California rejects access measures; funding concerns cited

Washington -- Voters in California struck down several measures that could have improved access to medical services for insured and uninsured residents but sealed their reputation as health care trendsetters with $3 billion in funding for stem cell research.

The state's voters rejected, 49% to 51%, a referendum that would have upheld a law that would have required medium and large businesses to provide health care coverage to their employees or pay into a state-run health plan for their workers.

It also would have created a panel of experts responsible for setting the minimum standards for mandated health benefits under the "pay-or-play" measure.

The mandate was signed into law by former Gov. Gray Davis and was scheduled to take effect on Jan. 1, 2006. It was opposed by the state's large employers.

The opposition, which was coordinated by California's Chamber of Commerce, spent millions of dollars to get the referendum on the ballot and then to run advertisements against the law.

They argued that the mandate would hurt small businesses and discourage companies from coming to the state. Opponents also criticized the measure as hastily written, poorly structured and lacking in detail.

The law was rushed through in the last days of the Davis administration and has been very controversial, said Robert Stern, president of the Center for Governmental Studies, a Los Angeles think tank, which offered nonpartisan analyses of the health care ballot initiatives for a voter information Web site sponsored by the California Healthcare Foundation.

But it was Calif. Gov. Arnold Schwarzenegger's objections that put the opposition over the top, he said.

Many of the state's physicians had supported the mandate as a way to stop the erosion of health care coverage in an environment in which businesses are dropping and restricting benefits packages or raising the share of costs paid by workers, said Peter Warren, spokesman for the California Medical Assn., which supported the law.

With the failure of the law, the CMA is now exploring an alternate proposal that would require the state's companies to offer workers less-costly catastrophic coverage that would, at least, head off some medical bankruptcies.

No help for EDs

Voters also rejected, 28% to 72%, a proposition that would have added an estimated $500 million to $600 million a year to help reimburse physicians and hospitals providing uncompensated emergency and urgent care to uninsured patients. The measure was to be funded by adding 50 cents to the 911 tax paid by local telephone subscribers and 3% to the tax on cellular phone bills.

The burden of uninsured patients has forced the closure of several emergency departments in California. This is an especially pressing problem, as emergency department closures affect access to care for both insured and uninsured alike, Warren said.

The CMA supported the measure. But some physicians were concerned that this was a Band-Aid approach that, if passed, would convince politicians they wouldn't have to come up with a more permanent solution.

Phone companies poured millions of dollars into the opposition campaign, arguing that taxing 911 was an inappropriate way to fix the problem.

A phone tax was probably the wrong way to go, Warren said. "The phone companies hated it and outspent us by millions."

Physicians have been unable to draw attention to the ED funding issue because medical ethics do not allow them to walk out on patients to protest the problem, Warren said.

In contrast, voters approved a measure to increase funding for mental health services that will be paid by the rich, specifically by a 1% tax on residents with annual incomes of more than $1 million. They also OK'd new funding for capital investment at children's hospitals that will be paid for through $750 million in state bonds. There was very little opposition to those financing approaches.

Stem cell research: Sending a message

Voters approved $295 million a year in funding for stem cell research over the next 10 years. The money will be distributed to California universities and is expected to attract biotechnology firms to the state.

"The funds available for stem cell research in California will dwarf what any other country in the world is spending," said Daniel Perry, president of the Coalition for the Advancement of Medical Research, made up of patient advocacy organizations, universities, scientific societies and other groups backing stem cell research.

California in 2002 became the first state to pass a law allowing state funds to be used for unrestricted research on embryonic stem cells, much of which is barred from federal funding under a policy instituted by President Bush in 2001.

New Jersey also has passed a law allowing the use of public money for stem cell research, later including nearly $10 million in funding for the private-public partnership in the state's 2004 budget. Lawmakers in several other states have considered similar legislation.

Opposition to the California funding measure did not make much of a splash with voters and was outspent by millions of dollars. It came mostly from groups opposed to abortion and some members of the medical community concerned about the amount of the funding and how it might affect dollars for other health priorities.

The measure passed 59% to 41%. "A lot of people voted for it because they wanted to send Bush a message," Stern said.

It will be an expensive message, according to opponents -- one the state could be paying for years to come. It's estimated that the $3 billion bond issue will accrue nearly $3 billion in interest over its life.