California Senate Rejects Plan To Overhaul State Health Care System

Armen Hareyan's picture

The California Senate Health Committee on Monday voted 7-1, with threeabstentions, to reject health care reform legislation (ABX1 1) supported byGov. Arnold Schwarzenegger (R) and Assembly Speaker Fabian Nunez (D), the New York Times reports (McKinley/Sack, NewYork Times, 1/29).

The proposal, approved by the California Assembly last month, would haverequired most state residents to obtain health coverage. Under the bill,residents with incomes up to 250% of the federal poverty level would havereceived state subsidies for coverage, and residents with incomes up to 400% ofthe poverty level would have received tax credits to ensure that health carepremium costs do not exceed 5.5% of their incomes. Insurers would have beenprohibited from denying coverage to residents because of pre-existing medicalconditions. A ballot initiative submitted by Schwarzenegger and Nunez wouldhave asked voters to approve about $9 billion in fees and taxes to partiallyfund the $14 billion plan. The initiative -- which would have gone beforevoters in November -- called for an increase in the state tax on cigarettes, aswell as a fee on hospital revenues. It also included an employer requirement tocontribute towards health coverage in amounts ranging from 1% to 6.5% of theirpayrolls, depending on the level of payroll (KaiserDaily Health Policy Report, 12/18/07).

The legislation "ran into trouble" last week when the nonpartisanstate Legislative Analyst's Office released a study that found byfiscal year 2014-2015, the annual cost of the program could exceed revenue by$300 million to $1.5 billion, the Washington Post reports (Lee, Washington Post,1/29). Legislators raised concerns about approving the measure at a time whenthe state is facing a $14.5 billion budget shortfall. Committee Chair Sen.Sheila Kuehl (D) said, "It doesn't matter how many good things are in thebill if there isn't money to pay for them" (Washington Times,1/29). State Sen. Leland Yee (D) said, "Nothing that came out of lastweek's hearing gives me the comfort level that working people of Californiawon't be left holding the bag," adding, "I was around when the energyderegulation came about and there are lessons I learned from that"(Chorneau, San Francisco Chronicle, 1/29).

Monday's vote leaves proponents "no time to regroup in time to putsomething before voters this year," according to the Wall StreetJournal (Rundle, Wall Street Journal, 1/29). However,according to legislative rules, the bill still can be amended and reconsideredby the health committee at its next scheduled meeting, which would be this week(San Francisco Chronicle, 1/29).


Schwarzenegger said,"I am someone who does not give up. Especially when there is a problem asbig and as serious as health care that needs to be fixed," adding,"One setback is just that -- a setback. I still believe comprehensivehealth care reform is needed in California.We will keep moving forward. I can promise you that." Nunez called thebill's defeat "a victory for tobacco companies, the insurance industry andthe shameful status quo."


Opponents of the measure -- including CaliforniansAgainst More Deficit Spending, a coalition of pro-business and anti-tax groups -- commended thecommittee for rejecting the proposal. Jon Coupal, president of coalition memberHoward Jarvis Taxpayers Association, said, "This state had ahorrible experience with energy deregulation, and this health care proposal hadall the earmarks of another disaster" (Washington Times,1/29).

Jonathan Gruber, a health economist at the MassachusettsInstitute of Technology and an adviser to Schwarzenegger and the state Legislature on theproposal, said it "was pretty clearly doomed by the larger fiscaldeficit" (New York Times, 1/29).

Senate President Pro Tempore Don Perata (D) on Monday in a letter toSchwarzenegger and Nunez suggested removing certain provisions from theproposal, such as the hospital fee and a requirement that insurers spend 85% ofhealth care premiums on medical care, and passing them as separate legislation(Zapler, MediaNews/Contra Costa Times, 1/29). Perata added that despiteproblems with the proposal's funding mechanisms, state leaders "have comea long way to solve some of the most intractable policy problems imaginable.The significant progress we have made can assure swift future steps when thestate's budget and economic climate improve" (San FranciscoChronicle, 1/29).

National Impact

According to the NewYork Times, the loss in California"bodes poorly for universal health coverage, an issue that just a year agoappeared to have found its moment." The New York Times notesthat of the three ambitious health care proposals in 2007 -- in California,Illinois and Pennsylvania -- "nothing of national significance waspassed" (New York Times, 1/29). In addition, the Los Angeles Times reports that the three leadingDemocratic presidential candidates -- Sens. Hillary Rodham Clinton (N.Y.) and BarackObama (Ill.) and former Sen. John Edwards (N.C.) -- all have announced similarhealth care proposals that aim to expand private insurance while allowingpeople to retain coverage they already have (Rau, Los Angeles Times,1/29).

The defeat of the Californiaplan "is a significant blow, but not a fatal blow, to the growing momentumfor health reform nationally," Drew Altman, president and CEO of the Kaiser Family Foundation, said. "California's failure, after coming so close, underscoresthe lesson that too many states don't have the political will or resources toreform health care on their own, and thus the need for a national solution ofsome kind," he added (Washington Post, 1/29).

According to MediaNews/Contra Costa Times, "The next besthope for changing health care may be at the federal level," as the threeleading Democratic presidential candidates have proposed plans similar toSchwarzenegger's, and Republican candidates are pitching market-based proposalsto extend coverage insurance to more people and lower costs. However, "Washington hasdeadlocked on health care reform for decades, and any action isn't likely untilwell into 2009" (MediaNews/Contra Costa Times, 1/29).

Reprintedwith permission from You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign upfor email delivery at . The Kaiser Daily Health PolicyReport is published for, a free service of The Henry J.Kaiser Family Foundation.