Health revamp takes a big step

If legislation approved by the state Assembly Monday becomes law, it would be the largest overhaul of a health care system ever undertaken by a state. The legislation also would require insurance companies to offer coverage to Californians with pre-existing medical conditions.

The landmark measure that would provide coverage to most uninsured Californians cleared its first major hurdle when it was approved along party lines in the Democratic-controlled lower house.

If the Senate approves the bill and voters agree to pay for it, it would extend coverage to nearly 70 percent of the state's permanently uninsured and require most Californians to buy health insurance.

Gov. Arnold Schwarzenegger supports the $14.4 billion health care plan. But Senate President Pro Tem Don Perata, D-Oakland, wants to determine its impact on the state's mounting budget deficit before deciding whether to put it to a vote of the Senate next year.

Despite the uncertainty, the Republican governor and Democratic Assembly Speaker Fabian Núñez – who negotiated the legislation known as AB 1x – were optimistic.

"Today, we can see the finish line," Schwarzenegger said during a celebratory news conference in the Capitol Rotunda, noting the yearlong effort has attracted national attention.

Besides the legislative impediments, funding for the $14.4 billion plan must be approved by voters. Supporters hope to place the measure on the November 2008 ballot.

Similar legislation, requiring employers to contribute to the health care cost of their workers, has been struck down by the federal courts.

A provision in the 237-page bill stipulates that if any provision of the legislation is invalidated by the courts, "the entire act shall be inoperative."

Schwarzenegger and Núñez have tried to distance the legislation from the state's projected $14 billion deficit, asserting that it will be self-funding.

The plan relies on fees imposed on hospitals and employers and a tax hike of up to $2 on a pack of cigarettes.

State subsidies would be provided for the working poor. The plan also calls for expanding the Medi-Cal and Healthy Families program for the indigent. It relies on $4.5 billion in federal matching dollars.

Backers estimate that if implemented, the plan would provide coverage for 3.7 million of the 5.1 million people who are considered permanently uninsured in California. Up to 6.7 million people go without health insurance in a given year, according to the U.S. census.

Last week, Perata said it would be "imprudent" to expand health care without considering the budget deficit. The Senate president also believes the proposed tobacco tax is "flawed" because the tobacco industry would spend heavily to defeat it at the polls.

Despite the Assembly vote, Perata spokeswoman Alicia Trost said "nothing has changed." The Senate president, she said, will not call his members back to the Capitol to vote on the legislation this year.

Perata sent a letter to Legislative Analyst Elizabeth Hill Monday asking her to assess the plan's impact on the state deficit.

Hill's report won't be available until mid-January, at the earliest, because Perata wants it to take into account the governor's proposed 2008-09 budget.

The health care plan was approved on a 45-31 vote with no Republican support.

The governor's fellow party members, health insurance companies and groups representing small businesses criticized the proposal, saying it relies on overly optimistic funding sources. They also said it would penalize California employers and drive businesses out of the state.

Assembly Minority Leader Mike Villines, R-Clovis, predicted voters would reject the proposed taxes. He also accused supporters of ignoring the state's fiscal crisis and engaging in a public relations blitz, rather than a policy discussion, to win plaudits from the media.

Núñez denied Monday's vote was publicity-driven and predicted it would ultimately bring comfort to millions of uninsured Californians.

"Fundamentally, health care is a right and not a privilege, and it ought to be afforded to everybody," Núñez said. "Make no mistake about it, this is truly an historic effort."

Assemblyman Chuck DeVore, R-Irvine, criticized Schwarzenegger for supporting tax increases after vowing during his campaign for governor that he would not.

The governor, DeVore charged, is now pushing "the largest business tax increase in the history of California."

At his news conference, where he was joined by Núñez and business and labor leaders who support the plan, Schwarzenegger praised the Democratic lawmakers who "courageously" voted for the bill.

The governor declined to publicly pressure Perata to bring the legislation to a vote, saying, "I don't tell the senator how to run his house."

But Schwarzenegger noted Perata has previously expressed support for universal health care.

"I am confident the Senate will follow up and quickly move the finish line even closer because I know Sen. Perata is a big, big believer in making sure everyone has medical insurance," the governor said.

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• Call Aurelio Rojas, Bee Capitol Bureau, (916) 326-5545.