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.”

4 thoughts on “The Curtain Goes Down on Act I. Now Comes Act II.

  1. I posted this on another site, let see what someone who knows about the current state thinks……

    Let’s all put on our collective thinking hats and work up a solution for California health care.

    I will start out this new line of thinking (we can give it a try when AB 8 does not get sufficient support to pass) and we can “round robin” it until we have an effective solution. Sound like fun? Okay, maybe not as much fun as taking over a small Latin American country and declaring yourself El Presidente but it is worth a try.

    Let it begin:

    Fact: In 2007-2008 the Health and Human Services related organizations will receive $38 billion dollars from the budget.

    Question: Is there a way to create and run a state hospital to enable a system whereby there is no or low cost health services?

    Answer: Yes.

    Discussion: In 2005 there were 355 hospitals in California with a combined bed space of 75,517 total beds and 36 million people or 0.48 beds per 1,000 population. There are several new hospitals bring constructed, expanded or replaced in California, an average price for a complete hospital with ICU, ER and 250 beds is about $200 million. Based on a 2001 budget from Natividad Medical Center a 163 bed facility with several satellite clinics, surgery center, ICU, and ER can be run for $113 million. Giving a double increase over the last six years puts the cost at $226 million.

    If California took 25% of the Health and Human Services budget for the year or $9.5 billion and moved the money to a fund setup for the creation of a self funded health care system, all of California would have access to health care within a few short years. If we took this years budget as an example the following would be an optimum situation:

     Year 1 = $9.5 billion budget
    o Building new California State Hospitals with 75% of the $9.5 billion budget would create 35.6 new hospitals and 8,900 new beds.
     Each hospital would take 1.5 to 2 years to complete for building.
    o $2.375 billion would go to the first 8 hospitals open for staffing.
     Year 2 = $9.5 billion budget
    o $7.8 billion spent on staff for 75% of the new hospitals. 26 open and running.
    o $1.7 billion reserve.
     Year 3 = $9.5 billion budget
    o All new construction finished with 36 new hospitals and 9,000 new beds available.
    o $10.8 billion for staff and operations on all of the hospitals.
    o Based on current ratios of 0.48 beds per 1,000 population it is conceivable that the new hospitals could provide free services to 18 million people in California. This means that half of the Californian population would be able to receive free health care.
     Year 4 = $13.3 billion or 35% of the 2007-2008 budget for Health and Human Services.
    o Transition from traditional Health and Human Services to total system health care.
     Families earning $50,000-110,000 per year can buy into system for $150 per family per month. Projected that 2.5 million families may signup for additional revenues of $4.5 billion.
    o $11 billion staff and operations on all of the hospitals.
    o $2.5 billion new hospital construction cost or 10 new hospitals under fast track program for 1.5 year build-out.
    o $4 billion surplus.
     Year 5 = $19 billion or 50% of the 2007-2008 budget for Health and Human Services.
    o Transition from traditional Health and Human Services to total system health care.
     $150 per family per month for $50-110k families. Projected 2.5 million families for additional revenues of $4.5 billion.
    o $14 billion staff and operations on all of the hospitals (46).
    o $2.5 billion new hospital construction cost or 10 new hospitals under fast track program for 1.5 year build-out.
    o $7 billion surplus.
     Year 6 = $19 billion or 50% of the 2007-2008 budget for Health and Human Services max amount under budget law with 2%-5% cost increase.
    o Transition from traditional Health and Human Services completed, department ended.
     $150 per family per month for $50-110k families. Projected 2.5 million families for additional revenues of $4.5 billion.
    o $17 billion staff and operations on all of the hospitals (56).
    o $2.5 billion new hospital construction cost or 10 new hospitals under fast track program for 1.5 year build-out.
    o $4 billion surplus.
     Year 7 = $19 billion
    o $150 per family per month for $50-110k families. Projected 2.5 million families for additional revenues of $4.5 billion.
    o $20 billion staff and operations on all of the hospitals (66).
    o $2.5 billion new hospital construction cost or 10 new hospitals under fast track program for 1.5 year build-out.
    o $1 billion surplus.
     Year 8 = $19 billion
    o $150 per family per month for $50-110k families. Projected 2.5 million families for additional revenues of $4.5 billion.
    o $23 billion staff and operations on all of the hospitals (76).
     19,000 beds
     New better ratio of beds to population and still serve 18 million population under plan.
    o $.5 billion surplus with extra cash of $16.5 billion.

    So, as you can see, moving to another system, like AB 8, in which the government is subsidizing a for profit corporation or a non-profit (that is not really a non-profit) is not the best system to move towards. As outlined above the system would be best suited for a corporate structure with state employees left out of the mix. After all, if the state of California is going to act socialist it might as well practice sustainable socialism.

    I agree that politicians left to their own devices will over spend any amount of funding they receive and bring little in return for it. So, let us develop this idea a bit more.

    Same situation as about with little governmental oversight but rather a private corporation setup just for the purpose of running the system described above. The corporation is allowed to “profit” by charging maximum of 15% admin fee on top of the budget they receive. This 15% can go down depending upon the “satisfaction” of the insured public.

    How we measure this I have not developed just yet.

    Example:

    In year one I list that the budget is $9.5 billion and as such the fee for the private corporation would be $1.4 billion if all time points and cost were met with great results. If however they did not build, open, and run efficiently the set number of hospitals, say they only got 80% of the job done, then they would be dropped to 10% or $900 million.

    In year 4, the total best they could do is $2.67 billion in profit if they did everything perfectly. If however they only hit a 50% satisfaction point then they would get 7% or about $1.2 billion.

    We could play with the numbers to come up with something that gives incentive to the corporation to make the consumer happy and make the program work.

    Tell me what you think and add to the business model.

    Yours truly,

    Michael Kassing, JD
    SizeMonkey.com

  2. Rita: Thank you for the kind words. I’m glad you enjoy the blog.

    John: There won’t be enough time to draft or qualify an initiative for the February ballot. If the stars align, it might be possible for the Governor and his allies to qualify their initiative for the June 2008 primary election, but it would be tough. It takes a two-thirds vote for the legislature to put an initiative on the ballot and that’s unlikely. Collecting signatures can be done quickly, but it will still take several weeks. But before that happens there’s the drafting of the language and the approval of the title and summary. Then there’s the certification of the petitions. And so on. Bottom line: June would be tough. So it looks like November.

  3. Alan,

    You mention something put on the November 08 ballot; the story in today’s paper mentions a special election for Feb 08. Do you still believe it will be in November?

    John Enright

  4. Alan,
    I can’t thank you enough for your intelligent comments and analysis about the politics, players, and dynamics of health care in Sacramento. I read your blog daily and appreciate your insights.

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