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Reaction to Governor Schwarzenegger New Health Care Reform Plan

Posted by Alan on October 9, 2007

Governor Arnold Schwarzenegger held a press conference today (October 9th) to announce changes to the health care reform plan he originally introduced in January. (Here’s a link to the press release and a comparison of the new and original plans).  The new proposal is laid out in an update to the legislative language first made public on September 28th.  Whereas the Governor’s staff made clear then that this earlier version was to enable input from interested parties only, the new version is now the Governor’s official proposal.

I’ll be writing later about the details of the new health care reform proposal soon. What’s clear at first glance, however, is that requiring all residents to obtain health care coverage remains central to the Governor’s reform plan. Further, the legislation is likely to have a limited impact on the group health insurance, but would make substantial changes to the individual market segment.

This version provides more details on how the plan might be funded, too. For example, the Governor is backing away from seeking a two percent tax on the gross revenue of physicians. And he caps the payroll fee on employers at four percent (Democrats in the Legislature had proposed 7.5 percent) with the percentage reduced to zero for firms with payrolls of less than $100,000. The Governor proposes to make up for these foregone revenue sources by leasing the lottery to a private firm (the percentage of lottery revenue directed to education would apparently not be impacted by this arrangement).

While future posts will focus on the public policy aspects of what the Administration has now placed on the table, for now I thought it might be interesting to see what the initial reaction to the press conference has been.

The Associated Press initially posted a brief story, reprinted here as it ran in the San Jose Mercury News:
SACRAMENTO—Gov. Arnold Schwarzenegger has announced a health care reform bill that he wants lawmakers to consider as they meet in special session.

Schwarzenegger laid out his health reform ideas in January, but Democrats ignored his plan. Instead, they passed a health reform bill the governor says he will veto.

Schwarzenegger hopes his latest effort will lead to a deal with Democratic leaders. But organized labor has been negative about the governor’s approach and may pressure Democrats to vote no.

Well, you have to admit, that’s to the point. Of interest is that the AP leads with a reminder that the Governor was unable to get any Democratic support for his “post-partisan” plan. What’s unstated is that he was unable to get Republican support either. However, as noted here months ago, this is Governor Arnold Schwarzenegger we’re talking about. He didn’t need a bill before. And my guess is he’ll get one now.

A few hours later, AP reporter Laura Kurtzman wrote a longer piece with a lead that focused on the Governor letting doctors off the hook for helping to finance reform and the proposal to lease the lottery. After highlighting several of the changes in the Governor’s health care reform approach since January, Ms. Kurtzman notes organized labor’s concern over the challenge of making required health insurance premiums affordable.  She reports on organized labor’s preference for premium for families of up to 500 percent of the Federal Poverty Level — over $100,000 for a family of four (compared to the Governor’s proposal to provide such assistance to households up to 350 percent of FPL — about $72,000).

In it’s story, the Sacramento Bee emphasized the Governor Schwarzenegger’s proposal to lease the lottery to a private firm in lieu of taxing doctors. Again, the emphasis is on the Governor’s failure to build a bi-partisan coalition for his plan.

Tom Chorneau, writing for the San Francisco Chronicle, also emphasized the concerns of Democrats and Labor with an individual mandate. He quotes Speaker Fabian Nunez as saying, “I have been strongly committed to ensuring affordability, and I will be examining the governor’s bill in that light, along with how it addresses prescription drugs for Californians and fair participation by employers.”

So, what to make of all this?

Remembering that we’re still dealing with just tea leaves here, the critical issue is beginning to emerge. The Governor will not back down from requiring all residents to obtain coverage. He’ll acknowledge this means health insurance must be affordable. He’ll maintain that expanding eligibility for Healthy Families and premium subsidies for households with incomes of up to 350 percent of the Federal Poverty Level, combined with a mandate that carriers spend 85 percent of their premium on health benefits, meets this requirement. The Democratic Leadership and their allies will claim it’s not enough. They’ll want to increase both the amount of the subsidy and expand who is eligible for it. This will require more revenue which they’ll want to extract by increasing the maximum health care coverage payroll tax on businesses from the Governor’s four percent to closer to eight percent or more. This, in turn will be problematic for the Governor.

Does this mean health care reform is dead for 2007? Nope. It’s always been an iffy proposition, certainly no more than a 50/50 chance. But keep in mind, Governor Schwarzenegger is an adroit politician. When some Democrats thought they had boxed him into a position in which he would have to sign AB 8, he nimbly escaped without breaking a sweat. He accomplished this in part by taking negotiations public; which has now done again.  The burden is now on the Democratic Leadership to put something as detailed on the table. They may fall back on Assembly Bill 8, but that’s so September. My guess is they’ll decide to put on the table a package which offers some concessions toward the Governor’s plan, but with subsidies which greatly increase the cost. I also wouldn’t be surprised if Speaker Nunez introduces both, the Leadership’s and the Administration’s health care reform proposals in bill form. And then we’ll see if a compromise this year is really possible.

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