Kaiser Daily Health Policy Report

Tuesday, November 06, 2007

State Watch

      California Assembly Speaker Fabian Núñez (D) on Monday announced a revised health care proposal that would require nearly all residents to obtain health care coverage and increase the state tobacco tax, the San Diego Union-Tribune reports (Ainsworth, San Diego Union-Tribune, 11/6). State Senate President Pro Tempore Don Perata (D) is expected to join Núñez at a news conference on Tuesday to officially release the health care bill (Chorneau, San Francisco Chronicle, 11/6). The revised bill comes eight weeks into the special legislative session on state health care reform and signals an effort by Democratic leaders to reach a compromise with Gov. Arnold Schwarzenegger (R) (Rojas, Sacramento Bee, 11/6).

Under the new plan, nearly all residents would be required to obtain health coverage, "the cornerstone of Schwarzenegger's plan," according to the San Jose Mercury News. Residents who would have to spend more than 6.5% of their family income on health -- including copayments, deductibles and premiums -- would be exempt from the individual coverage mandate, according to the plan (Zapler, San Jose Mercury News, 11/6).

The Democrats' proposal also would expand public health care programs to families with incomes up to 300% of the federal poverty level and provide tax subsidies to individuals with incomes between 300% and 450% of the poverty level. Individuals with incomes between 150% and 300% of the poverty level would be exempt from paying insurance premiums and deductibles (Sacramento Bee, 11/6). In addition, families with incomes up to 450% of the poverty level would receive a tax credit for the portion of premium costs that exceed 5% of their incomes (Rau, Los Angeles Times, 11/6).

Funding
State Democrats also revised funding mechanisms for the proposal. Under the new plan, employers would be required to pay a minimum of 2% to 6.5% of payroll towards health insurance, depending on the level of payroll. Schwarzenegger has proposed that employers pay zero to 4% of payroll based on a similar scale, while Democrats had previously proposed a 7.5% of payroll threshold (Sacramento Bee, 11/6).

The Democrats' revised plan also would increase the state tobacco tax from 87 cents per pack to $2.87 per pack to fund health insurance subsidies (Rau, Los Angeles Times, 11/6). The tax increase would generate $2 billion annually, but revenue would decline as more people quit smoking, according to the Union-Tribune (San Diego Union-Tribune, 11/6).

In addition, state Democrats' plan would require hospital contributions to help the state qualify for several billion dollars in additional federal funding. The money would be used to help hospitals cover treatment costs for low-income patients. The new proposal also would require hospitals and insurers to provide more transparency in their costs -- provisions that were in Democrats' original bill, which was vetoed by Schwarzenegger. The Assembly will hear the Democrats' new proposal on Nov. 14 (Rau, Los Angeles Times, 11/6).

Reaction
Aaron McLear, spokesperson for Schwarzenegger, said the Democrats' revisions are "a fairly positive movement." He added, "We look forward to seeing the details of the proposal but understand there are still issues to be resolved" (Sacramento Bee, 11/6).

Richard Frankenstein, president of the California Medical Association, said the Democrats' "proposal could break the logjam on health care reform discussions" (San Diego Union-Tribune, 11/6). He added that a proposed tobacco tax increase to fund health care reform is a "commonsense" approach.

Núñez said, "I'm expecting the governor to sign on to this ... This is more than a gesture of good will." He added, "There's no reason why anybody in their right mind would want to oppose this" (San Jose Mercury News, 11/6).

State Budget
In related news, Schwarzenegger on Monday directed state agency leaders to reduce fiscal year 2008-2009 budgets by 10%, a move that political analysts say could delay his health care reform proposal, the Los Angeles Times reports. State revenue is coming in below projections, in large part because of the decline in the housing market and related drops in state income tax revenue. California's budget deficit for the upcoming fiscal year could be as high as $10 billion.

Adam Mendelsohn, a spokesperson for the governor, declined to answer questions about the order but said budget talks were ongoing. Mendelsohn said that California needs to proceed with the governor's agenda regardless of the budget situation, adding, "The question people have to ask themselves is what will happen to the economy without a water plan. The failure of our health care system is costing taxpayers money" (Halper, Los Angeles Times, 11/6).