California Gov. Schwarzenegger, State Assembly Speaker Reach Compromise on Health System Overhaul

California Gov. Arnold Schwarzenegger (R) and state Assembly Speaker Fabian Núñez (D) have reached a tentative agreement on a $14 billion plan to overhaul California's health care system, officials said on Friday, the Los Angeles Times reports. Daniel Zingale, a senior adviser to Schwarzenegger, said the leaders "have agreed on the framework of health care reform that will go before voters" in November 2008. Under the compromise plan, nearly all residents would be required to obtain health care coverage.

Residents with incomes up to 250% of the federal poverty level would receive state subsidies for coverage, and residents with incomes up to 400% of the poverty level would be able to fully deduct any health care premium costs that exceed 5.5% of their incomes. In addition, residents who retire before they qualify for Medicare at age 65 would receive tax credits to prevent them from spending more than 10% of their savings on health insurance (Rau, Los Angeles Times, 12/15). Low-income residents would be exempt from the coverage mandate if they would be required to spend more than 5% of their income on minimal coverage and do not qualify for public programs.

The plan also would extend coverage to children in families with incomes up to 300% of the poverty level, regardless of immigration status (Kurtzman, AP/Ventura County Star, 12/15). In addition, insurers would be prohibited from denying coverage to residents because of pre-existing medical conditions and would have to spend at least 85% of premiums on medical care. The state Assembly is scheduled to vote on the bill on Monday (Los Angeles Times, 12/17).

Ballot Measure
Schwarzenegger and Núñez also revised how much employers would be required to pay toward health coverage. Under a new sliding scale, businesses with payrolls up to $250,000 would contribute 1% of payroll toward coverage; those with payrolls from $250,000 to $1 million would contribute 4% toward coverage; those with payrolls from $1 million to $15 million would contribute 6%; and those with payrolls greater than $15 million would contribute 6.5% (Zapler, San Jose Mercury News, 12/15).

In addition, Schwarzenegger has agreed to Núñez's proposal to partially finance a health care system overhaul by increasing the state's tobacco tax. The governor had proposed leasing California's lottery instead. Núñez supports a $2 tobacco tax increase, while Schwarzenegger favors a $1.50 increase. Senate President Pro Tempore Don Perata (D) said a proposed tobacco tax increase is "flawed only because big tobacco has a huge amount of money" to spend on defeating the measure (Rojas, Sacramento Bee, 12/15). Tobacco companies spent more than $60 million last year to help defeat a proposed tobacco tax increase on the ballot (Ainsworth, San Diego Union-Tribune, 12/15).

The plan also would be funded through a 4% tax on hospital revenue in an effort to secure matching federal funds and boost reimbursements for services (San Jose Mercury News, 12/16). In addition, the plan expects about $5 billion in new federal funding, mostly for Medi-Cal, the state's Medicaid program (Chorneau, San Francisco Chronicle, 12/15).

The legislation does not contain the taxes or other measures that would provide the $14 billion in funding needed for the overhaul. Those revenue provisions would go before the voters on the November 2008 ballot, and the bill would not take effect unless state residents approve that measure (Los Angeles Times, 12/15).

Financing
Núñez said that an overhaul bill must be approved by the Democratic-controlled Legislature and signed by Schwarzenegger by Friday to secure enough time to qualify a financing measure for the November 2008 ballot. Perata, however, told Democratic lawmakers earlier this month that they would not have to return to the Capitol until next year. Núñez said it is "possible to get something on the ballot before November without doing it this week" (Rojas, Sacramento Bee, 12/17). Perata said he believes lawmakers should not vote on a health care plan until the state determines how much funding will be cut from health programs such as Medi-Cal, the state's Medicaid program, to help reduce a projected $14 billion state budget shortfall (San Jose Mercury News, 12/16).

Schwarzenegger acknowledged that state spending will be cut "across the board," including from Medi-Cal's budget, but noted that the health care plan would boost Medi-Cal funding (San Francisco Chronicle, 12/15). The governor also argued that the plan would not require money from the general fund and would prevent some budget cuts (Los Angeles Times, 12/15).