The New Health Care Reform Dance: Noisy Action. Quiet Talks.

A lot of folks are saying the chances of health care reform in 2007 are gone. The unions and several consumer groups have declared war on Governor Arnold Schwarzenegger’s plan. They’re holding demonstrations and prayer vigils claiming the Administration’s proposal is too hard on the middle class and too easy on corporate California. The rhetoric is getting nasty. The demands more strident. It’s over.

Or is it? It seems to me that this could also be taken as a tactic to clarify — and strengthen — their bargaining position. At the same time it sends a message to their constituents (most of whom support a single-payer system) that they’re holding out for “real” reforms.

Anchoring an extreme position so others can appear more reasonable while extracting more from the other side is the negotiating equivalent of the “good copy, bad cop” interrogation routine. So one interpretation of what the unions and their consumer group allies is doing is giving their negotiators, Assembly Speaker Fabian Nunez and Senate President Pro Temp Don Perata, some help in the smoke filled tent. (Incidentally, this isn’t much different than what the Governor did back in August when he promised to veto the Democrat’s health care reform plan, Assembly Bill 8. Of course, in that case Governor Schwarzenegger was playing both the good cop and the bad cop).

The other reason the chances of health care reform remain alive is that on the two key issues which have emerged, the two sides aren’t all that far apart.

Eligibility for Premium Subsidies: The Governor would provide premium assistance to California residents in households earning up to 350 percent of the Federal Poverty Level ($35,735 for an individual; $72,275 for a family of four). There have been several statements from the other side, but it appears they want to set eligibility for these subsidies at something closer to 500 percent of the FPL ($51,050 for an individual; $103,250 for a household of four). Would a compromise at 400 percent make everyone happy? No, but it would probably allow each to declare a partial victory, which is what compromises are supposed to do.

Payroll Tax: The Governor wants businesses to pay four percent of their Social Security payroll to support the health care reform package; the union-led coalition wants a 7.5 percent tax. Would either side kill health care reform over a 5.5 percent tax? I doubt it. The Governor would still be delivering a ‘discount” to the business community and the Democrats can always seek an increase later.

There’s other issues to be worked out, but these two items are currently the center of attention. When it comes to reaching a compromise, my take is that the Governor has the stronger hand so he’ll have to give less. The Democrats have a greater need for a win on health care reform this year. Speaker Nunez and Senator Perata are pushing an initiative on the February ballot to modify term limits in a way that would enable them to remain in their leadership positions longer. With the budget debacle fresh in their minds they need something to convince voters keeping the current crop of lawmakers around longer is a good idea. Health care reform might be just the message they need.

None of this is to disparage the sincerity of the Democrats, the unions and their allies. I have no doubt they firmly believe the changes they’re calling for are good and necessary. Yet sincerity and good politics are not mutually exclusive. And noisy activity does not mean quiet talks can’t, and aren’t, continuing.

I should note, by the way, that others have a similar take on what may be happening. For example, Bill Ainsworth of the San Diego Union-Tribune made many of these same points in his blog yesterday. Today, Anthnoy York of the Capitol Weekly blog notes that “A day after blasting Gov. Arnold Schwarzenegger as the greatest obstacle to health-care reform, the head of the California Labor Federation appeared to back away from what many interpreted as the informal end of health care negotiations.”