Health Care Reform Debate Heats Up as Cost Estimates Come Out

Assembly Speaker Fabian Núñez (D-Los Angeles) and Senate President Pro Tempore Don Perata (D-Oakland) on Tuesday said their respective proposals to overhaul California's health care system largely would be funded by a mandatory 7.5% contribution from most businesses, the San Jose Mercury News reports (Zapler, San Jose Mercury News, 5/16).

The proposed contribution is nearly double the rate in Gov. Arnold Schwarzenegger's (R) proposal, but Núñez's office pointed out that a recent Rand Corporation study found that businesses that already provide health insurance spend an average of 13.8% of payroll on coverage (Herdt, Ventura County Star, 5/16).

The Los Angeles Times reports that:

• 233,000 businesses in California that employ a total of 4.5 million workers spend less than 7.5% of payroll on coverage; and
• 327,000 businesses that employ 1.5 million employees do not contribute to employee health care benefits (Rau, Los Angeles Times, 5/16).

An analysis of the plans funded by the California HealthCare Foundation projects that Núñez's plan would cost $8.3 billion, with funding from the same sources that Perata's plan draws upon totaling $8.7 billion (Myers, KQED, "Capital Notes," 5/15).

Perata's plan would cost $10.9 billion (Ventura County Star, 5/16). Contributions from employers, individual premiums and federal matching would amount to $11.5 billion (KQED, "Capital Notes," 5/15).

Employer contributions in both plans would cover almost 60% of the costs, while contributions from workers would cover about one-third. The remaining costs would be covered by increased federal funding, according to the Star (Ventura County Star, 5/16).

The costs were calculated in an analysis by Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology. Gruber also analyzed Schwarzenegger's health care reform proposal (Rojas, Sacramento Bee, 5/16).

Schwarzenegger's plan is projected to cost about $12 billion and would draw funds through mandatory contributions from doctors and hospitals, in addition to employers, the federal government and individuals (California Healthline, 4/30).

Perata's and Núñez's plans would expand coverage to about 3.4 million uninsured residents, representing about 70% of the state's uninsured population (Ventura County Star, 5/16). The governor has said his plan would achieve universal coverage (KQED, "Capital Notes," 5/15).

Perata and Núñez estimate an average monthly premium of $224 per person, which is one-third lower than the average HMO premium in the state, according to the Times. Schwarzenegger's plan relies on the same premium estimate (Los Angeles Times, 5/16).

Núñez's overhaul legislation (AB 8) would exempt businesses that have been operating less than three years and those with a payroll of less than $100,000. Self-employed individuals also would be exempt. The plan would cost $8.3 billion (Ventura County Star, 5/16).

Under the plan, families with incomes that do not exceed 300% of the federal poverty level would be eligible for state subsidies for health coverage.

Perata's bill (SB 48) would require all working California residents and their dependents with household incomes that exceed 400% of the federal poverty level to obtain a minimum health insurance policy. The plans would cover inpatient and outpatient care, as well as prescription drugs (Sacramento Bee, 5/16).

Allan Zaremberg, president of the California Chamber of Commerce, said, "These bills don't make health care coverage any more affordable for the employer -- even though high costs are the main reason more employers can't provide health benefits" (Sacramento Bee, 5/16).

Jot Condie, president of the California Restaurant Association, said that a broad-based tax, similar to an income or sales tax, would be "less burdensome and less punitive" than the proposals by Perata and Núñez (Los Angeles Times, 5/16).

Sabrina Lockhart, spokesperson for Schwarzenegger, said that "the governor has concerns about placing the entire burden on employers." Lockhart added that Perata's and Núñez's plans are missing "some core principles the governor believes in, (including) universal coverage and increasing Medi-Cal rates to address the rising costs of health care."

Democrats countered that it is difficult to extend coverage to all uninsured Californians because unemployed and childless adults are ineligible for federal subsidies (Sacramento Bee, 5/16).

The plans offered by Perata and Núñez would face easier chances at passage because both would require only a simple majority vote. Democrats maintain that provisions of Gov. Schwarzenegger's plan that would mandate contributions from physicians and hospitals would need a two-thirds majority vote for approval.

In addition, the plans offered by Perata and Núñez received support from representatives of the California Labor Federation, California Medical Association and Health Access California.

However, business industry lobbyists are prepared to challenge the final proposal in court or with a ballot measure, according to the Times (Los Angeles Times, 5/16).

Schwarzenegger on Tuesday held a town hall meeting in Concord to help build public support for his health care reform proposal to businesses and elected officials, the San Jose Mercury News reports.

The governor emphasized the importance of preventive health care and defended his proposed budget revision for fiscal year 2007-2008. The revision, released on Monday, already has drawn criticism from Elizabeth Hill, the state's legislative budget analyst.

Health and Human Services Agency Secretary Kim Belshé and other administration officials appeared with the governor (Vorderbrueggen, San Jose Mercury News, 5/16).

Schwarzenegger on Thursday will hold a similar town hall meeting in San Diego (Wildermuth, San Francisco Chronicle, 5/16).

KQED's "Forum" on Monday included a discussion on efforts to control health care costs. Panel members included:

• Donald Barr, a professor of sociology and human biology at Stanford University and director of the undergraduate health policy curriculum;
• William Dow, a professor of health economics at the UC-Berkeley School of Public Health;
• Joy Wilson, director of health policy at the National Conference of State Legislatures; and
• Richard Kronick, a health care sciences professor in the department of family and preventive medicine at UC-San Diego.