Health Care Restructuring Killed : Legislature: Modeled on Canadian system, plan called for state to administer money now paid to insurers and doctors.

The state Senate on Thursday rejected legislation to restructure California’s health care system by replacing more than $50 billion a year that residents now pay to insurance companies and doctors with taxes used to provide medical care for everyone.

The plan, modeled after the Canadian health care system, was designed to control the growth in medical costs by forcing doctors and hospitals to negotiate with a state commission that would set their fees annually.

Advocates for the system said it also would streamline health care administration by eliminating insurance company paperwork, oversight and marketing and substituting a “single payer”--the government--for all medical services.

The legislation, sponsored by a coalition of consumer, labor, religious and retiree groups, was fiercely opposed by the insurance industry and organized medicine. Those interests contended that the plan would lead to rationing of health care and long delays for patients in need of treatment.

The bill failed on a vote of 22 to 15 and was considered unlikely to be revived, at least in its present form. It needed 27 votes for passage. All but one of the votes in favor of the measure were from Democrats; the other was cast by an independent.

“This is a proud plan in which all of us will pay in and all of us will receive the benefits,” the bill’s author, Democratic Sen. Nicholas C. Petris of Oakland, said before the vote.

The program, as outlined by Petris, would have been funded largely by a 10% payroll tax on businesses and a 1.5% tax on income that exceeds 250% of the poverty level. A couple with two children and an adjusted income of $50,000 a year would pay about $250 annually.

The plan also called for patients to make co-payments on a sliding scale, depending on their income and the type of health plan they enrolled in. The maximum co-payment would be $500 a year for families who wanted the freedom to choose any doctor. Families enrolling in prepaid plans, with more limited choices, would pay a maximum of $250 a year.

In exchange, most of the current premiums paid by businesses and individuals, along with state subsidies to the poor through Medi-Cal and county health programs, would be eliminated. People still would have been free to buy private insurance to cover services, such as dental care, not included in the basic package.

Petris said the fundamental restructuring is necessary because California’s health care system costs too much and fails to provide for 6 million people. He said he hoped adoption of universal health care in California would be followed by similar action at the federal level.

Petris noted that in Canada, which has had a government-run health care system for many years, medical care costs less, everyone is covered and life expectancies are longer.

Critics of the measure cited anecdotes from Canada and Great Britain to argue that systems there stifle the freedom of choice they said Americans cherish.

Republican Sen. Don Rogers of Bakersfield said Canadian doctors have an annual income limit. Once that cap is reached, he said, they have no incentive to care for additional patients.

“Why should they?” he asked. He suggested that the proposal was the first step toward “socialized medicine.”

“This ain’t socialized medicine,” Petris said. “The only role of the state here is to collect the taxes that are paid and pay the bills as they come in.”

Despite rejection of the Petris bill, several health insurance measures remain alive in the Legislature.

One is a proposal by the California Medical Assn. to require every business to provide insurance for its workers. The group is also circulating petitions to place its measure on the November ballot should the Legislature reject it.

Assemblyman Burt Margolin (D-Los Angeles), chairman of the Assembly Insurance Committee, has proposed a “play or pay” system that would require businesses to provide insurance or pay a tax to help finance care for those who have no private coverage.

There also are a number of bills designed to force insurance companies to provide coverage to any business that seeks it, regardless of the health histories of the company’s employees. The measures also would regulate insurance rates so that similar businesses would have to be charged similar premiums.