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On California's Quest for Health Reform

Miracles Can Happen -- But Will They?
August 30, 2007 |
Imagine the three leaders campaigning together across the state for a historic health reform plan that would cover all Californians, spread the financing burden equitably, and lay the foundation for a more efficient health-care system.
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Twenty-five years ago, 49er quarterback Joe Montana connected with Dwight Clark on a last-minute miracle pass that changed the history of pro football forever. The metaphor for saving California health-care reform in 2007 resides in that memory.

Several national media reports of the death of reform are premature. But we are truly down to the final minute. Gov. Arnold Schwarzenegger’s original plan was good, but not perfect. Those for whom the perfect is the enemy of the good have effectively blocked it. Republican legislators refuse to consider whether investing in Californians’ health might be worth the cost. Some left-of-center advocates are opposed to sensible reform because it might challenge their dream of a government-run health system.

The good news is that neither Assembly Speaker Fabian Núnez nor Senate President Pro Tem Don Perata, like Clark on that famous play, have quit running. Their own good but imperfect plan invites a grand compromise, which could bring this saga to a happy ending.

The Perata/Núñez plan aims to cover many of California’s uninsured, but it stumbles in two ways. First, it relies too heavily on employer financing. Second, it contorts itself oddly to avoid taking on the left and its misplaced critique of an individual mandate.

Most of us get health coverage at work, but the businesses that do not offer health insurance employ mostly low-wage workers. The proposed 7.5 percent tax on their small payrolls will not raise enough money to subsidize adequately their low-income workers. The requirement for all employers to spend this much on health care is really a way to protect and enhance the benefits of those who get them at work already, not to cover the uninsured. Requiring high-wage firms to spend 7.5 percent of payroll on health care will not help us compete with foreign firms. Moreover, the Perata/Núñez proposal probably violates the federal law that protects labor-management agreements from state interference.

More important, the governor’s plan of sharing responsibility for financing among providers, employers (4 percent of payroll) and taxpayers generally is much smarter and fairer and more effective in expanding health care coverage, according to MIT professor Jonathan Gruber.

But the biggest flaw in the Democratic leaders’ proposal is incomplete personal responsibility. The Democrats would require workers whose employers do not offer coverage to buy it, but neither the self-employed nor the workers in firms which do offer coverage would have any obligation to secure coverage for themselves and their families. This would leave insurance markets as inefficient as they are today and retain so many uninsured that hospitals will keep shifting costs to the insured.

Why not require workers who are offered coverage at work and the self-employed to buy, if proper subsidies are available? Perata’s original proposal included a mandate for high-income people. Núñez is open to this possibility. Both Perata and Núñez clearly understand that mandates could make markets work better, but they both profess reasonable fears about the affordability of insurance for middle-income Californians.

For this reason, the governor’s next offer must tackle affordability directly, both to solve his own proposal’s flaw and to provide cover for the Democratic leaders to push back against the ardent opponents of compromise and private-market solutions. This means he must offer to subsidize more families and to require insurers to offer more comprehensive products at fair rates than in his original proposal.

This fix will require a bit more new revenue than has been discussed. The major obstacle? Republican legislators who oppose any tax increase for any reason, ever, and the Legislature’s rule that any tax increase requires a two-thirds majority.

Thus, in order to finance covering all Californians, putting the entire health-reform package into a ballot initiative may be the only way. And what’s wrong with that? The governor says that he is open to the idea. One of Núñez’s main objections to the Schwarzenegger plan is that it would run afoul of the two-thirds rule. This strategy would make an end-run around this misguided rule. Imagine the three leaders campaigning together across the state for a historic health reform plan that would cover all Californians, spread the financing burden equitably, and lay the foundation for a more efficient health-care system.

Polls show that Californians and business leaders large and small want health-care reform. The problem continues to worsen: as the U.S. Census Bureau reported Aug. 28, the number of uninsured Americans rose sharply last year. It can be done, if our leaders are willing to work as teammates and share the credit as well as the responsibility. Now the governor has to find the legislative leaders with a high hard pass that only he can throw and only they can catch and turn into glory.