Schwarzenegger is Right––You Can't Achieve Universal Coverage on the Backs of the Employer Community Alone

The California legislature has passed a major health care reform proposal but Republican Governor Schwarzenegger says it isn't good enough and he will veto it and bring the legislature back to do it over again in a special session.

Give the California governor and legislature credit for hitting the problem of health care head-on. If the biggest state can make headway, it could well open up the health care reform logjam for everyone and change the dynamics of this debate.

The proposals by both the California governor and the legislature have serious problems--most notably they are creating a system that is still going to be unaffordable.

But just maybe the only way we are finally going to deal with costs is to shove ourselves into an unsustainable system that later forces everyone's hand on the issue of affordability. Not statesmanship but perhaps the only way we can make progress (see earlier post below).

Governor Schwarzenegger says he is going to veto the Democratic led assembly health care bill because it places a big part of the cost burden on California's employers (with a 7.5% payroll tax for those who don't offer coverage) and because it does not contain an individual mandate.

Good for him.

While I don't necessarily agree that the governor needs an individual mandate for his program to work (see post below), the legislature is taking the easy way out and making doctors and hospitals happy by relieving them of any share of the cost they might have. I can't say that I have been proud of my doc and hospital friends in California over this one. Schwarzenegger made a very reasonable proposal for paying for a health reform plan by spreading the funding burden over the broader health care economy. The docs and hospital execs made an incredibly shortsighted decision to oppose that leading to the Democratic bill.

Apparently, in the past few days the hospitals have said they will agree to a hospital contribution and that will be helpful in future negotiations between the legislature and the governor.

The docs and the hospitals only have to pass their share onto the broader payer community in a rational and more affordable way. Instead, they lobbied to force the cost burden onto the employer. Most employers who don't offer health insurance don't do it because they are bad guys, the don't offer because they can't afford it. Too often these are start-up businesses working on a shoe string. It is just dumb economic policy to shift so many social welfare costs onto the one segment of the economy we count on for new jobs and economic growth.

And, just how was it we came to the conclusion that the employer community has the social responsibility for fixing America's health care problems?

The legislature also appears to have caved in to organized labor. Labor doesn't want health care to ever look like an individual responsibility because that would undermine so many of the benefit gains they have made--they want it to stay in the employer space. That may be understandable but it is shortsighted economic policy.

When corporate America is overburdened by health care costs we get something that looks like the "Big Three" automakers--companies that can't compete in the world economy. That leads to job loss and eventually, as we are seeing in Detroit today, negotiations to push the health care costs back onto the workers. Labor would be far better off seeing America's health care costs spread more broadly than the employer community.

The good news is that the California legislature and the governor have agreed on just about all of the other key elements of a health care bill.

Let's hope that Californian physicians, hospitals, and labor do their share to step-up and work with a California governor intent on doing something of great significance!

Why an individual mandate can't be enforced in California:
California Health Care Reform—An Individual Mandate is Nowhere Near as Important as Affordable Health Insurance

Both California health care plans on the table will only deal with access and not cost: Deja Vu in Massachusetts--We've Been Down this Road Before--The Massachusetts Health Care Plan and Health Care Costs

But dealing with access first and affordability second may be the only practical way to do health care reform: The “Realistic” Way to Do Health Care Reform