California Health Care Reform - Momentum Stalled

After more than a year of negotiation, compromise, and ample national attention, major health care reform in California was dealt a seemingly lethal blow on Monday.  The compromise health care measure,  ABX1 1, was rejected by the Senate Health Committee by a none-too-subtle 7 to 1 vote.  The reform, which resembled the 2006 Massachusetts law, was largely crafted by Speaker Nunez and the Governor after an earlier version was vetoed by Schwarzenegger in September.   Senate President Pro Tem Perata, while a participant in negotiations throughout, never came to fully back the latest measure. 

The $14.9 billion package had passed the Assembly on a party-line vote in December but was given a tepid reception by Senate Democrats amid concerns of the ballooning $14.5 billion state deficit and frustrations from some that negotiations with the Governor had weakened the measure too far.  Additionally, a report by the Legislative Analyst's Office found that the reform could be in the red by more than $1.5 billion within five years.

Like the 2006 Massachusetts reform law, ABX1 1 sought to fill the gaps in coverage created by the current disjointed and inefficient health care system composed of multiple payers, for-profit insurers, uncoordinated provider systems, and multiple insurance markets.  It employed many of the same features as Massachusetts, such as an insurance connector to bring more affordable options to market, robust Medicaid expansions, premium subsidies to help some families afford coverage and an employer "pay or play" requirement.  Similarly, the measure included an individual mandate but had stronger affordability protections than Massachusetts.  Subsidies in the form of a refundable tax credit would be provided to families with incomes up to 400% of poverty if premiums exceeded 5.5% of income, versus sliding scale premium subsidies up to 300% in Massachusetts.  However, like Massachusetts, there were no specific caps on potential out-of-pocket expenses, a major concern to some health care advocates who opposed the individual mandate. 

Still, the Massachusetts plan, despite its problems including a projected $645 million in cost overruns over the next two years, has provided coverage to 300,000 residents who were previously uninsured.  With 5 million uninsured in California, health care advocates in California are regroupingand will work to move forward with reform. 

Impact in Other States and National Debate:  The lesson from California is not that states can't make progress on health care reform, but that limited reforms often don't achieve the cost savings needed to help pay for expanded coverage.  

States are continually ratcheting up reform by learning from each other.  California would have gone several steps further than Massachusetts by requiring more robust employer participation and providing stronger affordability protections.  The Healthy Wisconsin approach to reform that is gaining traction in states, including Washington, represents a new standard by creating a more coordinated health care system, pooling residents' purchasing power, cutting unnecessary spending out of the system, and enhancing what Americans value most in health care - choice, control, patient-doctor relationships, access and quality.   

There is plenty the federal government can do to help states aside from enacting a national health plan; these include relaxing ERISA restrictions that limit states' ability to regulate self-insured and multi-state corporate health plans and passing a far reaching expansion of the State Children's Health Insurance Program.  Still, states must continue to lead on health care and fill the void created by federal inaction.