President’s Proposals Raise Questions About Governor’s Plan

In a month that already has seen broad state-based health care reform proposals announced in California and Pennsylvania, President Bush on Tuesday unveiled his own prescription as part of his State of the Union address.

The president's plan calls for a new federal tax deduction of $7,500 for individuals and $15,000 for families who either purchase health insurance themselves or receive health benefits through their employers. Individuals with employer-sponsored coverage that costs more than those deductions would be taxed on the amount above $7,500, while families would pay tax on the value of plans over $15,000.

Bush also proposed redirecting federal Medicaid funding from hospitals that treat low-income patients to states to subsidize private insurance coverage for low-income residents.

Bush's tax cuts likely would complement Gov. Arnold Schwarzenegger's (R) health reform proposal if both plans were enacted, according to Adam Mendelsohn, the governor's communications director. However, Mendelsohn said the administration is determining how Bush's Medicaid proposal would affect a similar provision in Schwarzenegger's plan that seeks increased federal funding to expand coverage.

The governor took to the road earlier this week to begin efforts to rally support for his proposal among business leaders. Some newspapers have said the move is motivated by a desire to avoid a business-backed referendum, similar to Proposition 72 in 2004, which resulted in the repeal of California's most recent attempt at large-scale health reform.

While the proposal has drawn criticism from consumers, business groups and medical providers since its announcement earlier this month, major health plans generally have not weighed in until this week. Larry Glasscock -- CEO of WellPoint, the largest health insurer in the nation and parent company of Blue Cross of California -- said the company supported most parts of the governor's proposal. However, Glasscock is concerned about a provision that would require health plans to spend at least 85% of premiums on health care expenses, saying the requirement would limit insurers' ability to provide low-cost plans.

Despite criticism from some groups, support for most parts of the governor's plan is strong among California residents. A poll released Wednesday found that 65% of likely voters support Schwarzenegger's health proposal, but a smaller percentage -- 46% -- support the governor's proposal to provide coverage to all children, regardless of immigration status.

This week's Legislative Update includes news on efforts to improve state-run health services to minorities at risk of hepatitis and diabetes.