GWEN IFILL: Now: how health care reform is playing out in the states.
Last night, we looked at how the newly-elected Republican governor and legislators in Wisconsin are working to turn back the new federal law.
Tonight: the other side of that coin. NewsHour correspondent Spencer Michels reports on California's efforts to move ahead.
SPENCER MICHELS: In California, where one out of every four families has no health insurance and the economy is in terrible shape, political leaders here have made implementing federal health care reform a major priority.
California's Democratically-controlled legislature and its outgoing Republican governor have joined forces to push ahead quickly on the state level.
Kim Belshe, secretary of health and human services for Governor Arnold Schwarzenegger, has been in charge of making the new law work.
KIM BELSHE, California Secretary of Health and Human Services: When it comes to health reform implementation, some states have hit the pause button. Some states are actually taking a step back and reconsidering. Under Governor Schwarzenegger's leadership, we really have been leaning forward and moving forward.
SPENCER MICHELS: And it's a direction that incoming Democratic Governor Jerry Brown has vowed to continue.
For the Bay Area family of 2-year-old Violet McManus (ph), federal health care reforms are already making a difference.
MAN: Where's his nose? Where's your nose? Where are your ears? Where are your ears?
SPENCER MICHELS: Violet was born with a genetic disease called epilepsy with mental retardation, and she suffers frequent seizures. Caring for her is expensive. Before the new law, her health insurance policy had a $6 million lifetime cap.
JULIE WALTERS, Mother of Violet: Which we thought was this huge amount of money. And then we realized -- we started getting bills, and it was like $250,000, you know, $100,000. And we were -- that just seemed crazy. By the time she's 4 or 5, she's going to hit her lifetime limit.
SPENCER MICHELS: As of September, the health care reform law did away with those limits, and Violet's bills will be paid as long as she remains on her family's policy.
JULIE WALTERS: She's not going to, you know, die because we can't afford the medicine. So, it's huge. It means her life.
SPENCER MICHELS: Another provision of the federal law which is already in effect bars insurance companies from denying children coverage because of preexisting conditions.
California takes that idea a step further, says Anthony Wright, a consumer advocate.
ANTHONY WRIGHT, Health Access: When the federal law said, you have to take children with preexisting conditions, and some insurers decided, well, then, we're not going to cover children, period, you know, California came up and said, well, if you don't cover children, then you're not going to be allowed to sell insurance, period, for -- for over five years. And that -- that's going to bring insurers back into the market.
SPENCER MICHELS: And for adults with preexisting conditions, California is getting the jump on the federal law by providing access to coverage four years before the national law kicks in.
Moving ahead of most other states, California is already setting up a health benefit exchange, where consumers and small businesses can shop for affordable health insurance among competing insurance companies starting in 2014.
KIM BELSHE: In California, we are the first state in the nation that has established a law to create a health benefit exchange under the new federal rules.
SPENCER MICHELS: Although enactment of the law was bipartisan, some critics of reform, like John Graham at the conservative think tank Pacific Research Institute, worry the exchange will be politicized and will actually limit consumer choice.
JOHN GRAHAM, Pacific Research Institute: What it does is, it allows the legislature to appoint five political appointees onto a board that will decide what health plan you can get. And that really dramatically reduces choice.
SPENCER MICHELS: But people applying for government-paid health care may be the most affected by California's efforts to implement reform.
WOMAN: In order for you to be eligible to Medi-Cal, these are some of the requirements.
SPENCER MICHELS: A major expansion of Medicaid, which provides health care for low-income citizens, is the key to decreasing the ranks of the uninsured.
The state recently received $10 billion from the federal government in the form of a waiver to begin that expansion, which is expected to add three million to four million people to the state's Medicaid rolls by 2014.
In areas like California's Central Valley, where agriculture is the dominant industry and unemployment hovers around 15 percent, Medicaid expansion could have a huge impact. It could mean an increased load for community health centers like Clinica Sierra Vista in Fresno, which treat Medicaid and uninsured patients, many of whom private doctors reject.
Stephen Schilling, its director, sees the changes as a mixed blessing.
STEPHEN SCHILLING, director, Clinica Sierra Vista: I'm certainly concerned about our ability to meet an increased demand. We're already pretty well slammed with patients all the time. But I'm very excited about health care reform.
SPENCER MICHELS: One reason he's excited is that federally funded health centers like Clinica Sierra Vista will receive additional money under the new law to expand his medical resident program and to attract more doctors to work in the Central Valley.
STEPHEN SCHILLING: Clearly, in the health reform law, there's going to be a rearranging of where money flows. That will allow me to bring more clinicians into this facility, or build more of these facilities, or pay these people better, so that we can encourage young people to enter into primary care.
SPENCER MICHELS: But Dr. Juan Carlos Ruvalcaba says the clinic's primary care doctors can only take care of patients' basic medical needs.
DR. JUAN CARLOS RUVALCABA, Clinica Sierra Vista: When we get into problems is when we need to refer out people out to specialists to do further exams, MRIs, CAT scans. That's when the trouble comes.
SPENCER MICHELS: The trouble is, many of those providers won't work for what Medicaid or Medi-Cal, as it's called in California, pays.
And that includes Linda Halderman, a doctor from Fresno.
DR. LINDA HALDERMAN (R-Calif.), State Assemblywoman: My practice was caring for women with breast cancer. I'm a surgeon. And that practice in the Central Valley wasn't sustainable. And the reason it wasn't sustainable is because Medi-Cal, which covered almost 90 percent of my patients, doesn't actually cover as -- pay as much as the cost of caring for them.
So, it would have been cheaper to close my doors. And, eventually, that's what happened.
SPENCER MICHELS: Halderman, a Republican, left her medical practice for politics. She was recently elected to the state assembly. She's convinced that health reform's promise to increase payments to providers under Medi-Cal will never take place.
DR. LINDA HALDERMAN: California will either be forced to cut services, or it will do what traditionally it has done, which is to further cut the reimbursement rates to hospitals and to doctors who accept Medi-Cal currently.
SPENCER MICHELS: The new health care reform law is not popular with the people who run Fresno's largest community medical center. Under the new law, they will lose special money they now receive from the federal government because they have such a large indigent population.
This is one of the busiest trauma centers in the state and serves a population in a huge swathe in the center of California. Most of its patients are poor. Without insurance, they use the emergency room as their primary care provider.
Emilio Inocensio (ph), an out-of-work machinist who hurt his leg playing an interactive video game, couldn't get Medicaid.
EMILIO INOCENSIO, California: Can't get it because I'm over 21 with no children.
SPENCER MICHELS: By 2014, he probably will be eligible. But, in the meantime, he showed up here at what's called a safety net hospital, which receives special payments from the federal government for treating uninsured patients.
But, under the health care reform law, such payments will be phased out. The idea is that hospitals will make up the difference since more patients will be insured. But administrators complain that such cuts could put them out of business.
They have made their concerns known to Fresno's congressman, Democrat Jim Costa, who is trying to help. Costa just survived a tough reelection race, where his vote for health care reform cost him some support.
So, today, he is walking a fine line, defending parts of it, while promising changes.
REP. JIM COSTA (D-Calif.): There are a lot of elements of this law that is going to be implemented over the next two, four and six years, and current -- and there will be changes, undoubtedly. There will be changes with the Republican Congress. There will be changes with -- as we try to see what's working and what's not working.
SPENCER MICHELS: Consumer advocate Anthony Wright argues that California has to make reform work, especially now.
ANTHONY WRIGHT: You know, we have a budget crisis that is -- that is potentially forcing additional cuts to our -- to our health care system and our safety net.
SPENCER MICHELS: While debate and analysis of the law continues, California officials say, to comply with its requirements by 2014 in a state this big, they have to move now.