From the Los Angeles Times

Calif. healthcare overhaul moves forward

An employer-based revamping of the system wins initial approval in the Legislature, despite unified GOP opposition.
By Jordan Rau
Times Staff Writer

June 8, 2007

SACRAMENTO — The Legislature gave initial approval Thursday to a Democratic plan for overhauling healthcare, despite Gov. Arnold Schwarzenegger's insistence on bipartisan cooperation and the unified resistance of his fellow Republicans. The Senate and Assembly passed — without a single Republican vote — bills that would require businesses to spend 7.5% of their payrolls on employee healthcare. Democratic leaders said they would negotiate with Schwarzenegger and the business and healthcare lobbies in hopes of reaching a deal by the session's end in mid-September.

But Thursday's debates in the Capitol revealed a chasm just as wide as it was in January, if not wider.

And Schwarzenegger's proposal to achieve medical coverage for all Californians, outlined in January, received another setback. The nonpartisan legislative counsel's office, which advises lawmakers in both parties, concluded that a core element of Schwarzenegger's plan — the collection of $3.5 billion from doctors and hospitals every year — would be a tax, not a fee as the governor has steadfastly maintained.

That means approval by two-thirds of lawmakers would be needed for it to pass — not a simple majority, as fees require. Republican votes would be necessary. And the governor vowed during his reelection campaign that he would not raise taxes.

Leaders in both parties said there was little chance that Republicans would go along with the levies. Schwarzenegger has said those assessments are key to his idea that all sectors of society should share responsibility for expanding insurance to Californians who lack it.

The Assembly Democrats' plan passed on a party-line vote of 47-32, with one member absent. The Senate plan passed 23-16, with one abstention; one Democrat, Lou Correa of Santa Ana, joined the Republicans in opposition.

The Democratic plans offer to provide insurance to about 3.4 million people, or 69% of those without it. Employers who did not spend the equivalent of at least 7.5% of their payroll on healthcare would have to pay into a state fund that would be used to help subsidize uncovered workers and the poor.

The plans differ on which businesses would be exempted from the mandate.

Republicans rejected the goal of universal healthcare coverage as a "recipe for failure" that would backfire, driving up insurance rates and drowning businesses with what they termed a $5-billion tax increase. They said the measures would not tame the rising costs that have made medical care unaffordable for many.

"How much do I hate this bill?" Assemblyman Roger Niello (R-Fair Oaks) said, referring to the Assembly Democrats' legislation. "How can I count the ways?"

Republicans also bitterly complained that their counter-proposals, which relied on market forces and incremental reforms, had been dismissed out of hand by the dominant Democrats. Of more than a dozen such bills, only two passed either house of the Legislature.

"Our bills were summarily killed on party-line votes," Assemblyman Sam Blakeslee (R-San Luis Obispo) said in an interview, echoing his comments on the floor.

Though insisting at a news conference after the votes that they still would like to work with Republicans, Democratic leaders laid out a strategy that did not rely on any GOP votes. Senate President Pro Tem Don Perata of Oakland and Assembly Speaker Fabian Nuñez of Los Angeles cited last year's global warming law as the model they aspired to follow. Schwarzenegger and the Democrats negotiated that bill, AB 32, over strenuous objections of the Republicans and passed it without their backing.

"We can do the same thing with healthcare," Perata said.

Adam Mendelsohn, the governor's spokesman, said there was still a "wide open landscape" on a final healthcare plan.

"This is exactly the place the governor would hope we would be at this point, which is a statewide dialogue about healthcare, the table being set for us to work on legislation this summer that will comprehensively reform California's healthcare system," he said.

He dismissed the significance of the counsel's opinion, saying that because the governor has not submitted his proposal as a bill, the lawyers could not render a definitive account. "You can't definitely say what it is and what it is not," Mendelsohn said.

But Tim Hodson, executive director of Sacramento State University's Center for California Studies, said the Legislature's lawyers are cautious about issuing opinions and that this one would influence the views of lawmakers.

"This is one of those instances where rhetoric and spin meet the law," Hodson said.

The administration has been trying for months to remove opposition in the healthcare community to the provisions of Schwarzenegger's plan. A deal with the hospital industry is close, said several people familiar with negotiations, but the doctors lobby has continued to balk at proposed physicians' contributions.

The Democratic approach faces fewer obstacles in the Legislature than Schwarzenegger's but may have legal vulnerabilities because federal law limits what states can do to compel firms to offer health insurance. Throughout Thursday, Republicans insisted that the employer mandate would never pass muster in court, while Democrats said they had fashioned it to survive legal challenges.

Despite all the disagreements, Michael Villines of Clovis, leader of the Assembly's GOP members, told reporters his party would support efforts to guarantee insurance for all California children. He said Republicans also would be open to expanding state-arranged coverage for people who cannot find private insurance because of existing health problems — if there was enough state revenue to pay for it all.

"If this is the No. 1 priority to Assembly Democrats, then … we should look at cutting something else" to pay for it, Villines said.

But California's fiscal condition has been deteriorating. The administration announced Thursday that the state collected $764 million less in taxes last month than expected. That is likely to complicate state budget negotiations for the fiscal year that begins next month.

jordan.rau@latimes.com

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(INFOBOX BELOW)

Healthcare plan provisions

Democrats in the state Assembly and Senate gave initial approval to similar proposals for changing California's healthcare system. Common elements of the plans:

Worker insurance: Employers spend 7.5% of their Social Security payroll wages on healthcare, or pay into a state fund that arranges insurance. Employees pay a share of premiums. Exemption for the self-employed.

The poor: State-subsidized insurance for children of families earning less than three times the federal poverty level ($61,950 a year for four). Families above poverty level pay some coverage costs, based on income.

Insurers: Healthcare companies spend at least 85% of premiums on medical care and publicly reveal profit ratios. Restrictions on reasons for refusing individual coverage.

Mid-size businesses: Companies with 51 to 250 workers get the same insurance protection that small businesses now have. Insurers can neither refuse to renew policies nor demand giant rate increases.

Cost: At least $8.3 billion in government, employer and employee spending.

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Source: California Legislature

Los Angeles Times