More on the debate…

Monday, December 17, 2007


* Agreement between Governor Schwarzenegger and Speaker Nunez passes first hurdle
* Proposal would extend health coverage to nearly 4 of 5 million uninsured Californians.
* Would be largest expansion of coverage since the creation of Medicaid and Medicare.
* Latest amendments include tax subsidies for families earning up to $82,600 (family of four) to help buy coverage, and for early retirees not yet eligible for Medicare.

New on the Health Access WeBlog: More on the Assembly vote and reaction; Sen. Perata’s LAO request; Analogies; More on the content on AB x1 1. Budget blues.

The California state Assembly Monday, on a 46-31 party line vote, approved an historic expansion of health care, which could ultimately provide health coverage to more than 95 percent of California residents.

“California is taking a giant step forward,’’ said Gov. Arnold Schwarzenegger, calling the Assembly’s passage of AB x1 1 “courageous.” Schwarzenegger spoke at a news conference flanked by Assembly Speaker Fabian Nunez and a phalanx of Democratic Assembly lawmakers. Also present were “groups who normally are opposed to one another” — representatives from a broad range of health care interests: from small businesses, large businesses, physicians, labor unions, consumer groups, community of color organizations, hospitals and insurance companies.

AB x1 1 (Nunez/Perata) is the latest measure of nearly a half a dozen comprehensive health reform measures introduced in Schwarzenegger’s so-called “Year of Health Reform.’’

Schwarzenegger, over the past five years has vetoed or opposed major coverage expansions, including children’s coverage, single-payer universal coverage and an employer mandate. However, this year, Schwarzenegger and legislative leaders volleyed bills back and forth all aimed at reducing the ranks of uninsured in California , numbering up to 5.1 million continuously without coverage. Nearly one year after Senate Leader Don Perata and Nunez introduced separate health reform packages, legislative leaders and the governor have agreed on a package in AB x1 1.

WHAT’S IN THE BILL: In a nutshell, ABx1 1 does the following:

For individuals:
* Expands public programs to all children below 300% of poverty ($62,000 for a family of four) and their parents.
* Expands coverage to parents and adults without children at home to 250% of poverty ($25,525 for an individual; $34,225 for a couple).
* Increases the reimbursement for providers who care for Medi-Cal patients.
* Extends tax credits to families between 250% and 400% of poverty (up to $82,000 for a family of four), so that the cost of coverage does not exceed 5.5% of income.
* Extends tax credits to early retirees with higher incomes could also receive tax credits, as adults between ages 50 and 64 have the highest health care premiums because of their age and health status.
* Allows every Californian to purchase health coverage without being denied because of “pre-existing’’ conditions.
* Requires every Californian to have health coverage, unless by appeal to the state, they can show that the cost of health coverage would pose a financial hardship.

For employers:
* Requires businesses to spend between 1% and 6.5% of payroll on health coverage for workers.
* Requires businesses to set up Section 125 cafeteria plans, which enable employees to use pre-tax dollars to pay for premiums.
* Creates a statewide purchasing pool that they can pay into (rather than buy separate coverage), allowing the state to negotiate large group rates for their employees.

In the health care industry:
* Imposes new rules on insurers, requiring them to provide coverage to all Californians, regardless of pre-existing conditions.
* Requires health plans to dedicate 85 cents of ever premium dollar toward patient health services.
* Requires strategies to rein in health care costs, including disclosure of cost and quality information by providers, bulk purchasing of prescription drugs, preventive care and chronic disease maintenance, electronic health records and the creation of a public insurer to compete with private health plans.

ABx1 1 would not take effect until an accompanying ballot measure is passed by voters in November 2008. That measure would contain many of the measures that would pay for the $14 billion program – including:
* 4% hospital provider fee, that would bring in federal matching funds
* Employer contribution of between 1% to 6.5% of payroll
* Tobacco tax of between $1.50 and $2 per pack.
* Counties share of caring for medically indigent.

To read a more detailed analysis, click here.

ABx1 1 was heard in Assembly Appropriations committee before being voted on by the full house.


Those supporting the measure in Appropriations Committee was the Service Employees International Union (SEIU), 100% Campaign of children’s groups, AARP, Kaiser Permanente, the American Cancer Society, Health Net, Blue Shield, American Federation of State, County and Municipal Employees (AFSCME), and Carpenters Union.

Other consumer and community groups appeared at a press conference with the Governor and the Speaker at the end of the day. (Click here to read Health Access’ “support if amended” letter on ABx1 1).

Taking no position on the measure was the California Labor Federation, which said it did not have time to adequately analyze and weigh the bill and was reluctant to take a position on the measure without seeing ballot initiative language. They emphasized that they were not opposed, as had been reported. California Federation of Teachers and the State Building Construction Trades echoed those concerns.

Opposition that testified in committee included the California Nurses Association, a representative of the UFCW and Teamsters unions, a representative of the CA School Employees Association, the National Federation of Independent Businesses (NFIB), and Blue Cross of California, the state’s largest insurer and longtime opponent of reform this year.

COMMITTEE DEBATE: With recent news about a $14 billion project deficit for the fiscal year, many lawmakers questioned whether this was the right time to pass such an expansive reform.

To such inquiries, Nunez and the Department of Finance both said the bill was “revenue neutral,’’ meaning that while the entire program would cost approximately $14.4 billion, it would bring with it its own sources of money (seven of them) from employers, workers, the federal government, tobacco taxes, hospitals, counties and state savings totaling $14.56 billion, which would cover the costs of the program.

Republican Assemblywoman Mimi Walters asked Nunez and the Department of Finance whether they were certain financial projections would come through. AB x1 1 relies on $4.5 billion in federal dollars in addition to other revenue sources. Department of Finance staffer Tom Sheehy said one provision in ABx1 1 would not be implemented unless the Director of Finance declared that money to pay for the program was in hand and in state coffers.

Assemblyman Mark Leno, Democrat chairman of the Appropriations committee, followed up with questions about whether the program could be turned off if money did not come in as expected. Nunez’ staff responded that ballot initiative would contain provisions to assure that insufficient funds would trigger a series of events to pull back the program, including the individual mandate and the market reforms. It would first allow the governor and legislature to fix any fiscal imbalances. If lawmakers and the governor did not act, then the pieces of the legislation would be repealed, including the public program expansions and tax credits, returning the state to the status quo.

Nunez also emphasized that ABx1 1 could be amended by future legislatures on a majority vote should unintended consequences arise, or more direction or clarification is needed for the state board that would be in charge of implementing the program.

Democrat Assemblyman Jose Solorio said he was worried about consumers who would be required to buy coverage, but unable to afford it. Nearly 90 percent of uninsured Californians earn less than 400% of poverty, according to the California Health Interview Survey. Nunez assured him that the vast majority of the Californians who would be newly mandated to have coverage under his plan would be receiving state subsidies (as tax credits) or enrolled in public programs, which have low premiums and cost sharing. Additionally, families will be able to ask for an exemption from coverage if it would create a financial hardship.

Republican Assemblyman Doug LaMalfa asked how many undocumented immigrants would benefit from this plan. In this plan, all children – regardless of immigration status – would receive coverage. But workers whose employers paid into the system would receive benefits, said Nunez, who said he didn’t want the state program to become an arm of the federal government’s immigration department.

Assemblyman Ted Lieu explained why he needed to vote for ABx1 1. “The relevant question is, ‘Does this bill do better than the status quo?’ The status quo is not working for millions and millions of people.” The status quo, for one of Lieu’s constituents, means a slow death from cancer. Linda, Lieu’s constituent, works, but does not receive health care through work. Her daughter, at age 18, cannot buy health care because of a prior heart condition. And now the constituent, herself, has been diagnosed with cancer. “What is horrific is that in one of the most advanced civilizations, we let people like Linda waste away. At the end of the day, this bill is going to save lives. For people like Linda, I look forward to going to her and saying, ‘Help is on the way.’’

Leno, from San Francisco, remarked that he would prefer a single-payer universal health care system, as has been introduced and passed nearly every year for the past five years in SB840 (Kuehl). The governor, however, vetoed that bill last year, and has promised to do the same if it reached his desk again. “My internal debate is, knowing that the governor is not going to sign a single payer bill, should we sit on our hands and say, ‘we tried?’ when we have stories of people in our districts suffering on a daily basis? Do we wait for the perfect? Or do we do something in the meantime. We will have the opportunity to make fixes in the years to come,’’ said Leno whose committee passed the bill on a party line vote.

FLOOR DEBATE: Debate on the Assembly floor echoed debates of the past year. Republicans continued to question why their proposals for Health Savings Accounts were not a proper mechanism for reform (even though they promote high-deductible plans and underinsurance) and conjured up the image of health care rationing in countries with single-payer systems–which AB x1 1 is not. Democratic legislators made the case for action immediately. More on the floor debate will be posted on the Health Access WeBlog.

PROCESS: The Legislature could not fully pass the financing elements of ABx1 1 because Republicans in the Legislature have – for most the past decade – signed a pact against “increasing taxes.’’ They view the hospital fee and employer contribution as taxes, as well as the tobacco tax. Because of that constraint, supporters of this measure will have to collect signatures and put the financing of this proposal on the ballot.

In order to have enough time to collect signatures by June for the November ballot, such a ballot measure, as a companion to ABx1 1, would need to be submitted to the Attorney General’s office in the next few weeks.

For a read of this year’s health care debates, visit

Health Access California promotes quality, affordable health care for all Californians.
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