California Governor, Assembly Speaker Reach Compromise On Health System Overhaul

California Gov. ArnoldSchwarzenegger and state AssemblySpeaker Fabian N ez (D) have reached a tentative agreement on a $14 billionplan to overhaul California's health care system, officials said on Friday, theLos Angeles Times reports. Daniel Zingale, a senioradviser to Schwarzenegger, said the leaders "have agreed on the frameworkof health care reform that will go before voters" in November 2008. Underthe compromise plan, nearly all residents would be required to obtain health carecoverage.

Residents with incomes up to 250% of the federal poverty level would receivestate subsidies for coverage, and residents with incomes up to 400% of thepoverty level would be able to fully deduct any health care premium costs thatexceed 5.5% of their incomes. In addition, residents who retire before theyqualify for Medicare at age 65 would receive tax credits to prevent them fromspending more than 10% of their savings on health insurance (Rau, LosAngeles Times, 12/15). Low-income residents would be exempt from thecoverage mandate if they would be required to spend more than 5% of theirincome on minimal coverage and do not qualify for public programs.

The plan also would extend coverage to children in families with incomes up to300% of the poverty level, regardless of immigration status (Kurtzman, AP/Ventura County Star, 12/15). In addition, insurerswould be prohibited from denying coverage to residents because of pre-existingmedical conditions and would have to spend at least 85% of premiums on medicalcare. The state Assembly is scheduled to vote on the bill on Monday (LosAngeles Times, 12/17).

Ballot Measure

Schwarzenegger and N ezalso revised how much employers would be required to pay toward healthcoverage. Under a new sliding scale, businesses with payrolls up to $250,000would contribute 1% of payroll toward coverage; those with payrolls from$250,000 to $1 million would contribute 4% toward coverage; those with payrollsfrom $1 million to $15 million would contribute 6%; and those with payrollsgreater than $15 million would contribute 6.5% (Zapler, San Jose Mercury News, 12/15).

In addition, Schwarzenegger has agreed to N ez's proposal to partially financea health care system overhaul by increasing the state's tobacco tax. Thegovernor had proposed leasing California'slottery instead. N ez supports a $2 tobacco tax increase, while Schwarzeneggerfavors a $1.50 increase. Senate President Pro Tempore Don Perata (D) said aproposed tobacco tax increase is "flawed only because big tobacco has ahuge amount of money" to spend on defeating the measure (Rojas, Sacramento Bee, 12/15). Tobacco companies spentmore than $60 million last year to help defeat a proposed tobacco tax increaseon the ballot (Ainsworth, San DiegoUnion-Tribune,12/15).

The plan also would be funded through a 4% tax on hospital revenue in an effortto secure matching federal funds and boost reimbursements for services (SanJose Mercury News, 12/16). In addition, the plan expects about $5billion in new federal funding, mostly for Medi-Cal, the state's Medicaid program (Chorneau, San Francisco Chronicle, 12/15).

The legislation does not contain the taxes or other measures that would providethe $14 million in funding needed for the overhaul. Those revenue provisionswould go before the voters on the November 2008 ballot, and the bill would nottake effect unless state residents approve that measure (Los AngelesTimes, 12/15).

Financing

N ez said that an overhaulbill must be approved by the Democratic-controlled Legislature and signed bySchwarzenegger by Friday to secure enough time to qualify a financing measurefor the November 2008 ballot. Perata, however, told Democratic lawmakersearlier this month that they would not have to return to the Capitol until nextyear. N ez said it is "possible to get something on the ballot beforeNovember without doing it this week" (Rojas, Sacramento Bee, 12/17). Perata said he believeslawmakers should not vote on a health care plan until the state determines howmuch funding will be cut from health programs such as Medi-Cal, the state'sMedicaid program, to help reduce a projected $14 billion state budget shortfall(San Jose Mercury News, 12/16).

Schwarzenegger acknowledged that state spending will be cut "across theboard," including from Medi-Cal's budget, but noted that the health careplan would boost Medi-Cal funding (San Francisco Chronicle,12/15). The governor also argued that the plan would not require money from thegeneral fund and would prevent some budget cuts (Los Angeles Times,12/15).

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