Analyst Raises Possibility of Steep Costs for Health Care Reform

The compromise health care reform plan (ABX1 1) negotiated by Gov. Arnold Schwarzenegger (R) and Assembly Speaker Fabian Núñez (D-Los Angeles) could leave the state with a $4 billion shortfall within five years of being launched if costs were underestimated, according to a report released Tuesday by the Legislative Analyst's Office, the Sacramento Bee reports.

The report by Legislative Analyst Elizabeth Hill was requested by Senate President Pro Tempore Don Perata (D-Oakland), who delayed a Senate vote on the plan until its impact on California's projected $14.5 billion budget deficit was analyzed (Rojas, Sacramento Bee, 1/23). The Assembly approved the measure in December 2007 (California Healthline, 1/22).

The governor, Núñez and other proponents maintain that the $14 billion health care overhaul plan would have no effect on the state budget (Sacramento Bee, 1/23).

Hill said the state's estimated cost for subsidizing health care coverage is based on monthly premiums of $250 per person. She noted, however, that proponents could have underestimated the cost of monthly premiums, which could end up being closer to $300. If so, the program could have a shortfall of $1.5 billion within five years, according to Hill.

The report also found that:

• Annual costs of the $14 billion overhaul would increase by $300 million by the program's fifth year, and by $1 billion after 2015, if proponents underestimated the increase in medical inflation by as little as 0.5% annually;
• $1 billion in federal funding for the program is uncertain; and
• Costs would be difficult to control as the number of uninsured California residents is likely to increase in the coming months if the economy slows down.

Steve Maviglio, spokesperson for Núñez, said, "We believe this report reinforces the overall soundness of our approach and financing for health care reform." He added, "The report also serves an important purpose in identifying every potential risk that's in the realm of possibility, regardless of any particular assumption's grounding in probability."

Beth Capell -- a lobbyist for the Service Employees International Union, a supporter of the bill -- said, "We will have opportunities to control costs," adding that the report "went looking for a midpoint of risk and found it."

The LAO report was released on the eve of a scheduled hearing on the health care overhaul measure by the Senate Health Committee (Chorneau, San Francisco Chronicle, 1/23).

However, with seven Democratic lawmakers on the 11-member committee, the measure is one vote shy of passage because two Democratic members have vowed to oppose the bill, the Sacramento Bee's "Capitol Alert" reports. No Republican committee member has backed the legislation, which needs six votes to pass (Goldmacher, Sacramento Bee, "Capitol Alert," 1/22).

Sen. Sheila Kuehl (D-Santa Monica), chair of the committee, has maintained she will not support the measure. On Tuesday, Sen. Leland Yee (D-San Francisco), another committee member, announced he also will vote against the plan, the Los Angeles Times reports (Rau, Los Angeles Times, 1/23).

In announcing his opposition, Yee said, "Californians should be extremely skeptical of a law which requires them to purchase insurance but allows insurance companies to charge any amount for the policy." He added that the plan "is not a step in the right direction but a huge jump backwards for California's working families without insurance" (Lawrence, AP/Los Angeles Daily News, 1/22).

Sources close to Perata said he wants the Senate to pass the bill and is considering adding several new members to Wednesday's committee hearing to create a majority in favor of the measure, according to the Times. The Senate leader also could use other incentives to pressure lawmakers to change their votes, the Times reports (Los Angeles Times, 1/23).

Perata also could ask Kuehl to grant the legislation a courtesy vote, allowing it to proceed to the Senate floor despite her personal opposition, according to the Bee's "Capitol Alert."

On Tuesday, Kuehl said that she had not been contacted by Perata or his staff to support the bill (Sacramento Bee, "Capitol Alert," 1/22).

On Wednesday, the Times featured a Q&A with Kuehl. In the interview, she said the compromise health care reform bill "should stand or fail on its own," without any amendments by the Senate Health Committee. "This bill has a long road to go," Kuehl added (Los Angeles Times, 1/23).

Summaries of two opinion pieces regarding health care reform in California appear below.

• Tammy Johnson, New America Media: "What is important is not that 'the year of health care reform' is symbolically redeemed by the passage of this (health care reform) legislation and the subsequent ballot measure" to provide a funding mechanism for the plan, Johnson, Race and Public Policy director at the Applied Research Center, writes in a New America Media opinion piece. "What is essential is that health care reform is done right," Johnson writes. "Solutions to our health care crisis exist," but ABX1 1 "is not one of them," Johnson concludes (New America Media, 1/21).
• John Hammergren, San Francisco Chronicle: "Today, we see that California is closer than ever to instituting reforms that will cover more people, focus on prevention and wellness, incorporate the use of technology and drive down costs," Hammergren, chair and CEO of McKesson, writes in a Chronicle opinion piece. "Credit should be given to [Schwarzenegger] and all legislators and advocates who are staying 'at the table' to persist in these discussions," Hammergren writes (Hammergren, San Francisco Chronicle, 1/23).

Capital Public Radio's "KXJZ News" on Wednesday reported on the hearing. The segment includes comments from Yee (O'Mara, "KXJZ News," Capital Public Radio, 1/23).

Audio and a transcript of the segment is available online.