Seeking a healthcare cure-all

Times Staff Writer

With time running out to overhaul California’s healthcare system this year, Gov. Arnold Schwarzenegger and Assembly Speaker Fabian Nuñez are fashioning a high-stakes strategy to raise business and hospital taxes through a ballot measure that would circumvent defiant Republican lawmakers.

“I think we’re on the verge of doing something huge,” Nuñez told The Times’ editorial board Friday.

The unusual partnership between the Republican governor and the Los Angeles Democrat echoes their collaboration last year, which resulted in landmark global warming legislation and a minimum-wage increase.


But a closed-door deal could incur political wrath for both men. The governor is backing tax increases despite last year’s campaign pledge against them, and Nuñez could alienate labor and consumer advocates for supporting mandatory health insurance.

Coming with just two weeks left in the legislative session, the negotiations are focused on expanding medical coverage to nearly all of the 4.9 million Californians without it.

The plan would require all Californians to have insurance and would give subsidies to those unable to afford coverage. It would also address the problems of the private insurance market and require healthcare providers to reveal the costs of their services to foster competition.

Schwarzenegger and Democrats have agreed all year on most of those goals. But they have been stymied on how to pay for it, since any tax increase passed by the Legislature requires two-thirds support, necessitating some Republican votes.

GOP legislators have refused to budge on Schwarzenegger’s proposal for a blend of taxes on hospitals, doctors and employers. And Schwarzenegger opposes as too high the Democratic alternative of requiring all employers to spend the equivalent of 7.5% of their payroll on medical care for their workers or pay a fee to the state. Republicans oppose any tax increases and have favored piecemeal efforts to make healthcare more accessible.

Under the gambit now being developed, the Democratic majority in the Legislature would approve a bill containing most of the plan except the financing, and possibly establish a special board to work out the details. Those issues require only a majority approval.


The governor, Democrats and supporters would draw up a ballot initiative for next year. It would ask voters to approve the employer spending mandate -- but at a rate lower than the Democrats’ proposal -- as well as a tax on hospital revenues, and possibly a sales tax increase.

“The governor has always said he’s open to doing whatever it takes, and that includes the ballot,” said Daniel Zingale, a senior advisor to Schwarzenegger.

The money would be used to increase Medi-Cal payments for healthcare providers that treat the poor and pay for insurance for employees whose companies do not provide it.

The hospital tax would allow California to obtain $1.7 billion in extra Medicaid money from the federal government, which matches money the state provides for care of the poor. That money would be distributed back to those hospitals based on how many poor people they cared for.

The hospitals’ support is critical to passing any initiative. Plus, some strategists believe that strong backing could budge enough Republican legislators to make the initiative unnecessary because many hospitals in GOP legislative districts stand to benefit financially.

In recent days, Schwarzenegger has intensified his effort to win their backing. An analysis commissioned by some of the hospitals and released a week ago found that the industry would benefit from the additional Medicaid money, and only a small number would be net losers. Of the major chains, Catholic Healthcare West and Sutter Health would each gain more than $180 million, Tenet Healthcare would gain $110 million and Adventist Health would gain $82 million, according to the administration’s review of the hospital data.

Kaiser Permanente would lose $119 million, but its chief executive has been supportive of Schwarzenegger’s effort. About 30 individual hospitals that don’t treat many poor people or are specialty institutions would also lose money.

C. Duane Dauner, president of the California Hospital Assn., has staunchly resisted the hospital tax as long as any hospital loses money. But Thursday, the executive committee of the association’s board met with Schwarzenegger to hear his pitch, and the full board meets Tuesday to discuss its next action.

“As hospital groups have become aware that this actually does work, the momentum has swung from resisting it outright to feeling that it holds a lot of promise,” said Wade Rose, a spokesman for Catholic Healthcare West, which has been pushing for the tax.

The plan Schwarzenegger and Nuñez are discussing would deviate in two significant ways from the governor’s original proposal that he laid out in January to national attention.

First, while all Californians would be required to have insurance -- a bottom-line requirement for Schwarzenegger, but one opposed by labor unions and consumer advocates who say low-income wage earners could not afford it -- Nuñez is insisting on protections for people who make too much to qualify for state subsidies but not enough to shoulder the costs of premiums.

One idea Nuñez floated to The Times editors would be to cap the maximum amount anyone would have to pay for premiums at 5% of their income. However, that would mean the state would need to find billions more in subsidies than Schwarzenegger had proposed in his $12-billion plan.

The second major difference is that the plan excludes Schwarzenegger’s proposal to tax the income of doctors’ practices.

The governor’s plan would have used that money to increase Medi-Cal payments to doctors, but the California Medical Assn. has opposed the idea, which many doctors say could devastate their practices.

“Some people say that so far doctors have not contributed one single thing to this conversation,” Nuñez said. “I’m very disappointed about that. I’ve never seen a doctor in a welfare line.”

In response, Dr. Anmol Mahal, president of the doctor’s lobby, said in a statement: “Doctors take care of uninsured patients each and every day. As well as any Sacramento politician, we understand the critical importance of passing healthcare reform for this state.”

Nunez said he understood why Schwarzenegger could not support the Democratic bill, AB 8, because its employer tax was nearly double the 4% payroll spending requirement that Schwarzenegger proposed in January.

“This is his last link to his claim on being a Republican, having business support,” Nuñez said. “He loses that, he’s done.”

The strategy has far to go. Senate President Pro Tem Don Perata (D-Oakland) has not signed on to the idea, nor have rank-and-file Democrats. And there is little time left in the legislative session. It is scheduled to end Sept. 14, but lawmakers are hoping to finish Sept. 11, before the Jewish holidays.

At an event in San Diego on Friday, Schwarzenegger said he was optimistic that a deal could be reached.

“Something that was maybe impossible to be done last year, impossible to be done five years ago or 10 years ago, I feel that the timing is right,” he said.

Nuñez was more guarded.

“The progress we’ve made has been considerable,” he said. “The question now is, can we go back to our constituencies and can we make the deal work.”

“It’s not gonna be easy for him and it’s not gonna be easy for me,” Nuñez said. “He’s got a business issue, I’ve got a labor issue, and we’re both gonna have to figure it out. We’re both gonna have to be Nixon in China.”