California faces particular barriers because of the demographics of its uninsured population and its political system, Mulkey and others said. But it also came up against some universal roadblocks: an inability to control the rising cost of healthcare; a complex federal reimbursement system where Medicaid changes are often necessary for reform; and limitations on tinkering with the employer-based system because of federal laws regulating employment benefits.
In short, Californias experience speaks to what a challenging undertaking this is in the first place, Mulkey said.
Momentum for healthcare reform in California came to a halt last week as, one by one, nearly all members of Californias Senate Health Committee voted down a carefully crafted bill a year in the making. But even in the weeks preceding that fateful 7-to-1 vote against the plan, it appeared the winds had been taken out of the proposals sails, those familiar with the situation said.
No one thing, or major lobbying effort, killed the immediate prospects for healthcare reform in the state. Rather, it was a series of obstacles that caused it to stumble and then fall, analysts said.
California has more uninsured than any other state, 6.7 million people, and those uninsured tend to be low-wage workers, many of whom are immigrants and many are employed by small businesses, studies have shown.
And unlike most states, any new revenue sources in California must be approved by a two-thirds majority in the Legislature. That makes passing any employer contributions, provider fees or other taxes pretty much impossible without going to the voters through a ballot initiative. Schwarzenegger and Assembly Speaker Fabian Núñez, a Democrat, had planned to go to the ballot box and bypass the Legislatures Republican minority, which is unilaterally opposed to any new taxes. But first the two state leaders had to get the framework of the agreement through the Legislature in an up-or-down vote. The state Assembly passed the bill in December.
Schwarzenegger, a Republican, knew from the start that pushing through reform would require building a wide coalition of diverse interests. In January 2007, he unveiled his proposal, with nearly every major interest group, including providers, seated at an expansive dais as he spoke via satellite. The governor couldnt be there in person, ironically, because he was laid up with a broken leg from a skiing accident. Through most of last year, stakeholders appeared engaged and optimistic, those familiar with the situation said.
I think what California shows is that you can build coalitions, said Peter Harbage, a healthcare consultant who advises Schwarzenegger. While I think California is about California, and not indicative of other states prospects, good leadership is important.
Schwarzenegger turned off some factionsnotably the California Medical Association, which opposed a 2% physician fee to help pay for the program. That fee was ultimately taken out of the governors plan, but it didnt sway the group. They were neutral on it, and I think that hurt, Harbage said.
At a news conference after the Senate Health Committee vote last week, Richard Frankenstein, president of the medical association, said he was not there to rejoice in the demise of another health reform plan and praised the governor and legislative leaders for laying the groundwork for the reform that eventually must happen.
Most major insurers supported the reform bill, known as AB 1X, including Kaiser Permanente, Blue Shield of California and Health Net. Blue Cross of California, a WellPoint subsidiary, opposed it.
Labor groups split, with the Service Employees International Union supporting, and the California Labor Federation AFL-CIO opposed. Safeway and some other major employers backed the governor, but several large employer groups did not.
You couldnt be fiscally responsible and be for this bill, said Rose Ann DeMoro, executive director of the California Nurses Association, which actively opposed the bill and supports a single-payer system. This going down probably saved them the embarrassment of failure at the ballot box later.
Senate Health Committee members who defeated the bill spoke of the states impending fiscal crisisa projected $14.5 billion deficit next fiscal year, which begins in Julyand a Legislative Analysts Office report on AB 1X that estimated that under some scenarios, costs to the program would outpace revenue within two years of implementation.
The budget crisis and the report offered political cover for the senators, said Robert Phillips, a senior program officer at the California Endowment and former trustee of 399-bed Alameda County Medical Center in Oakland, Calif. Unlike the Assembly, led by Núñez, the state Senate was not engaged on the issue, Phillips said.
Just before the Senate vote, Núñez complained that some Health Committee members hadnt bothered to return his phone calls or show up for scheduled meetings with him to discuss the bill. At the end of the day, youve got to be ready for defeat, he said.
Fear ruled the day, Phillips said. Its getting bewildered and scared by the complexity of it and not having the certainty they were doing the right thing. Thats the antithesis of reform. Reports of cost overruns for Massachusetts universal healthcare program also spooked members, he added.
Democratic state Sen. Sheila Kuehl, who chairs the Senate Health Committee, is a strong proponent of single-payer. In casting her vote against AB 1X, Kuehl cited the individual mandatea cornerstone of Sen. Hillary Rodham Clintons healthcare reform planas a factor. Kuehl, like several labor unions and the nurses association, opposed the provision requiring residents to carry health insurance without guaranteeing cost controls. We cant simply say to the people of California, go buy insurance, Kuehl said.
C. Duane Dauner, president and chief executive officer of the California Hospital Association, which supported the bill, declined to point fingers. A major part of the reform package was a 4% tax on hospital net revenue to help fund the program, in exchange for more federal matching Medicaid dollars for hospitals, a provision that the association backed. California has the lowest Medicaid reimbursement among all states, and its hospitals spend $2.3 billion a year on unfunded care.
Democratic state Sen. President Pro Tem Don Perata told reporters after the vote that the Legislature should consider passing many elements of the reform plan, including the hospital fee. Such a fee would likely also require voter approval. But Dauner opposes that idea. Using the hospital fee to cover the uninsured wont work if others dont pay in, too, such as employers, Dauner said. It falls flat on its face, pulling it out by itself.
Lloyd Dean, president and CEO of Catholic Healthcare West, said he is encouraged that state leadership was able to reach a consensus on issues such as transparency and quality and the hospital fee, but added in a statement that he is concerned this lack of progress will result in further deterioration of Californias healthcare system. The not-for-profit hospital chain is convening a healthcare leadership summit, moderated by Leon Panetta, former Clinton administration chief of staff, later this month to discuss possible reforms at the federal level.