Gov.’s push for healthcare may get a push back

Gov. Arnold Schwarzenegger’s most ambitious aspiration yet -- to extend medical coverage to millions of uninsured Californians while making healthcare for everyone more affordable -- has set the Capitol on edge as advocates hope for sweeping reforms and healthcare interests brace for a potentially punishing fight.

Details of the administration’s plan are still being formulated by a special team of advisors, but healthcare experts and some of the most powerful interest groups in Sacramento, including the $22-million annual lobbying presence of the healthcare industry, doubt that it is possible for the governor to fulfill all of his public promises.

Schwarzenegger, who at times has called healthcare his top priority for next year, has said he would like to cut in half the size of the state’s uninsured population, which by some counts tops 6 million people; reduce obesity, a major cause of illness; and lower the cost of care. He has also promised that he will not raise taxes and won’t make employers bear the brunt of the burden.

“We feel we shouldn’t have 6 million people uninsured,” Schwarzenegger said Wednesday in a speech in Los Angeles. “We maybe cannot solve the whole problem, but we definitely can cut it in half and do something that really is impressive and show the rest of the nation that it can be done.”

Earlier, he said he wanted to devise “an innovative way of approaching this subject, rather than just throwing more money at the same problem to make the problem bigger.”

The Capitol is still recuperating from the last battle over health insurance. Just before the 2003 gubernatorial recall, Democratic lawmakers passed a law mandating that all but small employers provide health insurance for their workers. After an expensive battle, business interests -- with Schwarzenegger’s support -- succeeded in getting the law repealed at the ballot box the next year.

Just about any plan the governor puts forth in his January State of the State address is sure to engender resistance. Hospitals, doctors, insurers and consumer groups are already scrambling to present their own proposals and to blunt alternatives, such as efforts to regulate insurance rates -- anathema to insurers -- or redirect hospital subsidies.

“There are a lot of people in Sacramento who will line up to defeat any proposal that’s not their own,” said Dustin Corcoran, vice president for government relations of the California Medical Assn., which represents doctors.

Schwarzenegger is known to admire the success this year of Massachusetts Gov. Mitt Romney, a Republican, in crafting a deal with the state’s Democratic-controlled Legislature.

The law requires all residents to obtain health insurance by next July as long as the state determines that affordable insurance is available. The plan includes state subsidies for the poor and small businesses. Firms that don’t provide coverage for their employees will be assessed a fee.

But replicating Massachusetts’ plan would be prohibitively expensive, most experts say. California has more people without coverage, more poor people and illegal immigrants, and a smaller proportion of companies that already offer insurance.

Massachusetts also had in place a number of rules that California does not have, such as a requirement that insurers sell coverage to anyone who wants it. The California Health Foundation has estimated that adopting a Massachusetts-style plan could cost as much as $9.4 billion more than California now spends on healthcare.

Expenditures on public and private healthcare in California totaled $169 billion in 2004. Medicare and Medi-Cal, the state’s program for the poor, pay for more than a third of that. Spending on Medi-Cal, funded by both Washington and Sacramento, has been rising 8% a year, one of the largest strains on state finances.

So far, Schwarzenegger’s advisors have publicly embraced a number of piecemeal approaches that, though likely to win support among lawmakers, would not come close to solving all of California’s troubles, in the view of most experts.

The administration wants to expand the small number of healthcare clinics set up in schools, particularly those in impoverished neighborhoods. There are only 119 such clinics in California’s 9,232 public schools.

Schwarzenegger has long advocated healthful behavior, and his team plans to ramp up an existing campaign against obesity and to promote exercise, particularly for children. One state-sponsored study estimated that physical inactivity and obesity cost California $10.5 billion in direct and indirect medical care costs in 2005.

The team also hopes to reduce the number of mistakes in surgeries, drug prescriptions and other treatments, and to encourage better technology in healthcare by using electronic records.

Kimberly Belshe, Schwarzenegger’s secretary of Health and Human Services, said the state already has substantial resources that can be redirected to help pay for new efforts, including federal money now given to counties and hospitals to help cover the uncompensated cost of treatment. This fiscal year the state is spending more than $10 billion supporting the uninsured and underinsured, she said.

But E. Richard Brown, director of UCLA’s Center for Health Policy Research, said such measures are “not a substitute for providing coverage to people.”

“We need to decide if we are going to cover our whole population,” he said. “And then if we are, we need a system that requires all employers to make a contribution at some level and all individuals to contribute -- to the extent of their ability to pay. That’s a bullet that needs to be bitten, and it’s going to take some very strong leadership on the governor’s part to do that.”

To formulate a plan, Schwarzenegger’s administration has hired respected healthcare experts, a bipartisan mix with experience in government regulation of insurers and private health maintenance organizations.

Schwarzenegger has charged his team with creating a plan based on the principle of “shared responsibility,” meaning that it must ask something of insurers, government, employers, healthcare providers and consumers.

He has ruled out the preferred solution of liberals and some unions: having the state take over the role now filled by private insurers.

The governor has publicly endorsed the notion that people should be required to have health insurance, just as drivers must carry car insurance. But negotiators for the Democratic-led Assembly have privately told the administration that proposal is unacceptable.

The Democrats also plan to put forth their own alternatives early next year. Many have concluded that the chief problem of their 2003 plan is that it was not comprehensive enough. It would have extended insurance to only 1 million more Californians and would not have dealt with the self-employed or those at companies with fewer than 50 workers.

Despite the governor’s condemnation of any new taxes, some healthcare policy veterans say lawmakers will be tempted to look at several potential sources of extra cash.

The state could raise $2 billion through a tobacco tax such as the one voters rejected this month. That, however, would take the support of the Republican legislative minority and would require Schwarzenegger to forsake his no-tax pledge -- something his advisors say will not occur.

Kaiser Permanente’s chief executive, George C. Halvorson, has been shopping around the company’s own plan. It would require all individuals to have insurance, say people who have been told of it. To help subsidize premiums for the poor, the plan would include a tax on medical services and a levy on employers who don’t provide coverage to their own workers. One of the plan’s architects, Ruth Liu, left Kaiser in August to join the Schwarzenegger administration.

The Democrats’ taking control of Congress, with many lawmakers talking about the importance of healthcare, has rekindled hopes in California that Washington might help the state out. But the power shift could also increase the inclination of some to delay reforms to see what Congress will do.

As a fallback option, a number of advocates are pressing for Schwarzenegger to try to guarantee coverage for all of California’s 9.6 million children. Such an effort would cost an estimated $500 million a year to cover 763,000 children. But even that would be expensive in a year when the state is expected to face a $5-billion deficit.

In fact, Schwarzenegger vetoed just such a bill in 2005 because it did not specify how the state would finance it. And Republican lawmakers blocked an effort in June to expand coverage for children because the offspring of illegal immigrants would have been eligible.

Jot Condie, president of the California Restaurant Assn., which helped repeal the 2003 employer mandate, said: “Nothing is going to pass without coming up with a new revenue stream, and nobody wants to talk about that.”

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jordan.rau@latimes.com