A proposal to reform healthcare in California got some momentum last week with its passage in the state Assembly, renewing the prospect that the state with the largest number of uninsured6.8 millioncould be on the path toward historic change.
The California experience is being watched closely on a national level as many of the elements of the reform package are included in healthcare pitches from the leading presidential candidates.
And the financing mechanismsincluding hospital fees, individual mandates and payroll contributionscould be rolled out elsewhere should they succeed in the Golden State.
Its very significant when a state as large as California takes on this issue, says Stephen Zuckerman, healthcare economist at the Urban Institute. Its got the pieces that are emerging as the consensus of what is needed for healthcare reform to happen.
The $14.4 billion proposal, crafted by Republican Gov. Arnold Schwarzenegger and Democratic leadership of the Legislature, which holds a majority in both houses, consists of numerous moving parts. The main components are an individual mandate, requiring all residents to carry health insurance; an employer contribution of between 1% and 6.5% of payroll; tax credits and subsidies to families with incomes up to 400% of federal poverty level ($82,600 for a family of four based on 2007 guidelines); a cigarette tax of between $1.50 to $2 per pack; and a 4% hospital tax.
The proposal also includes pay-for-performance, quality, transparency and electronic health-record provisions. Insurers would be required to spend 85% of premium dollars on medical care.
But it faces numerous hurdles, first in the state Senate. Don Perata, the Senate president pro tem and a Democrat, says he wont take up the measure until after getting a legislative analysis on how it would affect the general fund in light of a projected $14 billion deficit next fiscal year. In recent days, the governor has said he will declare a state of emergency on the budget crisis that likely will result in 10% average cuts to health and social services.
At a news conference on Dec. 19, Schwarzenegger said the healthcare proposal has a positive effect on the budget because we are pumping more than $4 billion in Medi-Cal (Medicaid) dollars into it.
Thats because, under a deal reached with California hospitals included as part of the proposal, the hospitals would pay a 4% aggregate fee on patient revenue, totaling an expected $2.3 billion. In exchange, the state will be able to pull down matching federal Medicaid funds.
California ranks last among states in Medicaid hospital reimbursements. Under this plan, California would rank near the top, says Lloyd Bookman, founding partner of the law firm Hooper, Lundy & Bookman in Los Angeles, who is helping the California Hospital Association on the financing provisions of the plan.
This is hugely important to California hospitals, Bookman says, especially because of unfunded mandates such as nurse-to-patient ratios and seismic-safety upgrades. It means that hospitals are able to get needed revenue to provide services.
The California Hospital Association would not release estimates on how much hospitals could gain under this proposed financing, saying those figures are available only to members. But Jan Emerson, spokeswoman, said the gains would be significant.
Under the complex financing structure of the deal, some hospitals would pay more than 4% of patient revenue, while others would pay less. Public hospitals will contribute under another complex financing scheme. All but about 20 to 30 hospitals statewide would get Medicaid dollars back in return. Those facilities that wouldnt reap a benefit include the Betty Ford Center in Rancho Mirage, Calif., which doesnt accept Medicaid, Emerson said.
Provided the 210-page bill clears the state Senate, it faces further obstacles. Opposition from Republican lawmakers in the state means the financing portion of the plan would have to be enacted via ballot initiative, expected in November 2008.
And the ballot initiative could face formidable opposition, notably from tobacco companies and some businesses, such as the California Restaurant Association or Blue Cross of California.
One only has to look at Oregons experience last month to see what can happen to healthcare initiatives when tobacco financing is part of the mix. In that state, voters soundly rejected a measure that would have raised the tobacco tax by 84.5 cents per pack to fund health insurance for 100,000 children.