California Health Reform Effort Fails--What Does It Mean?

With news that a California State Senate committee rejected Governor Schwarzenegger's plan by a vote of 7-1, efforts to achieve health care reform this year have all but ended in our biggest state.

Governor Schwarzenegger and Assembly Speaker Nunez almost accomplished the impossible with a complexly balanced compromise that would have gone a long way toward solving that state's uninsured problem.

But the bottom line problem was cost. A late to the party cost estimate found that the bill would not have been self-supporting even with all of the new tax and revenue opportunities. Facing a $14 billion budget deficit in California, legislators ran, not walked, to the exits.

The Governor and Speaker say they aren't going to give up but in fact it is over.

If the bill had passed the state legislature, it would have meant a state-wide ballot measure in November and a major referendum on the kind of health care reform plan the Democratic nominee for President would have been pushing. That would have been a critical vote on health care reform for the whole country--and fun to watch.

But in the end, cost killed what was almost entirely an access proposal.

In my mind there are two messages here:

1. Health care reform that focuses on cost and sidesteps dealing with fundamentally managing cost ultimately shows itself to be a non-starter.
2. Only the federal government has the tools necessary to accomplish real reform--the tax code and the ability to manage costs.

Many will say that what has happened in Massachusetts will prove my conclusions wrong. I believe that what will happen in Massachusetts will prove those conclusions right.