Democrats Health Care Reform Compromise

The Sacramento Bee reported today on a health care reform compromise offer put forward by Assembly Speaker Fabian Nunez and Senate President Pro Temp Don Perata. The article, written by Aurelio Rojas quotes Nunez as claiming “We’re a hop,skip or a jump from a deal we hope the governor can embrace.” And he may be right.

The biggest news in the proposal is the Legislative Leaders’ willingness to accept a requirement that all Californians buy health insurance coverage — with an asterisk (described below). Where Governor Arnold Schwarzenegger is proposing to expand existing state health care programs to residents earning up to 250 percent of the Federal Poverty Level (roughly $52,000 for a family of four), Democrats are pushing for expansion to 300 percent (about $62,000 annually).  Where the Governor offers tax credits to those earning between 250 percent and 350 percent of the FPL (about $72,000 for that family of four), Speaker Nunez wants tax credits for those earning up to 450 percent of FPL (up to about $93,000).

As for the asterisk, the Democrat’s proposal would exempt from the requirement to have insurance any family that would have to pay more than 6.5 percent of its income on premiums. Since both the Governor and the Speaker are willing to leave defining a minimum benefit package to a later date it’s unknown what out-of-pocket requirements such a family would face and thus what percentage of income their total health care spending might be.

This closes the gap with the Governor’s subsidy proposal that the parties should be able to reach an agreement. Legislative Leaders also agreed to a sliding scale for fees on employers to help pay for the subsidies. Whereas the Governor capped his payroll tax at four percent, the Speaker and Senator are proposing an upper level of 6.5 percent, down from the 7.5 percent in the Democratic-sponsored legislation passed earlier in the year and vetoed by the Governor, Assembly Bill 8. Again, this narrows the gap and increases the likelihood of a compromise.

As Mr. Rojas reports, there’s more to the Democrat’s proposal. It is scheduled to be heard by the Assembly Health Committee on November 14th. By then not only will more details be available, but we’ll know the response from various interest groups such as the unions and their allies, business groups, insurers, agents and the like.

What I find interesting is the Governor’s response. Aaron McLear, a spokesman for the governor told Rojas, “This is fairly positive movement. We look forward to seeing the details fo the proposal, but we understand there are still issues to be resolved.” That’s not the statement of an Administration who knew this was coming, which is surprising. If this proposal was the result of ongoing negotiations one might have expected the Governor’s and Speaker’s staffs had worked through some of these issues and to have reached some kind of an accommodation. That doesn’t seem to be the case. Instead, Speaker Nunez seems to be taking a page out of Governor Schwarzenegger’s playbook by making his negotiation positions public before bringing them to the table. What this tells me is that the hop, skip or jump separating the two parties may not be short ones.

The Speaker’s move clearly increases the possibility of an eventual compromise and for that he is to be commended. Whether it moves the debate toward an acceptable compromise remains to be seen. There’s still all those pesky details where the devils dwell to work through. And, as always, it will be interesting to see how the Governor responds once he’s seen those details.