Reaction to Governor Schwarzenegger New Health Care Reform Plan

Governor Arnold Schwarzenegger held a press conference today (October 9th) to announce changes to the health care reform plan he originally introduced in January. (Here’s a link to the press release and a comparison of the new and original plans).  The new proposal is laid out in an update to the legislative language first made public on September 28th.  Whereas the Governor’s staff made clear then that this earlier version was to enable input from interested parties only, the new version is now the Governor’s official proposal.

I’ll be writing later about the details of the new health care reform proposal soon. What’s clear at first glance, however, is that requiring all residents to obtain health care coverage remains central to the Governor’s reform plan. Further, the legislation is likely to have a limited impact on the group health insurance, but would make substantial changes to the individual market segment.

This version provides more details on how the plan might be funded, too. For example, the Governor is backing away from seeking a two percent tax on the gross revenue of physicians. And he caps the payroll fee on employers at four percent (Democrats in the Legislature had proposed 7.5 percent) with the percentage reduced to zero for firms with payrolls of less than $100,000. The Governor proposes to make up for these foregone revenue sources by leasing the lottery to a private firm (the percentage of lottery revenue directed to education would apparently not be impacted by this arrangement).

While future posts will focus on the public policy aspects of what the Administration has now placed on the table, for now I thought it might be interesting to see what the initial reaction to the press conference has been.

The Associated Press initially posted a brief story, reprinted here as it ran in the San Jose Mercury News:
SACRAMENTO—Gov. Arnold Schwarzenegger has announced a health care reform bill that he wants lawmakers to consider as they meet in special session.

Schwarzenegger laid out his health reform ideas in January, but Democrats ignored his plan. Instead, they passed a health reform bill the governor says he will veto.

Schwarzenegger hopes his latest effort will lead to a deal with Democratic leaders. But organized labor has been negative about the governor’s approach and may pressure Democrats to vote no.

Well, you have to admit, that’s to the point. Of interest is that the AP leads with a reminder that the Governor was unable to get any Democratic support for his “post-partisan” plan. What’s unstated is that he was unable to get Republican support either. However, as noted here months ago, this is Governor Arnold Schwarzenegger we’re talking about. He didn’t need a bill before. And my guess is he’ll get one now.

A few hours later, AP reporter Laura Kurtzman wrote a longer piece with a lead that focused on the Governor letting doctors off the hook for helping to finance reform and the proposal to lease the lottery. After highlighting several of the changes in the Governor’s health care reform approach since January, Ms. Kurtzman notes organized labor’s concern over the challenge of making required health insurance premiums affordable.  She reports on organized labor’s preference for premium for families of up to 500 percent of the Federal Poverty Level — over $100,000 for a family of four (compared to the Governor’s proposal to provide such assistance to households up to 350 percent of FPL — about $72,000).

In it’s story, the Sacramento Bee emphasized the Governor Schwarzenegger’s proposal to lease the lottery to a private firm in lieu of taxing doctors. Again, the emphasis is on the Governor’s failure to build a bi-partisan coalition for his plan.

Tom Chorneau, writing for the San Francisco Chronicle, also emphasized the concerns of Democrats and Labor with an individual mandate. He quotes Speaker Fabian Nunez as saying, “I have been strongly committed to ensuring affordability, and I will be examining the governor’s bill in that light, along with how it addresses prescription drugs for Californians and fair participation by employers.”

So, what to make of all this?

Remembering that we’re still dealing with just tea leaves here, the critical issue is beginning to emerge. The Governor will not back down from requiring all residents to obtain coverage. He’ll acknowledge this means health insurance must be affordable. He’ll maintain that expanding eligibility for Healthy Families and premium subsidies for households with incomes of up to 350 percent of the Federal Poverty Level, combined with a mandate that carriers spend 85 percent of their premium on health benefits, meets this requirement. The Democratic Leadership and their allies will claim it’s not enough. They’ll want to increase both the amount of the subsidy and expand who is eligible for it. This will require more revenue which they’ll want to extract by increasing the maximum health care coverage payroll tax on businesses from the Governor’s four percent to closer to eight percent or more. This, in turn will be problematic for the Governor.

Does this mean health care reform is dead for 2007? Nope. It’s always been an iffy proposition, certainly no more than a 50/50 chance. But keep in mind, Governor Schwarzenegger is an adroit politician. When some Democrats thought they had boxed him into a position in which he would have to sign AB 8, he nimbly escaped without breaking a sweat. He accomplished this in part by taking negotiations public; which has now done again.  The burden is now on the Democratic Leadership to put something as detailed on the table. They may fall back on Assembly Bill 8, but that’s so September. My guess is they’ll decide to put on the table a package which offers some concessions toward the Governor’s plan, but with subsidies which greatly increase the cost. I also wouldn’t be surprised if Speaker Nunez introduces both, the Leadership’s and the Administration’s health care reform proposals in bill form. And then we’ll see if a compromise this year is really possible.

To Legislate or Not to Legislate. That is the Question

To legislate or not to legislate. That is the question.

OK. It’s not really the question. Everyone seems to want to legislate, so a better question is whether they can or not. Governor Arnold Schwarzenegger’s and others labored through this weekend working toward a compromise that: 1) makes the current health care system better (at least in their view); 2) can earn the vote of a majority of Legislators; and 3) can get signed by the Governor. The endless meetings, sharing of drafts, eternal discussions, and shaping of legislative language constitute the nuts and bolts of legislation. It’s not flashy and it’s not fun, but ultimately it’s what moves legislation forward.

Will their efforts be enough? In today (Sunday’s) San Francisco Chronicle, Tom Chorneau writes that time is running out for health care reform this year.  He quotes Jan Emerson of the California Hospital Association as saying “It’s hard to tell how all this is going to play out. I think there’s still a lot of momentum, and people are still working very hard.”

According to those quoted in Mr. Chorneau’s column, the biggest obstacle remains the Governor’s insistence that all individuals obtain health care coverage and lawmakers differing approaches to making health insurance affordable — especially if Californians are mandated to buy it. Another stumbling block is how to finance the reform package.

There are a several dynamics which indicate against achieving a compromise. According to the Chronicle, the current special session is scheduled to conclude next week. (It would be relatively straightforward to extend it, although keeping enough legislators around to accomplish anything could be a problem). The devil dwells in details and while the Governor has assembled a broad coalition in support of the principles underlying his reform package, it remains to be seen how enthusiastic his supporters will be with the language that eventually emerges. Then there’s the small matter of the differences between the Administration and Legislature being very real and not easily resolved. Both have constituencies pulling in opposite directions and they may not be able to bring them together in the middle.

On the plus side, there is a real desire among the principals and their staff to get something done. They sincerely believe in what they’re doing and are deeply committed to their goals. Better still, while desire to succeed is a good motivator, fear can be a better one, and there’s plenty of that to go around, too. If lawmakers had initially declared health care reform a two year effort, it might be different. Unfortunately, both the Governor and the Legislative Leadership have repeatedly announced otherwise. The political fallout of failure to meet this (unnecessary) deadline would be substantial — especially in the run-up to the initiative aimed at modifying the state’s term limit law on the February 2008 ballot.  Also arguing for a resolution is that a great deal has already been accomplished.

My personal take on all this is that no legislation will pass next week. There’s just too many details to iron out on too many issues. So I think the special session on health care will be extended and negotiations will continue for a few more weeks. By Halloween, however, (and how appropriate is that?) we’ll see something both sides can agree on. It will then take several days to assess reaction and determine if a critical mass of stakeholders support the consensus. If there is, a bill could be on the Governor’s desk by mid-November.  Of course, much of what’s in the bill will be contingent on the passage of a funding initiative on the November 2008 ballot, so passage of legislation is only the start of the reform effort. For now, however, all anyone can do is keep moving forward through the political and policy thicket and hope there’s a there there when they’re done. Because the question isn’t whether or not to legislate. It’s not even whether they can legislate. Responsible and workable reform is needed. So the real question is, not whether to legislate, but what to legislate.

Republicans Sidelined By Choice?

The San Jose Mercury News had an interesting editorial yesterday which took to task the Governor and the Legislature on their failure to deliver on health care reform “two weeks into Gov. Arnold Schwarzenegger’s special session of the Legislature.” Some of what they had to say strikes me as greatly unfair. Lawmakers are seeking public input on proposals. If that takes some time so be it. Better the public should be heard than not, a sentiment I’m sure the Mercury News would agree with.

It was editorial’s criticism of Republican Legislators that got me thinking, however. As the Mercury News observes, the likely output of the special session, if there is any, will be legislation creating the framework for a new heatlh care system tied to a November 2008 initiative to finance and implement the reforms. The reason is that without Republican votes, there is no way the Governor and the Democratic Leadership can gain the two-thirds vote necessary to pass a spending bill.  Yes, as the Mercury News notes, “… instead of taking advantage of a prime opportunity to negotiate from strength, Republicans are remaining on the sidelines ….”

And he’s right. Republican legislators have been scarcely heard from on health care reform of late. There have been some op-ed pieces published in newspapers around the state (many of them quite good), but they’re clearly not a part of the negotiations. Earlier in the year the Republican caucuses presented their reform packages. Several of their ideas were innovative and would definitely improve the lives of many Californians, which is, after all, the goal here. The Democrats never held hearings on those bills and now the Republicans are “on the sidelines.”

Which makes me wonder: why? Is it their choice to leave the room or were they escorted out? (This being a Democratic leadership who punishes moderates in their own caucus by locking them out of their offices for crime of daring to be, well, moderate, perhaps “kicked” would be the more appropriate verb than “escorted.”). In a strange way it’s a bit of both. Republicans are so locked into a “no new taxes” mindset that they tie their hands on public policy. Since the Democrats are looking at expensive changes, why should they tolerate anyone at the table who can’t support the results under any circumstance? As a result, the only folks around to negotiate a compromise are the Democratic Legislative Leadership and the post-partisan Governor — or at least their staffs. The Republicans are no where near, without any influence.

Could they have a voice in the reform debate? It depends, I suppose, on how pure they want — or need — to be. If no new revenue sources are acceptable then I guess there’s nothing more for them to say. But maybe if they held out the possibility that if the health care reform package was a net win for the state’s economy and financial well-being (far from a sure thing, but definitely possible) that they could support it, perhaps their voice would be part of the debate. And that would be a good thing. Every voice needs to be heard, conservatives as well as liberals (and post-partisans, too). 

For example, when I was on the Santa Monica City Council there were two factions — the liberals and the moderates (this being Santa Monica even the conservatives were moderate) — with three members each (and they were formal members of their factions, running as slates and all). The seventh member was me who was independent of both coalitions. The best success I had was when I used my influence as a swing vote to force the two sides to reach a compromise. The result wasn’t necessarily what I would have come up with on my own, but it was something a broad spectrum of the city could get behind.

The same dynamic could happen with health care reform. It is a shame, however, that Republican have backed themselves so deeply into a no-tax corner that they deny themselves — and the people of California — the benefit of their ideas, influence and participation.

Health Care Reform Teleconference Summary

A little less than an hour ago, Herb Shultz, Senior Health Policy Advisor to Governor Arnold Schwarzenegger concluded a conference call with individuals from the insurance industry. (They are holding similar calls with other stakeholders in order to get input from all interested parties). The topic of conversation was the Draft Health Care Reform Package currently clogging up email boxes across the state and country (it’s over 4 megs, so be warned).

 Mr. Shultz made very clear this was not compromise language, but rather a starting point for future discussions negotiators wanted to make available to interested parties in the interest of transparency “prior to the introduction of a bill.” So in reading the document, please note that no one involved is committing to any particular provision.

I can’t emphasize the importance of this enough. The Governor’s office, and presumably the Legislative negotiators are taking extraordinary steps to make sure stakeholders are aware of what’s happening and have an opportunity to provide input. Speaking on behalf of the Governor’s staff, Mr. Shultz made it clear they are working weekends to craft a bill and that they are listening to as many people as possible. (Moments before the teleconference began I received a call from three agents who said they’d just spent two hours talking to John Ramey and Richard Figueroa, key advisors to the Governor on health care reform, about the proposal). This willingness to listen to interested parties is quite impressive. How all it impacts the final result remains to be seen, but at least they are keeping the lines of communication open. That’s always a good thing.

Here’s a summary of my notes from the call (my comments are in italics):

  1. The provisions of the draft package are starting points, not agreements.
  2. The draft contains much that has been part of the Governor’s proposal from the beginning including wellness and prevention programs, encouragement of electronic medical records and the like.
  3. While some of the language is very specific, certain elements are statements of intent. Specifics on these items will be fleshed out by an initiative in 2008 (in the case of financing), later legislative language, or future regulations.
    • For example, concerning financing of the health care reform plan, the draft states “It is the intent of the Legislature that the provisions of this act be financed by contributions from employers; individuals; federal, state, and local government; health care providers; and others.” (Section 97, page 191). What’s significant about this is that the Governor has, from the beginning, emphasized the need for shared responsibility. The Legislature in Assembly Bill 8 (Nunez) had put most of the financing burden on employers.
    • Another topic addressed through intent language concerns tax credits to subsidize premiums for families with household incomes of 250%-to-350%. (Section 98, Page 191).
    • The third “intent” topic concerns enforcement of the requirement that all California residents obtain at least minimum health care coverage. This will be a critical component of the final package. That carriers will be required to “guarantee issue” at least some individual health plans is now a given (guarantee issue means the carrier cannot deny an applicant because of their health condition). Guarantee issue in the absence of effective enforcement of a mandate for consumers to buy coverage has resulted in dramatically higher premiums and less choice for consumers.
  4. There had been earlier discussions of limiting the amount low income individuals would pay toward their medical care and insurance premiums. The draft puts on the table no spending requirement for families below 150 percent of the Federal Poverty Level and no more than five percent for families between 150 percent and 20 percent of FPL.
  5. There is no set date for introducing an actual bill. However, Mr. Schultz did note that the goal was to try to achieve agreement on health care reform at the same time an agreement is reached on water legislation (there are concurrent special sessions on these two topics currently underway in Sacramento). The goal of negotiations over the water issue is to qualify an initiative for the February 2008 ballot. As a practical matter this means resolving the issue by mid-October (October 16th, give-or-take).
  6. The Governor’s staff is open to hearing from any and all interested parties on any element of the package.

So what to make of all this? First, as noted above, negotiators are listening; whether what they hear changes the results remains to be seen.

Second, we’re getting close to the end game for health care reform in 2007. If the goal to produce legislation is mid-October, there’s not a lot of time. Of course, there’s nothing magical about this timetable. While the goal is to resolve health care reform at the same time the water issue is resolved, if lawmakers think more time is needed, they’ll take more time.

Third, progress is being made, but passage of a health care reform package is far from certain. The draft is a starting point. There are substantial differences to bridge and the constituencies of the Republican Governor and the Democratic Legislative Leadership have different goals and agendas. There will be a lot of pain, late nights and frayed nerves before a compromise the Legislature will pass and the Governor will sign is reached — if it can be reached at all.

My personal hope is that a responsible, effective reform package can be enacted this year. In my mind, even though reform will create new challenges for insurance agents — and for the industry — the right reform is much better than no reform. I’ll be looking for:

  • details on how the purchasing pool and connector/exchange is to be operated;
  • the language surrounding the requirement that 85 percent of premiums received by carriers be spent on health benefits is also critical (the draft language is a step in the right direction, but still punishes carriers whose primary business is in the individual and small group market); and
  • whether the guarantee issue/mandate to buy provisions make sense.

There are other important issues that the final health care reform bill will address, but these are the three that I personally find of greatest concern. But hey, as long as they are willing to listen, I’m happy to keep talking (and blogging).

Getting Closer to a Health Care Reform Bill … Maybe

Hopefully you’ve forgotten my prediction that we’d see Governor Arnold Schwarzenegger’s health care reform plan in legislative form on September 21st or so.  Well, the “or so” part was technically accurate. It’s still not here. However,  recently a draft bill has been circulating in Sacramento which seems to reflect some elements of the compromise reached by the Governor and Legislative Leaders. There’s also a great deal in the draft which is clearly just placeholder language — something to be filled in later. So when I say “draft” I mean “draft.”

Whether what’s in this version is close to what eventually gets introduced is unknown. Talk is there’s still some serious differences between the Democratic Legislative Leadership and the Republican Governor. In the end these may turn out to be insurmountable and no health care reform comes out of Sacramento.

Yet the odds seem to favor some sort of comprehensive package will get worked out. The circulating of a draft is a sign that movement toward a compromise is ongoing. Both sides have constituencies they need to bring along and an unofficial draft can help with that process. Showing around a “for comment” draft is a good way to flush out concerns from both allies and foes. It also psychologically moves the starting point of the discussion to the new proposals.

In a later post I’ll address some of the substantive issues in the draft. A quick glance indicates that nearly all of the concerns agents had with Assembly Bill 8 (Nunez) remain on the table. It’s important to keep things in perspective. We’ve all been concerned for some time and, while unpleasant, that’s healthy. 

When crunch time comes agents and their organizations will have specific language to promote. But our most important activities will be to educate lawmakers about the real value we deliver to our clients in specific and to the system in general. (Thanks to all of you who posted comments on the previous post describing examples of this). Agents also need to emphasize that responsible health care reform and a continued role for agents are not mutually exclusive concepts.  Hopefully this reality is already understood by the Governor and the Legislature. As the compromise language takes hold we’ll know for sure.

Carpe Diem — or at Least Seize the Special Session

There are actually two special sessions in Sacramento right now: one on water; the other on health care reform. For reasons due to the timing of potential initiatives, water is the first focus. And from what I hear it’s not going well.

But that’s legislation under the bridge (sorry). In a few weeks the Legislature will turn it’s attention to health care reform in earnest. There will be tremendous pressure to do something. After the budget fiasco, the failure to address reapportionment, perhaps inaction on water, Governor Arnold Schwarzenegger, Speaker Fabian Nunez and Senate President Pro Tem Don Perata need a victory of some kind to salvage the reputation of the the 2007 Legislative Session. This is especially important for the Legislative Leadership who will be asking voters to approve a change to term limit laws on the February ballot. If the initiative passes Speaker Nunez and Senator Perata will likely remain in their positions for several more years. If it fails ….

So health care reform might be the last lifeline left to our heroes. Which means something is likely to emerge from the special session. What’s not known is what.

Many observers I’ve talked to are increasingly pessimistic that comprehensive reform will move forward. They think some insurance market reforms may pass, specifically the requirement that 85 percent of premiums be spent on health care services. But when it comes to insuring more Californians, they consider expansion of Healthy Families eligibility to cover more children is the only likely accomplishment (this would be ironic since approximately $66 million promised for enhancing Healthy Family and MediCal outreach programs was cut from this year’s budget).

This may sound reassuring to those who are concerned lawmakers, in their great need to pass some health care reform legislation will pass bad health care reform legislation. Certainly there’s a lot to be worried about. The 85 percent heatlh care services mandate, as currently proposed, will likely increase premiums and decrease competition, especially in the individual and small group market segments. A requirement that carriers accept all applicants, regardless of their risk profile passes, without an effective mandate for individuals to purchase coverage before they’re on their way to the emergency room, individual insurance premiums will skyrocket and carriers will flee the state. The purchasing pool could become a black hole, sucking up more of the marketplace than is healthy for the state’s economy or the private marketplace. And that’s just the start. There is plenty to fear from getting health care reform wrong.

There’s also much to fear in doing little, or even worse, nothing. There are real problems in today’s health care system. Insurance reforms are a part of what’s needed. It’s not the only part needing a fix, far more important is the need to deal with escalating health care costs.  Yet politics being what it is, the focus now is on the insurance industry. If not changes emerge from Sacramento, the demand for “doing something to stop the evil insurance companies” will continue unabated. Doing something, if it’s done right, will enable politicians, the media and the public to focus on deeper and more serious problems.

Another reason to do something right now is to deflate the momentum of building behind single payer alternatives like SB 840. There is likely to be an initiative next year to bring a Canadian-style system south to California. It will be much easier to defeat — as it should be for a host of reasons — if voters perceive lawmakers as addressing their health care worries.

Finally, it’s important to do something constructive on health care reform because it’s the right thing to do. In unveiling his reform package, the Governor state, “The status quo can no longer be everyone’s second choice.” He’s right. The issues have been on the table long enough. What we need now is to address those issues and then move on. What will be interesting to watch is whether the way lawmakers seek to address health care reform is aimed at scratching their political itch or in enacting constructive, meaningful public policy. We’ll know in a few weeks.

The Curtain Goes Down on Act I. Now Comes Act II.

As predicted, the Legislature passed Assembly Bill 8 (Nunez). The Senate vote was 22-to-17 vote and in the Assembly it moved forward on a 45-31 vote. (Significantly, there will apparently be no vote this year on Senate Bill 840 (Keuhl), the single payer proposal). Governor Arnold Schwarzenegger immediately announced he would veto the bill and pledged to call a special session to iron out an acceptable health care reform package (his full statement is below).

None of this is surprising. Nor should it be taken as a failure of the Administration or Legislative Leaders — although that’s how many reporters will no doubt describe it. Lawmakers and their staffs worked hard to reach a compromise before the regular legislative session adjourns this week, but time, the complexity of the issue, and the press of other issues made that impossible. What’s impressive is how close they came. Which sets the stage for a productive special session.

Not that anyone’s asked but my wish list for the special session:

  • Detailed language on what each side (the Governor and the Legislative Leaders) are proposing.
  • Time for interested parties to digest this information
  • Meaningful public dialogue on the proposals with all parties keeping an open mind on how to achiee their common goals.

In short, while some backroom negotiating is inevitable, there’s been too much of it concerning AB 8. It’s time for the process to open up. What the Governor and the Legislative Leadership need to do is be very clear on their health care reform goals while not getting too locked into how those aims are achieved (the Governor makes a good start in this direction in his statement). By sincerely listening to alternative approaches, it may be possible to reach a workable and meaningful compromise. It’s happened before. Let’s hope it can happen again.

Here’s the Governor’s statement on health care reform in full:

Gov. Schwarzenegger Issues Statement Regarding Health Care Legislation

Gov. Arnold Schwarzenegger today issued the following statement regarding Assembly Bill 8, by Assembly Speaker Fabian Núñez and Senate President Pro Tem Don Perata:

“I applaud all the hard work that has gone into efforts to reform California’s health care system, but I cannot sign AB 8 because it would only put more pressure on an already broken health care system.

“First and foremost, AB 8 does not cover everyone. Any reform that leaves millions without health insurance and fails to address our dangerously overcrowded emergency rooms simply maintains a broken system. I have said from the beginning of this debate that coverage for all Californians is critical to reducing health care costs for everyone.

“AB 8 does not protect consumers because insurers would still be allowed to deny coverage, leaving Californians vulnerable to loss or denial of coverage when they need it most.

“I also believe that AB 8 is financially unsustainable. I have always said that I would not sign a health care bill that puts the vast majority of the financial burden for reform on any one segment of our economy. AB 8 unfortunately does that by requiring businesses to pay at least 7.5 percent of their payroll into a state fund or on health care services for employees.

“I believe we can find agreement on a financially sustainable reform plan that shares responsibility, covers all Californians and keeps our emergency rooms open and operating. The historic agreement reached this past week on the use of hospital contributions for coverage demonstrates that a more balanced approach is achievable.

“We have made tremendous progress on this issue during the past session and have found considerable common ground.

“That is why I intend to call a special session of the Legislature so that we can finish the job of truly reforming our health care system. I know that legislative leaders are willing to get the job done.

“We must keep working until we achieve the kind of historic solution that all of us and the people of California want.”

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.

Recent Amendments to AB 8

Assembly 8 (Nunez) is being amended to reflect the state of current negotiations continue between the Governor’s and Legislative Leadership’s staffs. The California Progress Report has an excellent summary of the bill written by Health Access Executive Director Anthony Wright.

Two of the most signficant changes to note concern affordability of coverage and expansion of small group health insurance reforms. Previously AB 8 required all employees of companies choosing to participate in the state-run California Cooperative Health Insurance Purchasing Program (Cal-CHIPP) to purchase coverage through the pool unless they were insured under another plan. The recent changes now enable an employee to decline coverage if the worker’s share of the premium would exceeded five percent of the worker’s income. This change was high on the agenda of unions and some consumer groups. AB 8 also provides that employees insured in the state pool who earn less than 300% of the Federal Poverty Level (appromiately $60,000 for a family of four) could not be required to pay more than five percent of their income in premiums.

The other signficant change expands the current small group health insurance rules to employers with 100 full-time employees, down from 250 employees in earlier drafts of AB 8.  This addresses the fear of some that, by heavily regulating groups of greater than 100 employees it would encourage those with lower-claims to self-insure. (Self-insurance becomes more viable with the size of a business and is more appealing to companies with low claim rates).  This in turn would leave higher-cost groups in the insured pool, driving up premiums. The changes to AB 8 should reduce this concern, although not entirely eliminate it.

Does any of this matter? With just a few days left for a vote on AB 8 it is growing increasingly unlikely that a compromise will be reached in time. In fact, there is a rumor circulating in Sacramento that Democrats will bring AB 8 (and perhaps Senate Bill SB 840 (Keuhl), the single-payer bill, to a vote knowing the Governor will veto it — regardless of how close negotiators are to a deal. Since neither bill is likely to receive a Republican vote this would allow Democrats to strengthen their claim to be the champions of health care reform as an election year approaches.

I’m of the belief that the Governor would use his veto message as an opportunity to call a special session focused on health care reform. This would be done either in coordination with the Leadership (to put pressure on recalcitrant Republican Legislators) or to maintain his dominant position in the process. For a clue to his motivation, keep an eye on whether the Leadership amends AB 8 again before the symbolic vote. If there are significant changes, it’s a sign the Governor is on board with the dance. If they vote on the bill as is, it’s more likely the parties are seeking a negotiating advantage at the other’s expense. The result, of course, is the same. The good news, however, is that a special session would give those excluded from the current closed-door negotiations a chance to thoroughly review, and hopefully amend, AB 8.

Politics is Fun, But It’s Policy That Matters

I’ve written more than a few posts about the politics behind California’s health care reform debate (like the one earlier today). One reason is to provide some insight on why things may be unfolding the way they are. Another reason is because its fun and sometimes interesting.

But at the end of the day, it’s the substance of legislation that matters. Especially when it comes to health care reform. After all, health care represents about 15 percent of the state’s economy. In dealing with this issue, lawmakers will impact job creation, business growth, government resources and, most importantly, the pocketbook of every California family.

The desire of Governor Arnold Schwarzenegger, Assembly Speaker Fabian Nunez, and Senate President Pro Tem Don Perata to pass something quickly is understandable. There’s a lot of strong political reasons for each to reach a deal before the Legislature’s scheduled adjournment on September 14th. However, because it is understandable doesn’t make it sound. The artificial deadline results in a focus on the wrong question. Instead of asking “what package can be signed?” the meed is to ask “what legislation should be signed?”.

So long as the final version of the bill is being written behind closed doors (or in the Governor’s famous smoking tent) the focus will remain on the wrong question. It’s not that the Governor’s and Legislative Leadership’s staffs aren’t well intentioned, smart and hard working. They are all three. It’s just that good public policy is achieved through vigorous public debate. The final package needs a thorough airing it can’t get in the insular world of a few rooms in downtown Sacramento. 

Getting health care reform right is more important than passing a bill quickly. If that means calling a special session of the Legislature to allow time for robust public input, then so be it. A special session presents challenges of its own, but the result will be far more substantive than what’s likely to emerge before September 14th.