Governor details health overhaul

Ten months after outlining his plan to overhaul California's health care system, Gov. Arnold Schwarzenegger on Tuesday released new details, including a proposal to lease the state lottery to help finance the plan.

During a Capitol news conference, the Republican governor acknowledged that the revised proposal still needs to be negotiated with Democrats who control the Legislature.

But a month into a special legislative session that has not yielded an agreement on how to reduce the ranks of the 6.7 million uninsured Californians, the governor said: "I feel really good about the negotiations."

In prepared statements, Assembly Speaker Fabian Núñez, D-Los Angeles, and Senate President Pro Tem Don Perata, D-Oakland, lauded the governor for fleshing out his proposal.

"I am pleased the governor will be putting his health care proposal into a bill that can be properly studied and evaluated," said Núñez, the Democrats' principal negotiator.

But Art Pulaski, executive secretary-treasurer of the California Labor Federation, called the governor's proposal "an enormous step backward."

"The governor has opted to ignore the (Democrats') wildly popular bill, which is currently awaiting his signature, in favor of his own unpopular and regressive plan," Pulaski said.

The governor was unable to get small businesses and doctors to buy into his original plan, and his revised plan no longer requires employers with 10 or more employees to contribute a flat 4 percent of their payroll for insurance coverage.

Instead, employers who do not offer health care coverage would be required to make a contribution based on a sliding scale fee from 0 to 4 percent, based on total payroll. Democrats want to require that employers contribute at least 7.5 percent of their payroll to health care.

Meanwhile, doctors would no longer be required to contribute 2 percent of their revenues to subsidize an insurance purchasing pool for the poor.

To make up for lost revenues, Schwarzenegger's rejiggered $14 billion-a-year plan -- $2 billion more than the governor's original proposal -- is proposing to lease the lottery to a professional management company to increase revenues.

The administration projects that a 40-year license to operate the lottery would raise $2 billion annually for health care.

Under the governor's proposal, proceeds from the lottery would no longer go to education. Over the last three years, schools received an average of $1.1 billion.

The state would replace that funding with money from the general fund. Administration officials said education stakeholders were briefed on the plan in advance.

Kevin Gordon, a consultant on education budget issues, said schools could conceivably receive more money and be freed of the unpredictability of lottery revenues.

All financing for the governor's plan, including leasing the lottery, would have to be approved by voters.

Republican lawmakers uniformly oppose any fee increases. But Schwarzenegger said he expects to strike a deal with Democrats on the details of the proposed November 2008 ballot measure within the next two weeks.

The governor's proposal, which he describes as "shared responsibility," relies on hospital and employer fees and leverages contributions from federal, state and county governments.

It also would require individuals to contribute to the cost of their insurance coverage -- a mandate that Democrats and union leaders oppose -- and provide subsidies to the poor.

"Middle-class families would be left on their own to figure out how to pay thousands of dollars in deductibles, premiums, co-pays, prescriptions and other out-of-pocket expenses," Pulaski said.

But administration officials say the revised plan increases affordability for working families by reducing the amount that low- and moderate-income workers would have to pay for coverage.

The plan also includes tax credit for individuals and families between 250 percent and 350 percent of the federal poverty level.

But Anthony Wright, director of Health Access California, a statewide health care consumer advocacy coalition, expressed concern that the governor's plan no longer defines minimum insurance benefits.

Instead, the secretary of health and human services would establish a minimum benefit level, which would cover medical, hospital and preventive and prescription services.

Health Access also rejected the governor's initial benefit proposal, saying low- and middle- income families could not afford the $5,000 deductible and out-of-pocket limits of $7,500 per person and $10,000 per family.

About the writer:

• The Bee's Aurelio Rojas can be reached at (916) 326-5545 or arojas@sacbee.com.