Kuehl Pushes for State-Run Health Plan

Times Staff Writer

Despite the ballot defeat last fall of a plan requiring that most California businesses provide employee healthcare, some Democratic lawmakers are considering an even broader insurance overhaul that would replace private companies with one government-run program.

Sen. Sheila Kuehl (D-Santa Monica), its chief legislative proponent, released a study Wednesday that said her proposal could save $8 billion of the $184 billion expected to be spent on healthcare in California next year. It would also reduce the state’s ranks of 5.3 million uninsured residents, one of the highest levels in the country.

Kuehl’s plan would levy payroll and other taxes to create a government insurer, often called a single-payer and compared in form to Canada’s system.


The savings would come from bulk purchasing of drugs and equipment, and eliminating much of the administrative cost that private insurers now bill, according to the study by the Lewin Group. The Virginia-based company was paid $90,000 for its analysis by the Health Care for All-California Education Fund, a Sebastopol-Calif.-based nonprofit established by supporters of the single-payer system.

“The findings of the report confirm that California can create a fiscally sound state insurance plan that covers every Californian with a solid, comprehensive health plan, reduces costs and controls health cost inflation,” Kuehl said.

Variations of her proposal, which will be formally introduced next month, have been floating around for years. But Democrats focused their recent efforts on a plan that required most businesses to offer health insurance and pay for 80% of it. Gov. Gray Davis signed it into law in 2003, but restaurants and the California Chamber of Commerce overturned it through last year’s Proposition 72 campaign.

With that defeat, many lawmakers believe that only incremental changes in the state’s healthcare programs will be politically feasible.

Some are trying to craft a requirement that all Californians buy insurance, much like drivers are required to hold car insurance. Others, noting that Proposition 72 lost by 1.6% of the vote, want to revise their 2003 plan with changes that could make it more palatable.

Many healthcare leaders believe that Kuehl’s sweeping plan has no realistic chance of being enacted, especially given Proposition 72’s defeat.


“It’s an expensive option and one that we don’t think has any political viability at this time,” said Dr. Jack Lewin, chief executive officer of the California Medical Assn.

Lewin, who is not associated with the Lewin Group, said that many physicians do not support the approach because of their experiences with other government-run programs, such as Medicare, Medi-Cal and workers’ compensation insurance.

Bobby Pena, spokesman for the California Assn. of Health Plans, an industry group, also criticized the proposal. “We think a large portion of this seems to be suggesting, ‘Wave a magic wand, give it to the government, and all administration costs will go away.’ And we don’t think that’s accurate,” Pena said.

At a morning news conference, Kuehl predicted that insurance companies would “totally freak out” at her plan and acknowledged that it had not yet won the endorsement of Democratic senators.

However, Senate President Pro Tem Don Perata (D-Oakland) was at the news conference and said that much of Kuehl’s plan was “supportable” and that Democrats were committed to tackling the topic this year.

Sen. Deborah Ortiz (D-Sacramento), chairwoman of the Senate Health Committee, said it was “a fair and reasonable proposal, and if in fact we can move a bill that makes sound policy, let’s worry about the politics later.”

Assembly Majority Leader Dario Frommer (D-Glendale) said: “I don’t see the Legislature having the heart right now to do a lot of additional taxes for anything. If they did, I think there is more interest in solving the budget problem first.”

Kuehl’s proposal would establish a single health plan that would replace private insurance, as well as Medicare and Medi-Cal and other state-run programs. There would be no deductible or co-payments, but instead a patchwork of taxes: an employer payroll tax equal to 8.2% of salaries; an employee payroll tax of 3.8% of salary; a 12% tax on the net business income of the self-employed; a 3.5% tax on unearned income; and a 1% surcharge on all income of more than $200,000 a year.

The Lewin study said employers that now offer health benefits would find their payroll tax to be about 16% less than what they would be paying in premiums to private companies. Firms that do not now offer coverage would see their costs go up, averaging an extra $2,290 per worker, the report said.

Overall, the report estimated, families would spend an average of $2,448 a year for healthcare coverage, about $340 less than they would through private premiums. But people would have to carry the insurance, so those who currently don’t would face new costs.

While families with incomes of less than $150,000 would see savings, the report said households making more than that would end up spending more. For instance, families with incomes of $200,000 to $250,000 would pay an average of $7,040 more a year.