Health system reform effort widens in California

Two Democrats have offered bills without the governor's doctor tax, which physicians oppose.

By Doug Trapp — Posted June 4, 2007

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While California Gov. Arnold Schwarzenegger campaigns for his universal health plan outside of the legislative process, state lawmakers have been working on plans of their own.

Last month, two leading Democratic legislators called for a 7.5% payroll tax to help pay for their health care reform bills. The measures drew immediate criticism from business groups but some support from the California Medical Assn. Schwarzenegger's plan, in contrast, includes a 4% payroll tax on employers with at least 10 workers, plus a 2% tax on physicians' gross revenues.

The Democrats' bills are essentially more limited versions of the proposal Schwarzenegger put forth in January. The measures -- individually sponsored by Assembly Speaker Fabian Núñez and Senate President Pro Tem Don Perata -- passed the health committees in April.

The $10.9 billion Perata plan and $8.3 billion Núñez bill would, like the governor's $12 billion proposal, create an insurance pool funded in part by the state, employers and sliding-scale individual contributions. Unlike the governor's plan, they do not have a physician and hospital tax or increase physicians' Medicaid payment.

The CMA opposes the physician tax proposal and is concerned that Schwarzenegger's 4% payroll tax would not raise enough money to pay for his plan. The association hasn't taken a position on Schwarzenegger's overall plan, in part, because it hasn't been introduced as legislation. "It's still just a slide show," said Lisa Folberg, associate director of the CMA's Center for Government Relations.

The organization is supportive of the 7.5% payroll tax proposed by the Democrats, Folberg said, and approves of the framework of the Perata and Núñez plans. But it has concerns about the measures, including their failure to address Medicaid physician payment problems.

Spokespeople for Perata and Núñez said the lawmakers are coordinating efforts to develop a consensus bill.

Schwarzenegger has promised bipartisan action. "I guarantee you that this year we will have comprehensive health care," he said at an April 30 AARP event.

But his strategy of holding off putting his plan into legislation was up for debate as the other bills headed to appropriations committees.

CMA President Anmol S. Mahal, MD, wasn't surprised by the lack of a formal bill from the governor. "Very clearly, what the governor is doing is testing the waters," he said. "The most difficult part is not writing a legislative proposal, but getting a consensus around the ideas in a legislative proposal."

The governor has been meeting with health care stakeholders to make sure he has heard everyone's opinion, said Schwarzenegger spokeswoman Sabrina Lockhart. It's possible his ideas will make it into legislation when lawmakers have a conference panel to craft a single bill, she said.

Schwarzenegger's recent stops include the CMA's annual Legislative Leadership Conference. Instead of mentioning the doctor tax directly, the governor talked about the shared sacrifice needed for meaningful health care reform. "We have to look for the big goal here. That is the important thing," Schwarzenegger said.

The governor told the CMA he would work with physicians about their concerns. Dr. Mahal left the event feeling optimistic. "He gave us an impression of being very open minded."

Business groups, such as the California Chamber of Commerce, have opposed all three plans because they fail to adequately address health care costs, said chamber spokesman Vince Sollitto. "The reason more employers aren't able to provide health insurance is its cost."

The Democratic payroll tax aims to reflect typical employer contributions. California businesses spend a median of 7.7% of payroll on health premiums, stated a 2006 report by the California HealthCare Foundation, an independent research organization. But that masks a wide range. The top quarter of businesses spend 15.3% of payroll, and the bottom quarter spend 3.7%.

Any of the three proposals could face one major complication. New taxes in California require approval by a two-thirds majority of the Legislature. While the governor is describing his physician, hospital and employer assessments as a "fee," state courts would consider it a tax and strike it down if it didn't have the necessary votes, California Chamber of Commerce President Allan Zaremberg said.

Legislators are expected to work on a budget until about July 1, then return to the health care bills. The legislative session is expected to end by late September.

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Conflicting plans

While California Gov. Arnold Schwarzenegger pushes his universal plan, two more limited bills, both of which have passed their health committees, are moving forward. Here is a comparison of some provisions.


Covers: 4.1 million of 4.9 million uninsured Californians through an insurance pool and a Medicaid expansion.
Cost: $12 billion.
Funding: Employers with 10 or more employees would pay 4% of payroll ($1 billion); individuals would pay 3% to 6% of gross income on a sliding scale ($1.4 billion); physicians would pay 2% of gross revenues and hospitals, 4%; the federal government would provide an additional $5.5 billion and the state, $2.5 billion.
Mandate: All Californians, including children, would be required to have minimum health coverage.

Assembly Bill 8

Covers: 3.4 million uninsured through an insurance pool and Medicaid expansion. Includes working Californians and their dependents, plus all children, regardless of residency, in families earning up to 300% of the federal poverty level.
Cost: $8.3 billion.
Funding: 7.5% employer payroll tax ($5 billion), plus $2.7 billion in individual contributions and $940 million in federal funds. The payroll tax would not apply to businesses begun less than three years ago with fewer than two workers or a payroll of less than $100,000.
Mandate: None.

Senate Bill 48

Covers: Same as Assembly bill.
Cost: $10.9 billion.
Funding: 7.5% employer payroll tax ($6.6 billion), plus $3.6 billion in individual contributions and $1.2 billion in federal funds.
Mandate: Californians earning more than 400% of the poverty level would be required to buy at least a basic health plan.

Source: Estimates from Jonathan Gruber, PhD, economics professor, Massachusetts Institute of Technology

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