Healthy Plan, but Expanding Waistline

Debra J. Saunders

7/9/2007 12:01:00 AM - Debra J. Saunders

If Gov. Arnold Schwarzenegger manages to get his universal health care package past the California Legislature, he will become a real action hero for the 4.8 million Californians who lack health care at any given moment, as well as insured residents who live in fear of losing both their jobs and their health plans.

He would be a superhero if he found an honest way to pay for it. State Health and Human Services Secretary Kim Belshe noted that Schwarzenegger believes "the opportunity is this year."

There is much to like in the governor's package. Plan Schwarzenegger calls for "shared responsibility" and "shared benefit:" It would not only provide access to health care to all Californians, but also require that all Californians sign onto a health care plan.

Under this plan, the state would provide health care for poor children and free care for adults whose income falls below the federal poverty level through Medi-Cal. Those with incomes of up to 250 percent of the poverty level will be eligible for subsidized coverage through a state-run insurance pool. Adults who earn more than that would have to buy private coverage.

Plan Schwarzenegger would encourage employers to provide health coverage through private HMOs and insurers. Those employers with 10 employees or more who don't provide health care for their workers would have to pay a 4 percent payroll tax (officially it's an "in-lieu fee") into a state health-care insurance fund.

Many critics fear that 4 percent is too low because it is less than what employers pay in premiums today -- and that, in order to save money, some employers might leave their private insurance plans and switch to the state pool. In June, the Assembly passed a measure, authored by Speaker Fabian Nunez, which would require all employers pay 7.5 percent payroll tax, but would not require all self-employed or uninsured Californians, who can afford to buy their own coverage, to do so.

The most revolutionary idea is Schwarzenegger's proposal to make the state reimburse health care providers the full cost of Medi-Cal services. For decades, states and the federal government have paid for their big promises by forcing doctors and hospitals to treat government-plan patients at a loss -- a cost that is passed on to private plans.

While many have argued that cost-shifting to fund the uninsured drives up the cost of private care, the California Chamber of Commerce's think tank recently found that low reimbursement rates from Medicare and Medi-Cal force health care providers to shift costs to private plans -- to the tune of 10.8 percent of private premiums, as opposed to 1.4 percent to pay for the uninsured.

Parts of Team Arnold's plan are downright fatuous. Take the promise to cut costs by reducing paperwork. Surely if paperless processing would save money, the greedy and evil -- or if you are a Republican, savvy -- health-care providers would have done so by now.

The governor's office estimates that some 1 million workers -- about a quarter of uninsured Californians -- are undocumented. Plan Schwarzenegger expects 40,000 of them to be covered by their employers, 160,000 to buy their own coverage and the rest to enroll in county-run plans. I still worry about a magnet effect that would draw illegal immigrants and out-of-staters to our sunny clime. I am told Schwarzenegger will negotiate a residency requirement with the Legislature.

Meanwhile, Sacramento seems to have decided not to let immigration issues stop the California dream of universal coverage. Sacramento also seems resolved to find the worst way to pay for it.

Schwarzenegger opposes any general tax increase. In addition, GOP lawmakers will not vote for any tax increase, which requires a two-thirds vote of the Legislature. "I let their 'no' votes on health care reform speak for themselves," Nunez spokesman Richard Stapler commented.

Thus, Schwarzenegger proposes paying for his plan with fees. In addition to the employer in-lieu fee, the governor proposes a 4 percent tax on hospital revenues and 2 percent tax on doctors' revenues. Ah, cost-shifting again.

The state continues to spend more than it takes in every year, yet somehow Schwarzenegger and the Democratic Legislature are going to provide universal health care without asking all Californians to pay for it.

The right thing to do, because GOP members are irrelevant, would be for Democratic leaders and the governor to agree on a bill that raises gasoline or sales taxes to pay for this plan. Then all Californians (even those in the underground economy) would pay for universal care, and have a stake in the new program.

California should have a new motto: If it is worth having, it is worth paying for. Not: We always want more something for nothing.