Schwarzenegger Releases Revised Health Care Reform Proposal

On Tuesday, Gov. Arnold Schwarzenegger (R) released legislative language for a revised health care reform proposal that would be partially funded by leasing the state lottery system to a private group, the Sacramento Business Journal reports (Robertson, Sacramento Business Journal, 10/9).

The new plan, called the Health Care Security and Cost Reduction Act, still would require all California residents to obtain health insurance (Vesely, Modern Healthcare, 10/9).

The language reflects feedback from more than 1,000 meetings the governor and his advisers held with industry stakeholders since he first presented the plan in January (Sacramento Business Journal, 10/9).

Compared to the original plan, the revised version contains several concessions aimed at winning support from opposing groups, including labor unions, physicians and small businesses (Rau, Los Angeles Times, 10/10).

Physicians no longer would be required to contribute 2% of revenue to help finance the proposal (Rojas, Sacramento Bee, 10/10).

For employers, the revised plan would require:

• No contributions if payrolls do not exceed $100,000;
• Contributions equal to 2% of payroll if payrolls range from $100,000 to $200,000; and
• 4% contributions if payrolls exceed $200,000.

Schwarzenegger's plan also would provide health insurance subsidies based on the federal poverty level:

• Families with incomes that do not exceed 150% of the poverty level will receive full subsidized health care coverage;
• Families with incomes that fall between 150% and 200% of the poverty level would pay no more than 4% of income on premiums; and
• Families with incomes that range between 200% and 250% of the poverty level would pay a maximum of 5% on premiums (Herdt, Ventura County Star [1], 10/10).

Schwarzenegger said he wants to lease the state lottery to a private group and use about $2 billion annually of the proceeds to help pay for health care expansion.

According to the governor's finance aides, a private management company would pay $37 billion for a 40-year lease. The state would use the money to create an annuity of $2 billion annually for the health reform plan.

Education, which currently receives about $1.1 billion annually from the lottery, would be unaffected. The state would replace that funding with money from the state general fund.

The San Jose Mercury News reports that the lottery funding stream for health care would expire within 15 to 25 years, at which point the state would have to find money to replace it. It is also unknown whether the fund would keep up with rising health care costs, according to the Mercury News.

All financing for the governor's plan, including leasing the lottery, would have to be approved by voters unless the plan wins two-thirds support from the Legislature (Zapler, San Jose Mercury News, 10/9).

However, the Mercury News reports that leasing the lottery would let Schwarzenegger avoid asking voters to raise the state sales tax to pay for his plan, a move that could be risky (San Jose Mercury News, 10/9).

Sabrina Lockhart, spokesperson for the governor, said it is now up to the Legislature to introduce Schwarzenegger's bill and schedule hearings and action (Sacramento Business Journal, 10/10).

Schwarzenegger said, "This is our proposal." He added, "These are not the final numbers. A lot of this stuff is still being negotiated." However, the governor said, "I'm looking forward to getting this health care plan wrapped up within two weeks" (Ventura County Star, 10/10).

Democratic legislative leaders, however, signaled that they continue to favor their own health care reform proposal, which would be financed largely through employer contributions (Los Angeles Times, 10/10).

Assembly Speaker Fabian Núñez (D-Los Angeles) said, "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" (Chorneau, San Francisco Chronicle, 10/10).

To place an initiative on the November 2008 ballot, the language likely would have to be submitted to the attorney general sometime next month (Ventura County Star, 10/10).

Bill Dombrowski, president and CEO of the California Retailers Association, said, "We believe today's proposal has the potential to drive down costs and provide more options for access to health care services." He added, "We are also pleased that the proposal continues to call for shared responsibility and does not place the financial burden solely on employers" (Sacramento Business Journal, 10/9).

Republican leaders indicated that they still objected to requiring employers to contribute toward health care coverage.

Assembly Minority Leader Mike Villines (R-Clovis) called on the Legislature to oppose the plan's mandates and tax increases (Ainsworth, San Diego Union-Tribune, 10/10).

Jerry Flanagan, founder of the Foundation for Taxpayer and Consumer Rights, said, "Individuals, workers and families would pay more for health care than ever without any caps on what the insurers can charge." He added, "This is a sop to the insurance companies and a time bomb for the middle class" (Foundation for Taxpayer and Consumer Rights release, 10/9).

Art Pulaski, executive secretary-treasurer of the California Labor Federation, called the proposal "an enormous step backward." Pulaski added that Schwarzenegger "has opted to ignore the (Democrats') wildly popular bill, which is currently awaiting his signature, in favor of his own unpopular and regressive plan."

Anthony Wright, director of Health Access California, a statewide health care consumer advocacy coalition, expressed concern that the governor's plan no longer defines minimum insurance benefits. Instead, the Secretary of the Health and Human Services Agency would use the regulatory process to establish a minimum benefit level governing coverage for medical, hospital, preventive care and prescription services (Sacramento Bee, 10/10).

Funding health care reform with proceeds from a lease on the lottery "seems a desperate idea" because "salvaging health care reform" in California "appears to have become a desperate cause," Timm Herdt, chief of the Star's capitol bureau, writes in his column.

"There are a whole bunch of questions to be answered in a few short weeks," Herdt writes, noting that chances of that happening are "[b]etter than hitting the lottery, perhaps, but not that much better" (Herdt, Ventura County Star [2], 10/10).

Video of the governor's announcement is available on his Web site.

Capital Public Radio's "KXJZ News" on Wednesday reported on Schwarzenegger's revised proposal. The segment includes comments from Schwarzenegger (Russ, "KXJZ News," Capital Public Radio, 10/10).

A transcript and audio of the segment are available online.