After a stunning defeat in California, a major political movement may have stalled. And I am not talking about Mitt Romney. Instead, a bold effort by Gov. Arnold Schwarzenegger and some Democrats to add coverage for millions of uninsured residents has foundered on numerous craggy boulders. The failure underscores the growing realization that states may not be the hope for healthcare innovation after all, and reveals some new fissures in the notion that national reform is going to be achievable.
Schwarzeneggers measure drew flack from just about every quarter, a reflection of the states unique political culture and demographics. The Legislatures unusually large single-payer contingent objected to the plans individual mandate, as did some in unions who complained that without better cost controls, premiums could put the squeeze on the unsubsidized middle class. Large business groups didnt like the employer play or pay mandate. Hospitals and doctors balked at new fees, and Republicans hated the idea of a big new tobacco tax.
The death knell for Golden State reform came from two fiscal reports, one detailing the states $14.5 billion budget deficit and the other predicting that revenue for the healthcare plan could be underfunded by anywhere from $300 million to $3 billion per year within five years. The timing of the latter report was especially tough given that it came just as Massachusetts, one of three states to have passed universal coverage, reported a shortfall in funding for its program by as much as $147 million this year.
The project cost overruns reflect the fact that California has more uninsured than any other state6.7 millionmany of whom are low-wage workers employed by small businesses that would be exempt from financing the plan. But other states with lower rates of uninsured and less complex political climates have also stumbled on reform, including Illinois, Pennsylvania and Wisconsin last year.
This year, similar plans have been unveiled in Colorado and New Mexico. Colorados much-anticipated report from a healthcare commission appointed by Gov. Bill Ritter and legislative leaders came out late last month and was promptly shelved by its backers. The $1.2 billion plan included an individual mandate, with subsidies for those who cant afford coverage, along with an expansion of Medicaid. One top legislative leader, a Democrat, scoffed at the mention of an insurance mandate ever becoming law. (Too bad that the commissions other proposals were also consigned to history. It put forth 32 recommendations to trim administrative costs, promote preventive care and chronic-care management, and otherwise improve efficiency in the care-delivery system.)
The reality is that states are now being hammered by budget shortfalls from the economic downturn, and lawmakers from both parties in many states seem to be having second thoughts about the go-it-alone strategy.
Further complicating matters is the fact that the Bush administration has made expanding Medicaid and the State Childrens Health Insurance Programa cornerstone of most state coverage plans, including Californiasall but impossible. Even the minor expansions going forward in states have benefited from past waivers granted by the Bush administration, success that wont be replicated anytime soon.
The common problems in the states where reform has failed are costs and mandates. Washington is going to have to take a long look at these failures. Assuming the next president really wants to tackle healthcare, solving the cost problem has to be Job One. He or she needs to know that you cant force people to pay for something with an open-ended commitment on its cost. All the remaining presidential candidates have made the right statements about controlling healthcare costs, but as anyone who has ever seriously studied that topic knows, achieving that goal makes expanding coverage look like childs play.
Whatever happens next, it looks like it will have to happen in Washington. With each passing day, the task seems more daunting.