As California has ably demonstrated, states do a poor job of facing economic challenges. They can’t deficit spend. The federal government has a tough time influencing the economy; states simply can’t.

Think about the budget drama of the past eight months. Now think about a health care structure upon which the state’s residents depends being subject to this horrendous display of chaos. It’s more than scary. It’s a nightmare that eventually California — or any state — will likely face if it tries to tackle the complex issues of comprehensive health care reform aimed at achieving anything close to universal coverage. Until states can print money, they will be incapable of shepherding their health systems through economic times like these.

America’s economy will recover. It’s only a matter of time and hard work. The nation’s health care system can be reformed into a truly American-style system that achieves universal — or nearly universal — coverage. It’s also a matter of time, hard work as well as of smart politics able to find common ground among competing factions. It won’t be easy, but it can be done.

No one during the debate over ABX1-1 could have anticipated what’s happened to the economy. The LAO warned against the potential, but even they did not declare this situation likely. Yet here we are. If ABX1-1 had passed the California fiscal crisis would be even worse than it is. And the state’s lawmakers would have been unable to face the challenge.

Baucus Health Care Reform Plan an Interesting Start

Comprehensive national health care reform is coming. The only question is when and what wil it look like. There will be many reform plans put forward during this process. Some will have more substance than others. Some will be more credible than others. Some may even be practical. And a few might make America’s health care system better, not worse, than it is today.

One thing we know pretty much for certain is that a true single payer system is not coming any time soon. President-elect Barack Obama made comprehensive health care reform a central theme to his campaign. it clear throughout his campaign that he saw an important role for the private sector in the country’s future health care system. The Democratic National Platform made this approach explicit. (Irrelevant factoid: this post could well be the one and only time you ever read anyone referring to a party platform — until 2012).

What’s less certain is whether health care reform will be taken up by the Obama White House and/or Congress in the first few months of the new Administration. There are certainly a lot of influential lawmakers seeking to make health care reform an initial priority, including Senator Max Baucus, Chair of the Senate Finance Committee, and Senator Ted Kennedy, Chair of the Senate’s Health, Education, Labor and Pensions Committee. There’s more already entered in this particular derby and many more to come.

Senator Baucus’ health care reform plan is interesting for several reasons. First, any reform package will need to pass through his Finance Committee. Whether it’s his bill or another’s, Senator Baucus will have the ability to influence the final package. Understanding his starting point, consequently, takes on special significance.

Second, Senator Baucus’ plan, which he notes is not intended to be a legislative proposal, but rather a blueprint describing his vision for health care reform, devotes considerable attention to the need to reduce the underlying cost of medical care at great length. Even his discussion of wellness, preventive care, transparency, and reducing waste — standard components of any credible reform plan — goes well beyond the normal discussion. Most significantly, he goes beyond the low hanging fruit to address more controversial approaches. For example, he calls for financial incentives for primary care providers in the Medicare system and suggests funding them by reducing payments to specialists. He also endorses using medicare to test other primary care models especially those that “promote comprehensive care management and coordination, particularly for the chronically ill.”

Third, while the market reforms included in Senator Baucus’ plan should be no surprise to anyone who listened to Senator Obama during the presidential campaign, it does provide more specificity than was offered during the election. So while it contains the expected laundry list of proposals (tax credits, guarantee issue, etc.) it’s the additional details he provides that are significant.

For example, most insurance agents who read this blog will want to know what role, if any, they will have in the government-run Health Insurance Exchange Senator Baucus would create to compete with private sector offerings. A hint is all he provides, but it’s an encouraging one. In the discussion of the proposed purchasing pool, the document states “Plans participating in the Exchange would be subject to oversight by states with regard to consumer protections (e.g., grievance procedures, external review, oversight of agent practices and training, market conduct). ” italics added.

States are to regulate agent practices in connection with the pool. That must mean Senator Baucus envisions some role for agents in connection with the pool. As noted, it’s only a hint, but it’s a welcome one.

During the debate over Assembly Bill X1-1 earlier this year, carriers and agents were able to insert language in the legislation to allow, but not require, agents to sell products offered through the purchasing pool it would have created. Whether agents can educate lawmakers at the national level that the services we provide are worth including and protecting in whatever reforms eventually emerge will be challenging. But it appears Senator Baucus, at least, is open to the idea. And the experience agents have gained in California and elsewhere should aid in this effort.

No one, not even Senator Baucus, assumes his blueprint will be adopted as is. There will be a long and contentious health care reform debate before any kind of consensus emerges. Senator Baucus’ proposal is an important contribution to the stew of ideas that is simmering in the nation’s Capital. It’s an interesting start. But only a start.

Do Schwarzenegger Vetoes Signal a Push for Comprehensive Reform in 2009?

Governor Arnold Schwarzenegger vetoed a host of health care reform bills on Tuesday. Some of them were to be expected. For example, he struck down Senate Bill 840, Senator Sheila Keuhl’s attempt to create a government-run, single payer system in the state. The Governor has been on record as opposing this approach for years and has vetoed the concept in the past. His vetoes of several bills requiring medical plans to include coverage for certain conditions is also consistent with his previously stated opposition to coverage mandates.

But there were lots of surprises on the list, too. Governor Schwarzenegger vetoed legislation that would have made it far more difficult for carriers to insurance companies to rescind an insured once they’ve accepted an application for individual or family coverage (Assembly Bill 1945 by Assemblyman Hector De La Torre. No carrier practice has garnered more negative press — and bigger fines — than rescission. From a political point of view, AB 1945 was a soft ball. Yet Governor Schwarzenegger struck it down.

He vetoed legislation (Senate Bill 1440 by Senator Keuhl) to compel carriers to spend 85 percent of the premium they take in on medical care — even though this concept was contained in the unsuccessful comprehensive health care reform package the Governor was pushing for last year. The same fate befell Senate Bill 973 by Senator Joe Simitian that would have created a statewide public insurer to link together existing regional and county-based health plans even though it too was similar to a portion of the Governor’s own reform plan.

Governor Schwarzenegger’s veto of Assembly Bill 2 by Assemblyman Mervyn Dymally was especially surprising. It would have expanded the ability of the state’s existing high risk pool to help more Californians unable to qualify for coverage in the private marketplace due to pre-existing health conditions.  The program needs significant help to continue to meet its mission. He also vetoed Senate Bill 981 by Senate President Pro Tem Don Perata which would have prohibited “balance billing” by doctors and other care providers.

The Governor had his reasons for keeping these bills from becoming law. His veto message concerning AB 1945 deplored the practice of unfair rescission and listed consumer-protection provisions he would want to see in legislation dealing with the issue. But he noted that AB 1945 was “written by the attorneys that stand to benefit from its provisions” and would lead to unwarranted litigation. Similarly, he preferred a different solution to the problem of balance billing than the approach embodied in SB 981.

Vetoes of this type, over approaches to solving problems, are common. They represent legitimate policy and political differences. The Legislature, for example, considered several bills addressing recission. They could have worked with the Governor’s office to fashion a compromise that he would sign. That didn’t happen. The veto did.

But it’s Governor Schwarzenegger’s rationale for vetoing AB 2, SB 1440, and SB 973 that best illuminates what’s in store for California concerning heatlh care reform. In all three of his veto messages, Governor Schwarzenegger made clear he wants comprehensive health care reform. Piecemeal and incremental changes are unacceptable.

I’ve written previously about why state health care reform efforts usually fail. In my mind, meaningful and comprehensive reform will need to come from Washington. And while enacting such reform has been greatly complicated by the current financial crisis, it still remains near the top of the domestic agendas for both Senator John McCain and Senator Barack Obama.

If the new Congress and the next Administration succeed in enacting dramatic health care reforms, it could preempt laws and regulations at the state level. To me, this suggests the efforts of California’s leaders might best be spent in helping to shape what happens in Washington, DC. Governor Schwarzenegger apparently disagrees.

Governor Schwarzenegger’s vetoes make clear he intends to pursue a California solution. It’s not just what the veto messages say, it’s their political impact that is important. They keep pressure on lawmakers to enact substantial reform. His opponents, for example, will be unable to call for a “time out” on further changes to the system while the new laws are given a chance to work. His allies, while angry at the vetoes, will work all the harder to get their pet reforms enacted.

In some significant ways, the potential for success is greater in 2009 than it was in 2008. Governor Schwarzenegger will be negotiating with a new cast of Legislative Leaders.  He will will be working with a relatively new Legislature, many of whom will have no scars with from his previous effort. Yet, unlike in 2007 when he launched the Year of Health Care Reform, a year in which, for most of it, the Governor offered only general principals, in 2009 he can use his defeated reform legislation, Assembly Bill X1-1, as a detailed starting point.

Certainly, the task won’t be easy. It may even be impossible. The state’s finances are in shambles and health care reform is expensive.

But there’s a legacy to be attended to. Plus, the Governor does not like to lose and the defeat of ABX1-1 was both visible and painful. His vetoes are a clear signal of where he’s headed. Expect 2009 to be the Year of Health Care Reform. Again.

2008 To Be A Busy Health Care Reform Year in California

With the demise of comprehensive health care reform and the arrival of a horrendous budget deficit, California lawmakers are busy looking for ways to fix what they perceive to be the state’s broken health care system on the cheap. After all, the concerns are still there: too many uninsured, ever increasing health care costs, bad behavior by carriers. And lawmakers can’t spend all their time haggling over budget cuts. So health care reform will be an important part of this legislative session. The issue will no longer be front and center, but it’s still on stage.

Several health care reform bills were passed before the legislative deadline. They focus on specific aspects of health care. Indeed, several are repackaged nuggets from Governor Arnold Schwarzenegger’s and Assembly Speaker Fabian Nunez’s comprehensive health care reform package, Assembly Bill x1-1.

One issue the legislature will no doubt act upon this year deal with how carriers cancel the coverage of customers who failed to honestly or completely complete their original applications. Because these rescissions are retroactive to the original date of coverage, the customer and health providers are often left with substantial financial exposure. This is an area that cries out for legislative attention. Carriers have been fined millions of dollars for the practice by state regulators. Consumers are terrified that the coverage they’ve been paying for won’t be there when they need it most. Everyone realizes there needs to be a balance between protecting those who make innocent errors in their applications without rewarding those who purposefully game the system. If there is to be an imbalance, however, most lawmakers understandably would rather err on the side of protecting their constituents rather than insurance company profits.

AB 1945, by Assemblyman Hector De La Torre, would require state regulators to sign off on such rescissions before they take effect. AB 1150 by Assemblyman Ted Lieu aims to prevent carriers from setting targets for cancelling policies or awarding bonuses to their employees based on the number of policies they rescind. It’s unclear whether state regulators want or can handle the responsibilities imposed on them by AB 1945. The bill may simply be impractical. AB 1150, on the other hand, is likely to pass without much controversy.

One of the key features of ABX1-1 was its requirement that carriers spend 85 percent of the premiums they receive on medical care. According to the San Jose Mercury News, this Medical Loss Ratio requirement is reappearing in legislation sponsored by Senate Health Committee Chair Shiela Kuehl. I haven’t been able to find the legislative language advocated by Senator Kuehl. The compromise approach contained in ABX1-1 was widely supported, including by many carriers. It’s unclear whether the new legislation will simply accept that language, in which case it is highly likely to pass, or veer off into new, more controversial directions.

Senate President Pro Tem To-Be Darrell Steinberg is pushing another element of ABX1-1. His bill, SB 1522, would require the Department of Managed Health Care and Department of Insurance to establish five categories of individual plans. Carriers participating in that market would be required to offer at least one health plan in each of those categories. As currently drafted, it appears insurers could offer additional plans, too. This flexibility would preserve consumer choice and allow carriers to continue to innovate new plan designs. If, however, this flexibility is diminished, the results could be harsh for California consumers. 

These are just some of the bills introduced prior to the legislature’s submission deadline. Keep in mind, however, that any bill can be amended in virtually any way, so the filing deadline doesn’t have a lot of teeth. The number of bills seeking to reform the health care system is likely to increase before the weeding out process begins. This could be a good thing. It would be nice to see, for example, more focus on controlling health care costs, which is the real root of problems in the health care system.

In any event, 2008 is going to be a busy year for health care reform advocates. It won’t make as many headlines as 2007’s efforts, but that doesn’t mean this year won’t be even more significant than last year.

Speaker Nunez on Health Care Reform 2008

According to Assembly Speaker Fabian Nunez, there’s no chance of California passing comprehensive health care reform before 2009 — if then. But that won’t stop the legislature from pursuing more narrowly focused  changes to the state’s health care system.

Frank Russo, who publishes the California Progress Report blog, was among those who talked to the Speaker following a press conference on Tuesday at the Sacramento Press Club.  Mr. Russo describes Speaker Nunez as being “quite animated” discussing the headlines that day concerning Blue Cross of California asking physicians to confirm the disclosure of pre-existing conditions on members’ applications (a practice Blue Cross has now discontinued). He quotes the Speaker as blasting the carrier and then promising, “No comprehensive health care package, but reforms to help improve the current health care system—absolutely.”

This is further evidence Senate Bill 840, Senator Shiela Kuehl’s legislation to establish a single payer system in California, is going nowhere this year. The Speaker again promised to subject the measure to the same level of scrutiny Senator Kuehl, as chair of the Senate Health Committee, gave to the Speaker’s comprehensive health care reform package, Assembly Bill ABX1-1. And if by some miracle — or political calculation — SB 840 were to be passed by the legislature, Governor Arnold Schwarzenegger would be certain to veto it.

Instead of comprehensive reform, I expect lawmakers to introduce several elements of ABX1-1. Setting a medical loss ratio target was an aspect of ABX1-1 that resonated with lawmakers — and will be looked at even more favorably in an election year. Bills addressing rescissions and establishing premium rate regulation mechanisms are also certain to emerge. There will be others. Few of these bills, however, are likely to become law. First, not all will pass. If money is a bill’s chances fall to near zero. Second, Governor Arnold Schwarzenegger will look closely at those that do make it through the legislature. During the health care reform negotiations that led to ABX1-1, he demonstrated a firm understanding of how the elements of ABX1-1 related to one another. He will likely be skeptical of a modular approach to reform, reasoning that without the checks and balances contained in ABX1-1, the consequences of a specific reform could do more harm than good.

There’s a good chance California won’t take another shot at comprehensive health care reform even in 2009. The timing will depend a great deal on who wins the White House in November. If a Democratic becomes president, California lawmakers will likely wait to see what progress on health care reform the new Administration can make. If a Republican wins, however, Democrats won’t wait. They’ll assume whatever reforms come out of Washington will be insufficient. The wild card in the timing? Governor Schwarzenegger. He’s termed out of office in 2010. He may want to finish what he started in 2007 while he can.

In either case, health care reform is not going away. Only the location may change.

A Short History of California’s “Year of Health Care Reform”

Over the past several months this blog has attempted to track the trajectory of health care reform in California. I had thought about combing through the various posts and summarizing the history of what happened. Now I don’t have to.  Daniel Weintraub of the Sacramento Bee has written a concise and insightful history of the rise and fall of California’s health care reform efforts. 

No doubt there will be people who disagree with his analysis. Assembly Bill ABX1-1, the compromise legislation that emerged from negotiations between Governor Arnold Schwarzenegger and Assembly Speaker Fabian Nunez, was a complicated bill that went through a convoluted process. But Mr. Weintraub does a good job of touching on the highlights.

Some already have objected to his conclusion, that the bill died in a liberal/conservative crossfire. Yet there’s a lot of truth in this observation. Conservatives locked themselves out of the negotiations by refusing to even talk about potential tax increases. Several liberal groups refused to accept any compromise short of single payer while others on the left refused to accept anything short of premium price controls. Their objections created the framework in which negotiators had to operate. It narrowed their options and flexibility. It led directly to the creation of a bill that was financially unworkable.

California needs to move forward now. It’s first task is to get it’s financial house in order in a manner that does as little harm to existing health care programs as possible. That will be a herculean task. Personally I think any meaningful comprehensive health care reform has to, and will, come from Washington. But if legislators in Sacramento are going to move forward with their pet reforms, they’d do well to read Mr. Weintraub’s short history of the Year of Health Care Reform.

Speaker Nunez to Put Single Payer Under ABX1-1 Microscope

Few pieces of major legislation in recent years have been subjected to the scrutiny Assembly Bill X1-1 received last week. ABX1-1, the compromise health care reform bill proposed by Governor Arnold Schwarzenegger and Speaker Fabian Nunez, was the topic of an 11 hour hearing by the Senate Health Committee on January 23rd and a thorough analysis of its finances by the Legislative Analyst’s Office. Indeed, it was the LAO report that opponents on the committee cited most in justifying their position.

Now other health care reform proposals are about to go under the same microscope. Speaker Nunez has promised nothing less. And first in line is likely to be the single-payer legislation, Senate Bill 840, championed by Senate Health Committee Chair Sheila Kuehl.

Supporters of ABX1-1 held a press conference on Tuesday to affirm their commitment to enacting comprehensive health care reform for California. During his turn at the microphone, Speaker Nunez referred to ABX1-1 as a “road map to getting the right type of health care that we need, to be a bridge between those who want government run health to those who want the private market to dictate the pace of how health care is delivered.” He pledged to continue to pursue this type of reform.

At the same time, he made clear his intent to hold proponents of competing systems — and specifically single-payer proposals — to the high degree of scrutiny to which ABX1-1 was subjected. It’s worth noting that among ABX1-1’s most vehement opponents was the California Nurses Association. They insist the only health care reform worth enacting is one that eliminates the health insurance industry and turns health care over to the government.

“I think it’s time … to have an honest conversation about single payer,” the Speaker said. “We cannot create the false sense of hope that we can do something better if it hasn’t been tested, vetted and put through the same type of scrutiny that our effort has been put through. And I intend to put each and every proposal that seeks to cover health care for everybody through that same process, because I think it’s only fair. And because I also believe that we need to be comparing any proposal not to some wishful thinking of what we might be able to do two decades from now, but to the world we live in today.”

In the past Speaker Nunez has supported SB 840. In introducing his own reform package early last year, Assembly Bill 8, he commented that while he preferred a single-payer solution he accepted Governor Schwarzenegger’s promise to veto it. Yet now he seems intent on demonstrating that SB 840 presents an even greater financial risk for the state than did ABX1-1. And that shouldn’t be hard to do.

Sacramento Bee columnist Daniel Weintraub recently commented on similarities in the risks posed by SB 840 and ABX1-1.  “[T]he single payer plan, to be financed primarily by a 12 percent payroll tax, would have run up a deficit unless its managers could have slowed the growth in health care costs to below the level of the growth in wages — an extremely unlikely prospect. To control those deficits, the commission to be put in charge of health care would have been empowered to cut benefits and levy co-payments on consumers. Hardly a risk-free undertaking.”

ABX1-1 was subjected to extraordinary scrutiny. What’s surprising is that such vetting is extraordinary. Major legislative initiatives — especially on issues that touch the lives of Californians as profoundly as health care reform — should be put under an ABX1-1-like microscope. This kind of detailed evaluation is, after all, what legislators are supposed to do. If some popular proposals are found to offer nothing more than a false sense of hope, so be it. Better to learn that now than after it’s enacted.

More significantly, it’s this approach that will help lawmakers find responsible ways to address challenging and complex issues. Ways that few might consider perfect, but that the majority can conclude with confidence, is an improvement to the status quo.

Let the scrutiny begin.

ABX1-1 Postmortems

For those distracted by — oh, let’s face it — no one could have been so distracted as tp not know Assembly Bill X1-1 died in the Senate Health Committee on Monday. The compromise health care reform package hammered out by Governor Arnold Schwarzenegger and Speaker Fabian Nunez received a single “aye” vote. Seven Senators, including all four Republicans, voted against it. Three of the committee’s seven Democrats abstained.

ABX1-1 was deeply flawed, but it also was creative and forward-looking. Many aspects of the legislation will be part of the health care reform debate — here in California and nationally — for years to come. Here’s a round-up of what folks are saying now that the year of health care reform is officially ended.

The Sacramento Bee’s Daniel Weintraub has a blunt, and on point, analysis of why ABX1-1 failed.

Frank Russo, who publishes the California Progress Report blog laments the liberal-against-liberal infighting that surrounded ABX1-1 and reminds all sides that “politics is the art of the possible.”

A sampling of California newspaper coverage from San Jose Mercury News, the Los Angeles Times, and the San Diego Union and an editorial from the San Francisco Chronicle.

And here’s how out-of-towners reported on the demise of ABX1-1 in the New York Times, the Wall Street Journal, and, from way out of town, a Chinese news outlet (why not?)

Here’s what Governor Schwarzenegger, Speaker Nunez and Senate President Pro Tem Don Perata had to say (the legislative leader’s statements were made prior to the Senate Health Committee vote). A video of a press conference held by the Governor and Speaker after the vote is on the Administration’s web site (right now it’s on the home page, I don’t know where it will be moved to later). And here’s where you can listen to Senator Perata’s press conference after the vote.

Finally, here’s a thorough review of what happened, and why, posted by the California Healthcare Foundation on its California’s Healthline web site. 

Some Lessons Learned from California’s Year of Health Care Reform

With the demise of Assembly Bill X1-1, the compromise health care reform package proposed by Governor Arnold Schwarzenegger and Speaker Fabian Nunez, California has demonstrated how difficult it is to pass comprehensive changes. The bill was attacked, sometimes viciously and not always fairly, by the right and the left. In the end, it lacked a cohesive constituency of the center to push it forward. Given the Legislative Analyst’s study showing the legislation was likely to cost the state billions of dollars more than the $14.4 billion acknowledged by its supporters, it’s doubtful any constituency could push it through.

ABX1-1 failed, but the health care reform debate that started in December 2006 did not. Governor Schwarzenegger declared 2007 to be the Year of Health Care Reform., It wasn’t, but it wasn’t a wasted effort either. California’s health care reform effort produced many innovative ideas and brought to light valuable lessons. Here’s just a few:

1. Compromise requires participation from all parties.California’s politics are unique. We’re a three party state: Democrats; Republicans; and Post-Partisans. OK, there’s only one member of the Post-Partisan party, but he’s the Governor so he counts as much as the others. Only two of the three were engaged in the negotiations that led to ABX1-1. The Republicans were excluded (whether for good reasons or bad isn’t relevant for this discussion). The result: complicated and distracting legislative and political gymnastics and a winnowing of available support for the bill.

2. It’s tough for a state to go it alone.California is a big state. A really big state, but in the end, just one state. It’s revenue raising options are few and it can’t print money. In the end, printing money was was about the only thing that could have saved ABX1-1. Without the flexibility and power inherent in the federal government, ABX1-1 lacked a credible safety net if things didn’t turn out as the authors planned. In fact, to date, no state has successfully implemented universal coverage. Some argue no state can. Health care reform may require a national solution.

3. Balancing access and affordability is key. Health care reform in California nearly died in November of last year. Negotiators had reached an impasse. Governor Schwarzenegger insisted on requiring all residents to buy coverage; Democrats argued this would could impose a financial hardship on low- and middle-income Californians.  The Administration was focused on access; the legislature on affordability.

What bridged the gap was the introduction into the dialogue of an “affordability exemption.”  Every Californian would be required to have coverage unless the cost was too great a percentage of their household income. That at least was the theory. As defined in the bill it may not have been the case. But more important than the details was the concept and how it bridged what had seemed like an insurmountable gap. It wasn’t wholly original, Massachusetts has a similar provision in its health care plan. The lesson is that until the tension between access and affordability is resolved, reforms can’t move forward. (Maybe someone should tell the Democratic presidential candidates about it — but then what would they have to argue about?)

4. It’s better to vet complicated public policy early. The Governor, Legislative Leaders and their staffs devoted thousands of hours to working through the complex issues that make up health care reform. They spoke with stakeholders of every stripe — if they had charged admission to all the meetings and conference calls they held they could have financed the bill. If you ask these insiders, the drafting of ABX1-1 was an open and inclusive process.

Only, it wasn’t. There was talk, but not always dialogue. When there was dialogue, a limited number of parties were in the smoke filled tent. In fact, the final version of the 200+ page bill was published just hours before the Assembly passed it, few if any lawmakers actually read it first.  It was only last week that the legislation got the close examination required. The Legislative Analyst’s Office (LAO) study was incredibly important and Senate President Pro Tem Don Perata was right to have demanded it before the Senate considered the bill. And the Senate Health Committee’s 11 hour meeting made sure all sides were heard on every element of the legislation. Would opening the process up in this manner months earlier have assured the bill’s passage? No one can really say, but I believe it would have inspired negotiators to fashion a more solid proposal.

5. The process worked. In their opening statements today, Speaker Nunez and Secretary of Health and Human Services Kim Belshe, gave heartfelt eulogies for ABX1-1. It was better than the status quo, they claimed. Millions without coverage would get it; millions with coverage would be more secure. Maybe. I’m sure the folks who advocated Tennessee’s ill-fated (and ill-designed) TennesseeCare felt the same way. As did the policy makers in Washington State before they had to unravel much of the reforms.

We’ll never know if ABX1-1 would have improved California’s health care system or just replaced current problems with new and potentially more devastating ones. The package was held together by optimistic assumptions and hopeful visions of how independent actors (businesses and consumers) would behave. As the LAO analysis proved, if those fragile assumptions and hopes were wrong, the resulting plan would crumble.

Concern about the risks created by the plan wasn’t the fear mongering some of ABX1-1’s supporters claimed it to be. These risks were likely and perhaps inevitable. In the end, the process allowed lawmakers to evaluate the risk and benefits of ABX1-1. And that’s what the legislative process is supposed to do.

6. It’s a marathon, not a sprint. Improving California’s health care system will take time. As flawed as it was, ABX1-1 is a good starting point for the next stage of that effort. Indeed, it’s a worthy starting point for a national health care reform effort. The legislation may have failed, but it’s legacy is likely to continue.

Can The Troika Pull a Rabbit Out of the Committee’s Hat?

Anyone have any idea how Governor Schwarzenegger, Assembly Speaker Fabian Nunez and President Pro Tem Don Perata are going to pull this rabbit out of their hat?

The Senate Health Committee seems poised to defeat their troika’s health care reform package, Assembly Bill X1-1. The math is pretty straightforward:

There are seven Democrats and four Republicans on the committee. Two of the Democrats have announced their opposition to the bill and none of the Republicans have ever said anything indicating they’re supporting the bill. That means the bill fails five-to-six. And that assumes none of the other Democrats decides to vote against the bill.

Seems to me there’s only three ways to turn this around:

1. Stack the committee. It’s been done before. Replace a no vote with a yes-Senator. But Senator Perata told the San Jose Mercury News he won’t do this.

2. Get a Yes vote from one of the Democrats currently committed to voting No. Committee Chair Shiela Kuehl or Senator Leland Yee have both come out against the bill. In his opening statement to the committee, Senator Perata took a none too subtle swipe at Senator Yee in his prepared statement before the start of the Health Committee hearing. “I am a little dismayed that some committee members have seen fit, or maybe one committee member, is seeing fit to pre-judge the LAO’s report without reading it. Be that as it may, I guess we all approach our work in a different manner.” As means of persuading someone to change their minds on one of the most public and publicized decisions of their political career, this approach leaves something to be desired.

More likely is that Senator Perata, the Governor and Speaker will seek a courtesy vote from one of the Democrats. Their argument could be: 1) you’ll get to vote no on the floor of the Senate; 2) we’ll owe you big time; 3) you’ll keep your office; and 4) eventually the voters will decide if they like this health care reform — why would you stand in the way of letting the people decide? 

This last argument might — emphasis on the word “might” — work. ABX1-1 is entirely dependent on a funding measure passing on the November 2008 ballot. If the initiative fails, the bill never gets implemented. So moving the bill forward can be seen as simply giving the people a chance to make the final determination. Will either Senator Kuehl or Yee buy into this? That’s a big unknown.

3. Get a Republican to vote Yes. It’s worth a try. However, the most likely GOP Senator to buck the party is Senator Abel Maldonado. He was, after all, the only Republican Senator to support the 2007-08 budget during the 52-day standoff.

However, according to someone who was there, at a meeting with constituents on Friday, Senator Maldonado expressed concern about committing the state to substantial new expenses before the state’s $14 billion deficit is fixed. As the observer described it, Senator Maldonado explained that everything he knows from his own business experience and his commitment to being a responsible elected official points to a “No” vote on Monday.

OK, there’s a glimmer of a chance that the troika can find a courtesy vote. Or they can convince Senator Maldonado to listen to their financial analysis and not that of the non-partisan and highly respected Legislative Analyst. But it’s a long shot.

Nonetheless, some Sacramento insiders, even some opposed to the bill, are convinced they’ll pull it off. The Governor, Speaker and Senate Leader simply have too much invested in ABX1-1 to let it fail this close to the finish line.

I can’t figure out how they could do it. But if any of you have a guess — or better yet, inside information — please share with the class.