Kaiser Daily Health Policy Report

Wednesday, January 10, 2007

State Watch

      A proposal announced on Monday by California Gov. Arnold Schwarzenegger (R) that would require all state residents to obtain health insurance "is promising and ambitious but faces a long, hard fight before enactment," the New York Times reports (McKinley, New York Times, 1/10). Under the proposal, employers with 10 or more employees would have to offer health insurance for workers or pay a fee of 4% of payroll to a state pool that would help workers purchase coverage, with the amount that they pay based on income. Employees could pay for health insurance with pretax income. The proposal would require health insurers to sell policies to all state residents, regardless of whether they have medical conditions. State residents who refuse to obtain health insurance could face reductions in their state income tax refunds or have their wages garnished. The proposal also would extend coverage under Medi-Cal, the state Medicaid program, to all adults with annual incomes of as much as 100% of the federal poverty level and to children -- regardless of their immigration status -- in households with annual incomes of as much as 300% of the federal poverty level. The proposal would provide additional subsidies to help state residents with annual incomes of as much as 250% of the federal poverty level purchase health insurance. In addition, the proposal would increase by $4 billion reimbursements to health care providers under Medi-Cal. Under the proposal, physicians would have to pay 2% and hospitals would have to pay 4% of their revenue to help cover the cost. According to Schwarzenegger aides, the governor would finance the proposal in part with about $5 billion in federal matching funds that the state will receive as a result of restructured health care programs and with state funds currently used to finance charity care (Kaiser Daily Health Policy Report, 1/9).

Concerns From Many Players
According to lawmakers and policy analysts, enactment of the proposal remains uncertain because of the "enormous number of political players -- from big labor and big insurance to small-county government -- that would be affected by any universal health care bill," the Times reports. State Senate Pro Tem Don Perata (D) said, "I cannot think of another topic that requires so many people to be heard to build consensus. You'd have to rent out Madison Square Garden to get them all in there" (McKinley, New York Times, 1/10). State Assembly member Robert Huff (R) said, "Health coverage for illegal aliens is a nonstarter for us. It creates a magnet for them coming here rather than staying there" (McKinley, New York Times, 1/10). State Assembly Republican Leader Michael Villines said, "Imposing a new jobs tax on employers of any size and expanding costly government mandates is the wrong approach" (Wood, Christian Science Monitor, 1/10).

Additional Concerns
Some groups raised concerns about the proposed requirement that physicians and hospitals pay a share of their revenue. Jan Emerson, a spokesperson for the California Hospital Association, said, "What we don't understand is the impact of (the 4% fee) versus the additional money that we'll get from increases in Medi-Cal reimbursements. We don't understand the trade-offs" (Colliver, San Francisco Chronicle, 1/9). Anmol Singh Mahal, president of the California Medical Association, said, "We feel it's a regressive tax" (McKinley, New York Times, 1/10). Art Pulaski, executive secretary treasurer of the California Labor Federation, criticized the proposal as a "boon to insurance companies" and a "bust for most workers." Pulaski said, "This plan requires all Californians to buy health insurance with no guarantee that it will be affordable or that coverage will be adequate. We are concerned that the plan creates an incentive for employers who currently provide health care to drop coverage and instead pay only a minimal tax." Other groups raised concerns about the plan to finance the proposal in part with about $5 billion in federal matching funds. Jeffrey Miles, spokesperson for the California Association of Health Underwriters, said, "To try to make the assumption that the money is going to drop out of the sky from Washington is unrealistic" (San Francisco Chronicle, 1/9). In addition, some groups raised concerns about enforcement of the proposal.

Some Support
Kim Belsh?, the secretary of the state Health and Human Services Agency, said, "Without an individual mandate, people will continue to forgo coverage and thus continue to shift the costs of unpaid bills to insured individuals," adding, "One of the goals is to create a more functional market where everyone is insured, providers are more fairly compensated" (Chorneau/Colliver, San Francisco Chronicle, 1/10). According to the Christian Science Monitor, the proposed extension of coverage under Medi-Cal to children in low-income households, regardless of their immigration status, "is winning kudos from family groups nationally." Ron Pollack, executive director of Families USA, said that the proposal "will not only be enormously helpful for California children but will also play a very significant role at the national level." He added, "This will no doubt lend enormous support for the federal government's providing states with significant funding to expand coverage to uninsured children" through the SCHIP program, which requires reauthorization this year (Christian Science Monitor, 1/10). Health insurers also have expressed support for the proposal (AP/Washington Times, 1/10).

Massachusetts as Model?
Massachusetts, which recently enacted a similar health insurance law, "could offer some guideposts" as "California maps out its path near universal health insurance," the Times reports. Michael Widmer, president of the Massachusetts Taxpayers Foundation, said, "We're really changing the culture of providing health care. For some people, it's changing the mind-set from one of showing up at the emergency room or at the local health center with a problem to understanding that they can be insured" (Belluck, New York Times, 1/10).