Governor Schwarzenegger proposes coverage for all Californians -- everyone to share cost

January 9, 2007 Sacramento -- Gov. Arnold Schwarzenegger proposed Monday extending medical insurance to all Californians, including illegal immigrants, with a far-reaching plan that would transform the health care market by spreading the $12 billion cost of universal coverage among employers, individuals, insurers, government and health care providers.

The proposal, which the governor called a model for bringing universal coverage to the nation, would deliver both pain and reward to the many powerful interests in the health care industry, giving the plan an uncertain future before the Legislature.

But Schwarzenegger said the problem of covering the state's million uninsured must be undertaken.

"We have more than 6.5 million people without insurance, nearly one-fifth of our population -- so the rest of us pay their bills," the governor said during a news conference in Sacramento through a satellite television link from his office in Los Angeles.

Schwarzenegger said his solution is to make sure everyone in the state has health insurance.

To get there, Schwarzenegger would require all Californians to have insurance and to take more responsibility for staying healthy.

He would require employers with more than 10 workers to provide insurance or pay into a fund that would purchase policies. He would require insurance carriers to accept all applicants regardless of their health, and he would limit insurers' profits.

Schwarzenegger's plan also would redirect billions of dollars now spent subsidizing the care of the uninsured at hospitals to a pool for purchasing policies for those without insurance.

And he would impose a tax on doctors and hospitals under the theory that once all Californians have insurance, medical businesses no longer would be burdened by the cost of the uninsured, and the higher rates that providers now charge insured patients could be used to help buy more insurance.

By getting all parts of the economy and the industry sharing in the solution, Schwarzenegger said, he believes the price of care will fall, benefiting all.

"In each case where it appears to be we're taking something from someone -- if you do the math, everyone is left with a better deal here," he said.

But some skeptics pointed out that the plan's symmetry might also leave Schwarzenegger few proponents willing to fight alongside him.

"He's counting on a groundswell of public opinion," said Larry Gerston, a political scientist at San Jose State, noting a recent Field Poll that showed nearly 80 percent of California voters support expanding health care programs to cover the uninsured.

"My question is, what is the intensity of that belief?" he said. "How many people go to sleep at night thinking about this problem? I think the intensity is uneven and really only among those who are already not in the system."

Although complaints about the governor's plan were largely muted Monday, there were hints of the rhetoric that could be used in the coming political fight.

A "coverage dividend" was how Kim Belshe, the governor's Cabinet secretary for health care issues, described a 2 percent tax on doctors and a 4 percent tax on hospitals.

Dr. Anmol Singh Mahal, president of the California Medical Association, called it a tax.

"A tax on physicians is really a tax on those who are sick, because it is the sick who go see their doctors," he said.

Allan Zaremberg, president of the California Chamber of Commerce -- a group that is already on record opposing a mandate on employers to provide insurance -- said he is worried that business profits will not keep pace with health care costs.

Labor unions and consumer groups are opposed to Schwarzenegger's mandate on individuals to have insurance because there is nothing in the plan to make sure policies will be affordable.

Hospitals are concerned about losing subsidies for uncompensated care in a time when so many already are losing money.

"Part of the problem is that health care is one of the few places in our society where we haven't made the commitment to include everybody," said Anthony Wright, director of Health Access, a Sacramento consumer group.

"We don't have a fire system where the fire trucks don't go to certain houses on the block," said Wright. "We have a public education system where we say we're going to include all children. Yet the United States has never made the commitment to include everybody in health care, which creates further disfunction."

Assembly Speaker Fabian Núñez, D-Los Angeles, said one certainty is that whatever changes are made to the state's health care system, not everyone will be completely happy with the results.

"But I think the key here is to really do what's most effective," he said. "Do what is going to have the most positive impact on a progressive health care system for California and not do what is politically convenient because it's helpful to this or that group. As long as we do that, I think we'll end up in the right place."

Senate President Pro Tem Don Perata, D-Oakland, went even further, saying there is something in Schwarzenegger's plan "for everyone to hate." Perata said that is usually an indicator of being on the right track.

The governor's plan also contemplates extending coverage to undocumented immigrants -- something that has been criticized by Republican lawmakers whom Schwarzenegger might need to support any spending legislation.

"There is no debate about whether to provide medical care for people who are in California illegally," Schwarzenegger said. "I know this is controversial, but federal law requires us to treat anyone who shows up at an emergency room in need of care."

In addition to getting employers to provide private insurance, the governor also would expand the existing Medi-Cal and Healthy Families programs. The state will subsidize the estimated 1.2 million low-income people who do not currently qualify for coverage under Medi-Cal.

The governor's plan would also provide insurance for all children whose families earn less than $60,000 per year, regardless of their residency status.

Like other parties affected by Schwarzenegger's proposal, hospitals complimented the governor for his proposal but insisted it contain enough money for their emergency rooms.

"Even when coverage is broadly expanded, the reality is that many individuals will inevitably fall through the cracks," said Duane Dauner, California Hospital Association president. "The health care safety net must be funded in such a manner that persons served by safety-net hospitals continue to have access to the care they need."

Among the harsher critics of the governor's plan was the California Nurses Association, a political enemy of Schwarzenegger since he relaxed higher nurse-to-patient staffing requirements in hospitals, something the nurses had sought for more than decade.

"Little more than a fresh coat of paint on a collapsing house" and a "huge gift to the insurance industry" was the description of the plan by Deborah Burger, the president of the nurses association. "There are no limits on skyrocketing health premiums, no requirements on what will be included in the required plans."

Small businesses are especially wary of the mandates on employers.

"I don't see anything about the cost containment," said Jot Condie, president of the California Restaurant Association, which helped defeat a ballot measure to require that employers provide insurance to their employees. "Our position is, fix the system first, then maybe you don't have to require employers to contribute 4 percent of payroll."

Highlights of insurance plan

Effect on employers

-- Employers who have 10 or more workers and don't provide medical insurance would be required to pay a 4 percent payroll tax to support a state purchasing pool that would help employees get coverage.

Effect on individuals

-- Everyone would have to obtain insurance through an employer or buy it individually. The minimum benefit would be a $5,000-deductible plan with maximum out-of-pocket expenses of $10,000 per family.

-- Payment assistance for individual insurance would be available to about 1.2 million low-income Californians.

-- The state would provide health insurance to all children, including illegal immigrants, living below 300 percent of the federal poverty level, or about $60,000 a year for a family of four.

-- The state would expand Medi-Cal to cover about 630,000 indigent adults not currently eligible for benefits.

Effect on doctors and hospitals

-- Medi-Cal reimbursement rates would be increased, but doctors would be required to pay a 2 percent provider tax and hospitals a 4 percent tax.

Effect on insurers

-- Insurance companies no longer would be allowed to deny coverage to individuals based on medical history, and they would have to spend 85 percent of their revenue on services.

Source: Governor's office