Senate Panel Rejects California?s Universal Healthcare Plan

The California Senate’s Finance Committee yesterday overwhelming rejected a $14 billion health care reform plan less than a week after the Legislative Analyst Office there warned the governor and other supporters that a new system could cost significantly more than anticipated.

Meanwhile, Senate President pro Tem Don Perata informed Governor Arnold Schwarzenegger in a letter yesterday that he no longer supports the proposal they helped develop along with House Speaker Fabian Nunez because the plan will “grow faster than the revenues chosen to pay for it.”

“We have the fiduciary responsibility to approve a health care coverage plan that is both self financing and fiscally sound and a moral responsibility to protect from harm those who already have health care coverage,” Perata wrote. The Finance Committee voted 7-1 against the plan.

Perata’s new stance could kill any chance that the Senate will approve the measure, keeping it from going to voters in November for a decision on how health care coverage for the state’s uninsured would have been funded. Schwarzenegger told the San Francisco Chronicle yesterday that he will do everything he can to keep the measure alive.

California’s health care reform efforts are considered an indicator of the direction other states and possibly the country could take on the issue. Perata asked the Legislative Analyst Office to analyze the fiscal soundness of the plan last month after the House Assembly approved the measure.

Last week Legislative Analyst Elizabeth Hill said proponents of the plan may have underestimated the cost to provide coverage to the state’s uninsured, in part, by overestimating the amount of revenue it will receive in federal funds and a tobacco tax. “The reform plan relies, in part, on $4.4 billion in federal matching funds,” according to the report. “Our review finds that a total of about $1.1 billion in federal matching funds assumed by the reform plan are at risk.” 

The measure seeks to insure most Californians by having employers provide coverage for their workers or pay a fee to the state to do so. It also assesses fees on state hospitals and increases the tobacco tax. 

The LAO evaluated the plan under two models calling for either a $250 or a $300 per month premium for an individual policy, said Sean Martin, the LAO’s director of the health. Under the $250 premium scenario, there are sufficient revenues to support the program in the first year of operation in 2010-2011, he said. Although annual costs exceed revenues by $300 million by the fifth year, the program still had a positive cumulative fund balance because the collection of tobacco tax and employer fees start before program costs are incurred.

However, under the $300 premium scenario, costs exceed revenues by $122 million in the first year of operation and the shortfall rose to $1.5 billion by the fifth year. In addition, the early collection of the tobacco tax and employer fees was not enough to offset a fund balance deficit of almost $4 billion by the end of that period, the report said. Martin said the office used the larger premium model because it may be difficult to purchase a policy for a $250 premium. 

Nunez challenged the State Senate to propose workable solutions to providing healthcare in California. “I would challenge the members of the Senate to come up with a plan that’s doable, that can withstand the same type of scrutiny that (proposals have been) put through in this committee, the same kind of analysis by the Legislative Analyst, and that is going to respond to the needs of those poor families who have absolutely no health care today,” Nunez said at the hearing.