Analysis: No easy Rx for health care's hurdles

In his typical upbeat manner, Gov. Arnold Schwarzenegger announced a special legislative session on health care in September, emphasizing that he and legislators were "very close" to a deal to revamp the system in California.

Two months later, "very close" feels awfully far apart.

Consider this: Even if lawmakers and Schwarzenegger agree to a health care deal – a waning prospect after Assembly Speaker Fabian Núñez canceled a floor vote that he promised would take place today – most Capitol insiders believe the heavy political lifting hasn't even begun.

Multiple hurdles would loom next year, including a legal challenge over a federal law violation, a potential referendum to overturn the plan in June when Democrats are least likely to vote and an opposition campaign financed by well-heeled business interests.

Because Republicans are not part of health care negotiations, Democrats and Schwarzenegger need voter approval for a $14 billion financing plan. But proponents would have to navigate a challenging political environment in which the state is facing a $10 billion budget shortfall. They also would have to persuade voters, the vast majority of whom have health insurance, to approve a plan predicated on extending coverage to 6.7 million uninsured Californians.

Schwarzenegger has insisted the health care plan would be self-financing, but Republican critics charge the proposal would eventually be a drain on businesses or state finances.

"Voters are obviously going to be very nervous, and whenever you're asking voters to cough up more money, it's always iffy," said Ray McNally, a Republican political consultant. "You marry that to a bad economy, and it's a pretty lethal barrage. It's tough to get a 'yes' vote for anything, but especially so when facing a well-funded opposition. And I'll tell you, in a bad economy, one of the easiest things to do is scare voters."

Democrats have proposed that the state increase its cigarette tax $2 per pack to help pay for health care costs. That would almost certainly invite the tobacco industry to spend tens of millions of dollars against the financing plan. The industry last year spent more than $65 million to defeat a similar $2.60 per-pack tax increase for health services and $12 million this year to defeat an 85-cent increase in Oregon.

Frank Schubert, a consultant who worked on both campaigns, said he has not spoken to tobacco companies about what they would do if the cigarette tax is included in the health care plan, though he noted that he'd "be surprised if they didn't" finance an opposition campaign.

Additionally, pharmaceutical companies dislike a component of the health care plan that would allow the state to purchase prescription drugs in bulk. In 2005, drug companies spent $80 million to defeat a prescription-drug initiative, a campaign Schubert also worked on.

"You've got groups who have a demonstrated history of defending the interests of their consumers at the ballot box, and combined with a fairly tenuous political dynamic at the ballot box, I think it's a very difficult proposal to pass," Schubert said.

The political difficulty of getting voters to approve a health care plan next year is one reason that a Capitol deal has remained elusive this year. Lawmakers and Schwarzenegger are aware that relying on ballot financing means that a deal should be constructed in a way that would avoid significant political opposition.

It's one likely reason Schwar-zenegger has not embraced a tobacco tax, instead preferring to lease the California Lottery to help finance the health care plan. The governor also courted various business groups, hospitals and insurers early on, hoping to avoid a political battle later.

"When you're talking about legislation that will require an initiative campaign, part of what we are working on inside the administration is making sure we are in the position where we can win in November," said Schwarzenegger communications director Adam Mendelsohn.

About the writer:

• Call Kevin Yamamura, Bee Capitol Bureau, (916) 326-5548.