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.