California Proposes Leasing State Lottery To Fund Universal Health Insurance Coverage

California Gov. Arnold Schwarzenegger (R) on Tuesday introduced arevised $14 billion proposal to require all state residents to obtainhealth insurance, financed in large part by leasing the Californialottery to a private firm, the Los Angeles Timesreports. Schwarzenegger's new plan largely maintains the framework of aproposal he outlined in January, "although it contains a number ofconcessions intended to appease labor unions, physicians and some smallbusinesses, all of which have persistently opposed his vision,"according to the Times (Rau, Los Angeles Times, 10/10). The revised plan would cost about $2 billion more than the original proposal (Kurtzman, AP/San Francisco Chronicle, 10/9).

Underthe revised proposal, all residents would be required to obtaincoverage, either individually or through their employer, and the statewould subsidize coverage for individuals with annual incomes less than$25,525 and for families with annual incomes less than $51,625.Lower-income workers who do not qualify for the subsidies but whosehealth insurance costs exceed 5% of their family's income would receivea tax credit.

The plan would be funded in part by leasing thestate lottery program to a private firm. Administration officialsestimate a 40-year lease could generate $2 billion if the state canincrease lottery sales to the national average. Those payments couldincrease to $4.5 billion annually to keep pace with medical inflation.However the funds would run out in as little as 15 years unless othersources of revenue are identified (Los Angeles Times, 10/10).

Schwarzeneggeraltered a provision of his original plan that would require employerswith 10 or more employees to contribute 4% of their payrolls to helpfund health insurance. The revised proposal would require employers whodo not offer health coverage to contribute based on a sliding scale feefrom 0% to 4% based on their total payroll (Rojas, Sacramento Bee,10/10). The new plan would double to $2 billion the amount businessescontribute, while allowing small businesses to contribute less,according to the Times (Los Angeles Times, 10/10).

Inaddition, physicians would not be required to contribute 2% of theirrevenues to help subsidize a health insurance purchasing pool forlow-income residents. Under the proposal, the state Health and Human Services Agency would establish a minimum benefit level for medical, hospital, preventive and prescription drug coverage (Sacramento Bee, 10/10).

Prospects

The new plan still needs to be negotiated with theDemocratic-controlled Legislature, Schwarzenegger said during a pressconference on Tuesday. According to the Times, hisproposal "did not immediately win any new converts in the [state]Legislature." Republican leaders indicated that they still opposerequiring employers to fund the proposal, while Democratic leadersindicated that they prefer their own legislation that would requireemployers to spend the equivalent of 7.5% of their payrolls on healthcoverage, the Times reports (Los Angeles Times, 10/10).

The governor called a special legislative session of the state Legislature in September to focus on health care (Sacramento Bee, 10/10). The proposal would be part of a larger health care financing measure on the November 2008 statewide ballot (Zapler, Contra Costa Times, 10/10).

Democratsalso expressed concern over the longevity of lottery revenue, whilesome with "moral qualms about gambling" were apprehensive aboutallowing a private firm, which might more aggressively pursue players,to run the lottery. Wall Street investment firms Goldman Sachs and Lehman Brothers "have expressed interest in helping the state find a private manager," the Times reports (Los Angeles Times, 10/10).

Reaction

Schwarzenegger said, "Our original proposal is now fleshed out and much stronger" (Los Angeles Times,10/10). He added, " We have the best opportunity for comprehensivehealth care reform in 100 years because the more people study our plan,the more they agree with what we have been saying since day one: Ifeveryone pitches in and does their part, then everyone will benefit" (Reuters, 10/9).

AssemblySpeaker Fabian N