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Schwarzenegger Proposes Universal Health Care in California

January 9, 2007 at 4:40 PM EDT

GWEN IFILL: The Census Bureau estimates that almost 47 million people in the country lack health insurance. Yesterday, the governor of the nation’s most populous state proposed a plan to single-handedly cut that number by 14 percent.

Arnold Schwarzenegger’s $12 billion plan would require every Californian to have health insurance, including illegal immigrants.

Joining us to discuss how that plan might work and its implications for the rest of the nation is California’s health and human services secretary, Kim Belshe, and Susan Dentzer, the NewsHour’s health correspondent.

Ms. Belshe, the Los Angeles Times today wrote, in covering this, the governor’s announcement, that this was the most audacious plan of its kind in the country. Give us the nuts and bolts. What’s so audacious about this?

KIM BELSHE, California Health and Human Services Secretary: Well, it is big, it’s bold. To use the L.A. Times’ word, it is audacious. It’s reflective of Governor Schwarzenegger’s commitment to tackle the tough issues, to not shy away from them.

For far too long, the problem of the uninsured, rising health care costs, has resulted in chief executives retreating rather than leading. Yesterday, Governor Schwarzenegger led with a very comprehensive, far-reaching proposal that will fix California’s broken health care system by focusing on prevention and wellness, coverage for all, and affordability.

And in so doing, the governor’s approach will eliminate the hidden tax associated with the shifting of uncompensated costs or unpaid bills from the uninsured to the insured. It will make coverage more affordable. It will cover all Californians, and it will promote a healthier California, which is a very important goal.

GWEN IFILL: You say it eliminates the hidden tax, but does it replace it with new taxes on insurers, on hospitals, even on individuals?

KIM BELSHE: You know, the governor’s plan is not about raising taxes. The governor’s plan is about eliminating this hidden tax associated with unpaid medical bills from the uninsured that are shifted to paying individuals.

Researchers estimate that it contributes 10 percent of all premiums. So for an average family policy, they’re spending $1,200 each year because of this hidden tax.

Governor Schwarzenegger’s approach to fixing California’s health care problems is premised upon everyone playing a part, everyone sharing the responsibility. Taken together, the approach he’s put forward is a budget-neutral approach, and it’s an approach that will result in overall taxes going down rather than going up.

GWEN IFILL: Do employers, however — they’re required to participate in this. Doesn’t that make it a mandate and something that the governor has tried to avoid in the past?

KIM BELSHE: Governor Schwarzenegger has not proposed an employer mandate. He is not dictating to employers what they should or are required to provide in terms of benefits.

You know, in California — and I think in other states, as well — far too many proposals put forward have looked to employers to exclusively bear the burden of health reform. Governor Schwarzenegger’s approach is a different approach.

It’s an approach built upon shared responsibility, beginning with the individual, but also government, in terms of helping coverage become more affordable, health care providers, in terms of providing lower-cost services due to the elimination of this cost shift, health plans, making benefit plans available to all individuals so that they can access affordable coverage.

And employers have a responsibility, as well. Most Californian employers are already offering health coverage. And for them, nothing is going to change, other than health care should become more affordable under the governor’s plan.

But for those employers who do not offer coverage, the governor’s plan does ask them to contribute a fee to help subsidize the cost for uninsured individuals.

But it’s structured in a way to exempt our smallest employers. It’s structured in a way to promote affordability for employers overall. And there are some very significant tax benefits for employers that far exceed the fee that would be required of non-offering employers.

Other state plans

Kim Belshe
California Health and Human Services
The governor's plan is about eliminating this hidden tax associated with unpaid medical bills from the uninsured that are shifted to paying individuals.

GWEN IFILL: Susan Dentzer, even though California is the biggest state in the nation, therefore their plan is going to affect more people than any other state plan of this kind would, California is not the only state trying to tackle this question.

SUSAN DENTZER, NewsHour Health Correspondent: No, by no means, Gwen. And, in fact, the California plan does borrow heavily on a particular plan that was announced last year and enacted last year, which is that of Massachusetts, which had both elements that the California plan has, which is not only an employer-mandate -- we can play with words and call it a fee, what have you, but it is a mandate that employers contribute to coverage, provide coverage for workers, or else pay a 4 percent payroll tax...

GWEN IFILL: Four percent, right.

SUSAN DENTZER: ... 4 percent of their payroll into the fund that will help subsidize coverage for all in California, analogous to a Massachusetts requirement, much lower, that requires employers to pay $295 if they don't offer a meaningful amount of contribution toward health insurance coverage.

Similarly, Massachusetts also had a requirement that individuals have coverage. And the California plan also stipulates that individuals must be covered. And that includes, again, those who are undocumented in California. They have to have coverage under this plan, as do others working for small businesses, large businesses, et cetera.

Obstacles to success

Susan Dentzer
NewsHour with Jim Lehrer
Think about the way health care is financed as being like a big water system under the service of a major city, what goes on is usual spigots get turned on, spigots get turned off, new drainage ditches get dug.

GWEN IFILL: In the states -- Massachusetts, Vermont, Maine, other states who are talking about it -- who have tried to implement some version of this plan, have they encountered any bumps in the road? What have been the biggest burdens? Because, in fact, if this were something that was easy to do, it would have been done a long time ago.

SUSAN DENTZER: Well, they always encounter burden, and all of it always comes down to money. If you think about the way health care is financed as being like a big water system under the service of a major city, what goes on is usual spigots get turned on, spigots get turned off, new drainage ditches get dug.

California is that on steroids, as people are saying, because massive amounts of money need to be rearranged, and in particular, in the case of California, $4 billion of net new federal funding will be necessary to finance the $12 billion annual cost of the plan.

So many states run into bumps, first of all, making sure they get whatever additional federal contributions they want. They run into bumps of getting the employer contributions.

Even Massachusetts, the now-former governor of Massachusetts, Mitt Romney, actually tried to veto or override the portion of the Massachusetts plan that would have required the employer contributions. That veto was eventually overridden.

So there are always forces arrayed against various aspects of these very complicated plans. And already we're seeing that in California, as well.

GWEN IFILL: Ms. Belshe, there has been already some questions raised about Governor Schwarzenegger's plan, especially the part that Susan alluded to, which is the part that would cover illegal residents of the state of California. Some members of the legislature have already called it a non-starter. How do you propose to sell that?

KIM BELSHE: Well, Governor Schwarzenegger has been very clear on this issue, particularly as it relates to children. Governor Schwarzenegger's plan delivers on his long-stated committee to ensure that all Californian children have access to affordable coverage, and his plan delivers on that commitment, as it relates to kids.

In terms of adults, the governor's plan calls for the counties to continue to have the responsibility for providing services to our state's undocumented immigrant population. So that responsibility continues to rest at the local level.

And it will be a decision that our local partners will make, in terms of, what are the appropriate services and supports to facilitate coverage and, frankly, do a better job in terms of keeping undocumented immigrants out of our emergency rooms?

In California, the cost of emergency room care for undocumented immigrants is nearly a billion dollars a year. We are required under federal law -- hospitals are required, I should say -- under federal local law to provide services through emergency rooms, which is appropriate and humane.

But emergency rooms are the least appropriate, most costly setting. And that is a huge tax burden that California taxpayers are experiencing.

So it's a question the counties are going to be grappling with, in terms of, what's the proper approach? The responsibility remains with the counties, and the governor's plan ensures that the counties have sufficient resources for this population.

GWEN IFILL: So this is a tradeoff, in your view. The government, the state government mandates it or requires it. The counties have to execute it. And if they don't execute it, they're paying one way or another?

KIM BELSHE: The guiding principle of Governor Schwarzenegger's proposal -- and I think one of the real lessons potentially for other states -- that distinguishes California from other approaches is this principle of shared responsibility.

This is not a proposal that looks only to government to fix the problem, only to employers, only to any one sector. It is shared responsibility, beginning with the individual, but supported by government, by employers, by health plans and health providers.

Our county partners, our county government partners are a part of that equation. Counties in California have historically had this responsibility related to undocumented immigrants. And under the governor's plan, they will continue to have that responsibility.

State vs. federal programs

Susan Dentzer
NewsHour with Jim Lehrer
I think the thinking is widespread in this town, as is in the case in much of the rest of the country, that the 2008 elections will be waged at least in part over whether there should be universal health coverage, as a major campaign issue.

GWEN IFILL: Susan Dentzer, I wonder whether -- states now are stepping in, in so many ways, where this argument used to be conducted on the federal level. You covered the 1993 health care plan during the Clinton administration. This was part of that; it went nowhere.

Is this something where states figure they've got to pick up the reins?

SUSAN DENTZER: Well, there's no question that the impulse is really now coming from the states. In fact, more than a dozen states have announced or are contemplating some kind of major coverage expansion.

But it's also true that the fire is catching on at the federal level. Senator Ron Wyden of Oregon, a Democrat, recently unveiled a universal coverage plan. There isn't a trade group in Washington, D.C., that represents some kind of health care interest that isn't working on or has already unveiled its own universal or close-to-universal coverage plan.

I think the thinking is widespread in this town, as is in the case in much of the rest of the country, that the 2008 elections will be waged at least in part over whether there should be universal health coverage, as a major campaign issue. So the steam is picking up.

GWEN IFILL: The thinking is widespread, the steam is picking up, but has the reality shifted at all, in terms of, who's going to pay, and who's going to benefit?

SUSAN DENTZER: Well, what has changed, first of all, is the sheer numbers. Forty-seven million gets a lot of people's attention. And also the fact that employer-based coverage has been dropping like a rock.

People of all aspects of the health care system recognize that the country really is in a serious crisis that could get much greater in years ahead. So there's a sense that, unless there are some serious moves made now to either shore up the existing system in some way or put some very meaningful new steps in place to expand coverage, we're really in trouble.

And as Secretary Belshe says, it's not as if the costs aren't been borne for this now. The uninsured of California, 17 percent of premiums paid by the insured population go to care for the uninsured. So the money is being spent now. It's just being spent in the most inefficient way possible. And there's a sense that we really can do a better job of that.