The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Assembly Health Committee: Some Possible Tea Leaves

Posted by Alan on November 13, 2007

The Assembly Health Committee will be considering the three major health care reform plans tomorrow in Sacramento. The conventional wisdom is that the Committee will pass ABX1-1 (Nunez), the Democratic Leadership’s health care reform plan, on a party line vote. ABX1-2, the Governor’s plan, and ABX1-8 (Villines), the Republican proposal, are expected to fail along party line votes. Few expect an announcement of a deal among Governor Arnold Schwarzenegger, Assembly Speaker Fabian Nunez and Senate President Pro Temp Don Perata to be announced before, during or after the hearing. Update: Now I’m hearing ABX1-2 will NOT be heard tomorrow. We’ll see.

This means observers will be looking for clues as to where negotiations stand. For those of you planning to listen in on the Assembly Health Committee hearing (please see the previous post for instructions on how to do this) what you may want to listen for is what version of ABX1-1 passes.

If it’s the current version with no substantial changes, it probably means negotiations between Governor Schwarzenegger and Speaker Nunez are not going well.  No meaningful amendments means the Speaker is holding tight to his original negotiating position. This in turn means the legislation will likely pass the full Assembly virtually unchanged on Monday, November 26th. Then attention will turn to the State Senate. If a compromise is to be reached, it will be while the legislation is working it’s way through the upper house.

If, however, Speaker Nunez accepts substantial compromises to the bill, changes which move it closer to Governor’s plan, then a deal more likely and imminent.  For example, if the Speaker accepts changes to the way the exemption from the mandate to purchase coverage is made, that’s a sign negotiations are going well. So would a further reduction in the payroll tax Democrats want to impose on the California businesses to finance reforms (they recently reduced their tax target from 7.5 percent of a company’s Social Security wages to 6.5 percent; the Governor is proposing a 5.5 percent payroll tax). Movement toward the Governor’s approach to reducing the burden of the tax on the state’s smallest businesses would also be a sign of progress. Another sign of progress: if the Governor’s staff testifies that premium subsidies should be raised toward the Assembly Democrat’s levels.

Then there’s financing. Both the Governor and the Speaker require some extraordinary measures to finance their plans (This, of course, assumes they’ve accurately estimated the cost of their reforms — the odds of which are extremely unlikely). The Speaker imposes a $2.00 per pack tax on cigarettes; the Governor would lease the state lottery. A move by one side towards the other’s financing plan would be a huge step toward an eventual compromise.

Not all changes are substantial, however. For example, ABX1-1 revives some of the group health insurance reforms that had been a part of Assembly Bill 8, the previous Democratic health care reform plan. If those are removed it’s a sign of progress, but not as significant as other amendments might be. The Governor’s staff has been intent on minimizing the risk of law suits based on ERISA. They would prefer not touching group coverage directly at all.

One thing to keep in mind is that the rhetoric of the hearing is less important than changes, if any, to ABX1-1. Everyone will be playing to their core constituencies. The key is to listen for what the participants do, not what they say.


2 Responses to “Assembly Health Committee: Some Possible Tea Leaves”

  1. Alan said

    The leasing of the state lottery is a complicated undertaking, but as I understand it, the state would guarantee that schools would continue to receive now what they’re getting from the Lottery. Today the amount varies month-to-month (or however frequently it’s paid)depending on how much is bet. Under the Governor’s proposal, there would be more certainty in the cash flow going to schools. As for whether education is being short changed now, I have no idea. The calculation is pretty straightforward, there’s lots of state agencies and auditors watching the money, so I assume schools are getting what they were promised as a percentage of what’s bet.

    As for what happens if there’s a financing shortfall: either taxes would go up or premium subsidies would go down or eligibility for state programs would tighten up or all three possibilities. I don’t think it would impact premiums as they’re unrelated to the state’s share of the cost.

    And finally, concerning the cigarette tax, critics of that proposal claim it’s a very unreliable source of funds for ungoing programs. There are fewer smokers and the tax itself encourages people to stop smoking. They claim leasing the lottery for a fixed annual amount over a few decades is a more reliable source of financing.

  2. I have a question about leasing the state lottery. My girlfriends’ mother is a teacher in Marin County. She said a couple of years ago that our Governor tried leasing a state lottery to help fund the education system. From her look and tone I could tell she didn’t feel that the education system got the funds it was promised. If this is the case with Health Insurance, what will happen when all the money we are promised to help fund it doesn’t show up? Will premiums go up? Will the government just go into more debt? I feel like the $2 tax is a for sure thing because so many well informed Californian’s decide to puff puff everyday. I know people will continue to smoke at alarming rates, but what guaranteed do we have leasing a state lottery?

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