Battle Over Health Care Reform Shifts to State : Insurance: AARP and two labor unions pledge extensive support for Prop. 186. The measure would create a single-payer medical system.

The battle to enact health care reform began shifting to California on Thursday as the American Assn. of Retired Persons and two major labor unions promised extensive volunteer and financial backing for Proposition 186, which would create a single-payer medical system in the state.

A “decisive vote” for a government-operated health program in California “will provide an irreversible boost to eventual national health care reform,” Mary Kay Henry, health care division director for the Service Employees International Union, told a news conference.

The increased attention to the California ballot initiative suggests that reform advocates have all but given up on passing significant federal legislation this year and now believe that state-level changes offer better prospects for their long-range goal of universal health coverage.

There is no foreseeable majority now for any of the health plans being discussed in Congress, which is scheduled to adjourn for the year on Oct. 7.

“The message from the voters is ‘go home,’ ” House Minority Whip Newt Gingrich (R-Ga.) said Thursday as he outlined Republican conditions that would make it virtually impossible to pass any health legislation.

Supporters of Proposition 186 are promising guaranteed insurance coverage for every Californian, whether someone becomes unemployed or ill. Opponents are warning about a government takeover of the health care system, with the state imposing an ever-growing tax burden, deciding on benefits, and setting prices for all medical fees and services.

Under Proposition 186, a state-run insurance program would be offered as an alternative to private health insurance. As envisioned, instead of the premiums now paid by individuals, corporations and their workers, the state would collect a 2.5% surtax on all taxable income, up to $250,000 for individuals and $500,000 for families. The tax would be 5% at incomes above those levels.

Corporations would pay a payroll tax of 4.4% to 8.9%, depending on the number of workers. A $1-a-pack cigarette tax would be imposed. Added to this would be the revenues now spent in various federal and state programs, including Medicare, for people over 65 and the disabled, and MediCal for the poor.

Federal waivers would be needed to fully implement the single-payer plan.

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Money raised by the new taxes would go to a single state fund, to pay for medical bills, mental health coverage, prescription drugs and long-term care, including nursing homes.

In California, “we will be working at the grass-roots level very intensively, giving this the strongest possible base of support,” said John Rother, director of public policy for the 33-million member AARP.

The National Education Assn. announced a contribution of $350,000 to the campaign from the national union and its state affiliate, the California Teachers Assn. The Service Employees International Union is contributing at least $200,000, half in cash and half in the donated time of union staff members, according to Henry.

At the California Chamber of Commerce headquarters in Sacramento, Senior Vice President Allan Zaremberg reiterated his group’s opposition to the measure. “We will be fighting it very hard,” he said. “We think Prop. 186 is devastating for the California economy, not only for businesses that are here, but for anyone asking businesses to come and settle here.”

Times staff writers William J. Eaton in Washington and Douglas P. Shuit in Los Angeles contributed to this story.