Thursday, December 27, 2007

A November Ballot Initiative Over California Health Reform Would Be The Biggest Thing Ever To Happen In The Debate

With news that California Governor Arnold Schwarzenegger (R) and the Democratic controlled General Assembly have agreed on a health reform proposal we may be on the cusp of a huge referendum on the Democratic version of health care reform.

The next step is for the State Senate to approve the plan. The Assembly approved it earlier this month on a party-line vote with Republicans in opposition. The Democratic-controlled Senate is also likely to approve the bill but that vote will be held at about the time as the state's presidential primary in early February.

Technically, the November ballot initiative would be about approving the new taxes necessary to implement the plan.

All of the Republican presidential candidates oppose this generally Democratic brand of health care reform. You can expect the Republican candidates to be railing against the $14 billion plan that mandates that both individuals and businesses buy health insurance and has lots of tax increases to pay for it.

All of the leading Democratic presidential contenders have proposed a health care reform plan very similar to the already enacted Massachusetts health reform law.

Now, California seems poised to take a very similar health reform program to state voters next November.

If this ballot initiative passes in our largest state next November, it would provide enormous energy for any incoming Democratic president to accomplish the same thing at the federal level.

If a Republican wins the presidency, it would give Democrats in the new Congress a great deal of momentum in their health care dealings with a new Republican president.

If the ballot initiative were to fail in so strong a Democratic state, it would likely scare the Congress far from any similar national program. Just like the failed Clinton health plan of 1993 left Democrats too scared to touch major health care reform for almost fifteen years, a California defeat would have a catastrophic impact. Democratic efforts for their preferred Massachusetts-like style of health care reform would be dead in their tracks and Dems would be forced to take another look at the more incremental market-based proposals offered by Republicans.

A California referendum on health care reform could well be the whole ballgame for Democrats and an enormous opportunity for Republicans to turn the tide in the health care reform battle.

Today, the polls say 65% of the voters support the plan. But in California, these ballot measures often look lopsided in the beginning before opponents spend millions in counter advertising. Given the importance of this vote, every health care stakeholder with something to lose will be pulling out all of the stops and the outcome of the contest, that would fundamentally change how peoples' health care would be paid for and delivered in California, can in no way be predicted this far out.

Plan supporters believe it would cover more than 70% of the state's almost 7 million uninsured.

Under the California health reform bill:
  • Those with under 250% of the federal poverty level would get state subsidies for coverage while those up to 400% of the poverty level would get tax credits aimed at keeping their health insurance premiums below 5.5% of their incomes.
  • While there is an individual mandate to buy coverage, residents are exempt if they are required to spend more than 5% of their income to buy a basic policy.
  • There would be an employer mandate to "pay or play" by requiring those who do not cover their employees to pay a tax.
  • Insurers would be prohibited from denying coverage to residents because of pre-existing medical conditions.
  • Insurers would be required to spend at least 85% of their premiums on medical care--the leading for-profit health plans currently spend about 82% on medical care.
  • To fund the program new taxes would be created thereby requiring voters to approve the plan in a November referendum. These taxes would include an increase of between $1.50 and $2 over the current $.87 per pack cigarette tax, a 4% tax on hospital revenues, and the employer mandate that would require any employer not providing coverage to pay a tax of between 1% and 6.5% based on the size of the business. The program would also count on $4.5 billion in federal matching funds. Proponents say the program is revenue neutral--it will pay for itself.
This outline is very similar to the health care plans offered by the leading Democrats; Clinton, Edwards, and Obama and the already enacted Massachusetts health plan.

The California health reform plan also looks like everything the Republican candidates say they are against--mandated coverage, more taxes, and bigger government.

But if the California Senate approves this and sends it on to voters next November, we are going to have an unavoidable showdown on health care policy right at the time of the national election.

The outcome of the California vote on health care reform would have enormous life and death policy implications.
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