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Speaker's Plan a Big Step in the Final Push for California Health Care Reform

By Michael Russo
Health Care Advocate and Staff Attorney
California Public Interest Research Group (CalPIRG)

Governor Schwarzenegger called 2007 the year of health care reform back in January, but most of the action’s been saved for the last few months. After a summer spent on budget wrangling and with little time to spare before adjournment, the legislature quickly passed a reform bill. But the bill – called AB 8 – didn’t satisfy the Governor. He called a special legislative session on health care reform, vetoed the legislature’s bill, and last month released legislative language on his plan. Then on Tuesday, Assembly Speaker Nunez and Senate President Pro Tem Perata replied with their own proposal for reform.

That’s a lot of back-and-forth, but the legislatures’ proposal puts us very close to a deal.

The Speaker’s plan goes a long way towards meeting the governor in the middle, while still containing costs, expanding coverage, and helping consumers get a fair shake when buying insurance.

When he vetoed AB 8, the Governor cited two specific issues: the bill didn’t attempt to cover all Californians, and he argued that it didn’t spread out the costs of reform fairly enough, and imposed too high a burden on businesses.

The Governor has insisted that any plan has to mandate universal coverage by requiring that all Californians buy insurance, while AB 8 simply required some employees to take up coverage if their employers offered it. The Governor is right to push for universal coverage. But ordering Californians to buy health insurance with money they just don’t have isn’t a real solution. That’s why the mandate needs robust consumer protections and adequate subsidies to work.

Recognizing this reality, legislature’s new proposal does include a mandate – but it couples it with affordability protections that ensure that individuals aren’t forced to spend more than 6.5 percent of their income on health care. This is a common-sense compromise that will expand coverage and make sure individuals don’t have to pay more than their fair share.

The second issue is how to pay for reform. Both the Governor and the legislature required employers either to cover their employees or pay a fee to the sate – but while AB 8 set out a flat level of 7.5 percent of payroll, the Governor proposed a sliding scale that would have capped out at 4 percent for large employers. The legislature listened, and the new proposal now also has a sliding scale to reduce the costs paid by small businesses, and lowers the top rate to 6.5 percent.

This is another compromise that just makes sense. For big businesses, the 6.5 percent is already lower than the 11 percent paid by businesses that cover their employees. The variable rate means that both small and large employers will pay their fair share without breaking the bank. In fact, a recent poll of California small business owners found that 80 percent thought employers should contribute to their employees’ health care – with a plurality even backing a fee of more than 4 percent of total payroll!

The employer fee is only one part of the funding, though. To raise additional money, the Governor proposed leasing out the state’s lottery to a private company – a risky move that would have required some financial shell games, and which would have dried up after twenty or thirty years. The legislature’s new proposal dumps the lottery idea, and replaces it with a $2-a-pack tobacco tax increase.

The tobacco tax is much smarter. Cigarette taxes are a solid, reliable source of funding, and it makes sense to finance health care by using one of the unhealthiest products around. Plus, higher cigarette prices are a proven way of reducing smoking – especially teen smoking. The tobacco tax will raise money for health care, and because nonsmokers tend to have fewer health issues than smokers, it will also lower costs and make Californians healthier.

There’s a lot more to the legislature’s plan, and not all the details have been finalized. But it looks like it will be a big step towards ensuring that all Californians can buy high-quality health care at a fair price. The compromises it makes also means that the proposal is a big step towards agreement on health care this year. The negotiations aren’t over, but one last push could get us to the health care reform California needs.

Mike Russo is the Health Care Advocate and Staff Attorney for the California Public Interest Research Group (CalPIRG). He has worked with other public interest organizations on human rights and First Amendment issues. Russo received his law degree from Columbia Law School in 2007. CalPIRG is a statewide membership-based public interest group that stands up to powerful interests, working to win concrete results for Californians’ health and well-being. With researchers, advocates, organizers and students , it advocates on behalf of consumers and all California’s residents.

Posted on November 08, 2007

Comments

I'm not a smoker, but I think it is unfair that cigarette taxes get raised over and over again simply because it is unpopular. I'm all for applying a tax on something if it corresponds in some way with the costs that product might impose on society which was the rationale for the the tobacco rate increases years ago. To look to smokers as a source of income because they are "reliable" is not a valid reason. The product is legal and smokers should not be punished because they have little political clout.

Posted by: Tim at November 9, 2007 06:35 AM

Have to strongly differ on a few points here.

Neither the Nunez bill, nor the Schwarzenegger proposal, does anything to control costs, other than a vague reliance on the market -- the same market which has driven healthcare costs through the roof. There are no limits on skyrocketing premiums, co-pays, deductibles, hospital charges, or other costs.

Without any limits on costs, the basic minimum package people are forced to buy -- under threat of having the cost of the plan deducted from their wages -- will continue to be eroded.

What looks very likely is that the minimal plan will just have a very limited set of basics, and all kinds of essential care services, including dental, vision, mental health, and long term care, to name a few, will all cost extra -- exposing millions of Californians to continued health insecurity or encouraging them to self-ration care they need. The supposed affordability offsets and exemptions only apply to the minimum plan.

The employer mandate is also very problematic. Since it is far less than California businesses now pay, especially unionized employers, it is an obvious incentive for businesses to shift more costs to their employers through high deductible plans or drop benefits entirely.

Posted by: Chuck Idelson, California Nurses Association at November 9, 2007 10:33 AM

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