The employer mandate

It shouldn't come as much of a surprise that Federal District Court Judge Jeffrey White has ruled that San Francisco's new health care benefits law violates federal law because it requires employers to spend a certain amount on health care for their workers or else pay a fee for the city. The bigger mystery is why state officials -- especially Gov. Arnold Schwarzenegger and Assembly Speaker Fabian Nunez -- have been pursuing an almost identical strategy, knowing it would probably eventually suffer the same fate. One answer is that they hope the Congress and the next president will repeal the law that preempts state and local programs, or at least give California permission to experiment with a federal mandate.

But White, at the very end of his ruling, suggested there might be another way for state officials to skin the same cat. He suggested tax credits. This is something I have wondered about in the past. It would work like this: every employer would have to pay a higher payroll tax, or fee to the state. Let's say it's six percent. They have to pay regardless of whether they offer health benefits to their workers. And then, in a separate part of the law, every employer would be entitled to a tax credit of six percent of payroll to offset the cost of health care they provide their workers. Such an approach pursues and delivers the same result but with only a little more finesse. White's opinion indicates that, at least in his court, it might survive a challenge.

But I still think it would be better for the state to stop trying to prop up our archaic system of employer-provided benefits and instead offer more incentives for individuals to buy their own insurance, possibly through large risk-sharing pools that give them the same, or more clout in the marketplace that employers now enjoy.

Denial of care

The California Nurses Assn. is leading a march on the offices of Cigna to protest the insurance company's denial of a liver transplant to a critically ill 17-year-old girl. The nurses say the company's denial illustrates a flaw in the Schwarzenegger-Nunez health care plan, because that plan "does not address the problem" of denial of care. The press release at first attributes the denial to "some administrator" deciding the transplant would cost too much, but later concedes that Cigna has concluded that the treatment is experimental and thus not covered by its policy. This sounds like a caes that will ultimately be decided by an independent panel of doctors under the state's independent medical review system.

But re the nurses' point about AB1X1, they are right, the bill does not address denial of care. But neither does the bill the nurses support, SB 840. That bill, which would set up a single-payer system, would let a government "administrator" decide whether the patient should get the transplant or not, just as government employees now make those decisions all the time for patients in the Medi-Cal system. It's misleading for the nurses to imply that their plan somehow would give every patient every treatment they requested. It wouldn't.

DOA?

So Don Perata says the health plan is "DOA" in his house. If you watch the video, the comment is off the cuff as he literally stands on a street corner riffing on the subject. I wouldn't take his pronouncement as his final word on the subject.

The substance of his objection, the idea that it seems crazy to be doing health care at the same time the state has a $14 billion shortfall, is legit, of course.

Some thoughts on that:

First, the voters wouldn't be voting on health care until November. Presumbably, by then, the governor and the Legislature will have devised and passed a plan to deal with the deficit. No guarantees that it will be a good plan, or that it will solve the problem forever. They have not done that yet and I will believe it when I see it. But as a political matter, the voters probably won't be weighing the one against the other. And there is a chance they will be weighing the health care plan in the wake of a settlement on the budget that at least has been sold as solving that problem. So I just don't think that's really much of an issue as a political concern. In other words, if you support the reform on its merits, you shouldn't be too concerned about what the voters will think of it in relation to the budget.

How about beyond the politics of it, to the budget itself? Well, Perata seems to be implying that the state will need to raise taxes to close the deficit so it shouldn't raise taxes to expand access to health care. That's a good argument too, if you support raising taxes. But how, exactly, is Perata going to get that tax increase? We pretty much know the Republicans in the Legislature are not going to pass it. That leaves the voters. And it's a pretty safe bet that the voters are not going to pass a general-purpose tax increase to help balance the budget, or probably even a narrowly drafted one to stave off cuts in health care programs. They might, maybe, pass a tax increase to expand access to health insurance and protect people who have it from losing it if they get sick and/or lose their job.

The LAO is looking at the general fund implications of the health care plan. On the surface, there appears to be little risk to the general fund and the chance that the program would actually benefit the general fund by reducing the cost of health care now funded by general taxes, shifting it to the special taxes created for the program. But there is at least one potential trap door. AB 1X1 says it won't take effect until the director of finance certifies that the money is there for it. And that money does not have to be the money called for in the planned ballot measure. So one could argue that if the ballot measure fails, there will be pressure to come up with money from the general fund to make it happen, and that could hurt other programs. But that seems like a stretch, and it's a decision that would still be in the hands of the Legislature. The program does not take effect until the money is there.

Finally, Perata says it makes no sense to promise universal health care in four years while cutting health care today. I'm not sure if that makes sense or not. But clearly he wants and is going to have to get some kind of assurances from Schwarzenegger on the short-term magnitude of cuts in health care programs. And that probably will be what comes out of all of this.

Sacramento's K Street troubles

I am not a purist on the eminent domain issue, but quotes like those in today's SacBee story on the city's struggles with a downtown landowner who owns a bunch of vacant buildings don't convince me that public agencies need this power. The city is making a folk hero out of the guy they are trying to force from his land.

Excerpt:

City leaders think they've found the plan they're looking for in the proposal by Z Gallerie owner Joe Zeiden to rehabilitate the historic buildings in the 700 block of K Street into a retail row that includes big name tenants such as Sur La Table and Urban Outfitters.

"We're looking for more than a coat of paint and putting a tenant in the existing space," said Assistant City Manager John Dangberg. "We're looking for a major renovation of the buildings, both seismically and a reconfiguring of the space. Some of these (buildings) are 20 feet wide, and they're not going to lend themselves to the kind of retail we're trying to attract."

The landowner, Moe Mohanna, has brought in a coffeehouse, a Mexican restaurant and a pizza joint, all locally owned. I personally would like to see more retail and fewer restaurants in the area, but I don't own the property. And I am not sure the chain stores Mr. Dangberg has in mind are all that great. They are certainly not unique. I am also not comfortable with city officials saying they need to force out the current owners because their buildings as now configured are "not going to lend themselves to the kind of retail we're trying to attract."

The city should have found a way to settle this dispute a long time ago.

Where the $14 billion would come from

Much has been made and will be made of the health care plan's $14 billion price tag. But it's interesting how little of that actually comes from the employer payroll tax -- the only source of money in the plan that could arguably distort the broader California economy. The rests comes from federal funds, the tobacco tax, the hospital tax, redirected state and local funds, and individual premiums.

Here is the breakdown:

Employer fee in lieu of providing coverage: $1.6 billion
Employers who provide coverage through the pool: $900 million
Hospital tax: $2.3 billion
Federal funds: $4.7 billion
tobacco tax $1.6 billion
Redirected county money: $1.6 billion
Individual premiums to pool: $2.1 billion

Total: $14.8 billion

Note. Governor's office now says the redirected county funds would total $1.6 billion, not $1 billion. And I fixed a typo in this post, changing millions to billions for the federal share....

Half of electricity from renewables?

Backers of two versions of an initiative to require utilities to generate 50 percent of their electricity from renewable sources by 2025 have been cleared to gather signatures. You can read the summaries here.

Risky business

As the Legislature and the governor prepare to enact a far-reaching overhaul of the health care industry in California, I'm looking at the risks that come with the approach they are favoring. Here are the ones I can think of off the top of my head:

--Guaranteed issue, the requirement that insurers sell coverage to everyone without regard to pre-existing conditions, could push costs higher because it will bring sicker people into the insurance pool.

--Businesses that cover their workers now might stop providing insurance, opting instead to pay the fee required by the state.

--The tobacco tax will decline over time as fewer people smoke, and the payroll tax will probably not keep up with the rise in health care costs. This will probably mean that the program will run out of money soon after it takes effect and will have to be adjusted.

--Insurers might increase rates – increasing their profits even as they comply with the new mandate to spend 85 percent of their premium revenue on health care. This could increase pressure for rate regulation and regulation of hospital and doctor charges.

Any others come to mind? Send them along.

Health care bill moves forward

Gov. Arnold Schwarzenegger still does not have "his" health care plan in bill form in the Legisalture. But the bill he has endorsed -- AB1x1 -- just moved out of the Assembly Appropriations Committee on a party line vote. The full Assembly is expected to vote on it this afternoon. The governor and the speaker, meanwhile, have scheduled a press conference for 4:30 p.m. at which they will be joined by labor, business, consumer and insurance groups....

Assembly plans vote today on health care

The Assembly Appropriations Committee is scheduled to vote on AB 1X1, the health care bill, after a hearing that begins at 11 a.m....The full Assembly is still planning to take up the bill on the floor later today. No word yet on whether the Senate plans to consider the bill before the end of the year.

Both the Assembly committee hearing and the floor vote are scheduled to be webcast live on this site.

One man's creativity is...

From today's Sacramento Bee:

Núñez said the state cannot fix its structural budget imbalance only by cutting services.

"The fact of the matter is we've been cutting our way out of this budget mess for the last four years," Núñez said. "I think it's time we show a little bit of creativity."

From the Legislative Analyst's web site:

Year General Fund Spending
03-04 $76.3 billion
04-05 $79.8 billion
05-06 $91.6 billion
06-07 $101.9 billion
07-08 $104.2 billion

Growth in general fund past four years: $27.9 billion
Percentage growth in general fund past four years: 36.6%
Average percentage growth in general fund past four years: 9.1%
Average population growth past four years: 1.35%
Average inflation past four years: 3.3%

Perata on health care: not yet

Don Perata appears to be throwing some cold water on the chances for a health care deal. He says he likes what he sees from Schwarzenegger and Nunez, but wants to hold off at least until he sees how the state is going to deal with its broader budget problem. Of course, that could mean no deal in 2008.

But the other players, and many interest groups, will likely make the argument -- to Perata and others -- that health care reform would bring billions in additional revenue from private and federal sources for programs that are now dependent on the general fund.

Here is what Perata says in a statement released by his office today:

“I am encouraged by the progress the Governor, the Assembly Speaker and I have made this year developing a plan for extending health care insurance to the many Californians who do not have it.”

“While I still strongly favor the concept, I have been shocked by the recent revelation that next year’s budget is facing a $14 billion deficit and what that could mean.”

“It would be imprudent and impolitic to support an expansion of health care coverage without knowing how we’re going to pay for vital health programs the state now provides for poor children, their families and the aged, blind and disabled.”

“The real issue now is the deficit and how this squares with everything else that we are going to do.”

November revenues not so bad

The state has tallied up its November revenues, and the numbers don't look nearly as bad as the gloomy projections that have been flying around lately. In fact, for the month, revenues were about $530 million, or 10 percent, above projections made when the budget was written last spring.

Most of that bump came from a big surge in insurance taxes that appears to be an accounting issue: the Department of Finance expects the numbers to balance out over the next few months.

Still, withholding from paychecks was above the forecast, which is a significant sign of life in the economy, and other income taxes, corporate taxes and sales taxes all came in at or above projections.

The numbers are still down for the year. But the bleeding appears to have stopped for the moment. Or at least it had stopped in November.

Read the full report here.

Why bother?

Chris Reed says it's strange that there has been so little discussion in California of the federal law that seems to ban states from regulating employee health benefits in the way the governor and the Democrats in the Legislature appear poised to do. He's right. Reed also says there is a very good chance that a federal judge will strike down any law that requires employers to provide coverage or else pay a fee to the state. He's right about that, too.

So why are the governor and the Democrats proceeding down this path anyway? First, some of them actually seem to believe that they can write the law in a way that passes court scrutiny. But even if they can't, there is a decent chance that a Democrat will be elected president in 2008 and a Democratic Congress will remain in power. And if that happens, it's possible if not probable that the feds would pass a law allowing California's plan to go forward.

Health care

It sounds as if Fabian Nunez and Gov. Arnold Schwarzenegger are either closing in on a health care deal or making one last attempt to get it done. They have a meeting scheduled for Wednesday, and the speaker has inquired with his members about their plans for next week. A Nunez aide says not to read too much into that, but adds that they are "down to a few issues." Of course they have been down to a few issues for a month now. At any rate, stay tuned for possible news on this front in the next day or two.

Coast Guard says pilot incompetent

Here is my column from this morning about the Legislature's strange lack of interest in the pilot who was on duty when the Cosco Busan hit the Bay Bridge, and the board that is supposed to oversee those pilots.

Today, the US Coast Guard requested that the pilot -- John Cota -- turn in his license, citing "evidence of mental or physical imcompetence." If Cota does not comply, the Coast Guard has the option of charging him with incompetence and holding a hearing to seek suspension or revocation of his license.

SF's retiree health benefits

San Francisco Mayor Gavin Newsom and a city supervisor are proposing to pare back retiree health benefits for future city workers as a way to reduce the government's unfunded liability. Among other things, they want to force future hires to work 20 years, rather than only 5, before being fully vested in retireee health benefits, and they would have to work until age 55 instead of age 50 to be eligible. So far the proposal is getting a chilly reception from labor and the other supervisors. But check out the comments at the end of this Chronicle story. Sounds like the SF natives are getting a bit restless.

Bar pilot accused of misconduct

It's odd that with all the condemnations and inquiries going on around the SF Bay oil spill, legislators have said relatively little about the one person involved who was the most responsible for what happened: the pilot who was guiding the ship when it sideswiped a support beneath the Bay Bridge.

Today, Capt. John Cota was accused of misconduct by the Board of Pilot Commissioners, a state-authorized panel that oversees a monopoly of about 60 pilots who, by law, are required to guide big ships in and out of San Francisco Bay.

Here is what the commission said about the pilot's performance:

"Captain Cota is charged with having reason to doubt whether the ship could safely proceed under the prevailing circumstances and proceeding on his course with insufficient information about the level of visibility along his intended route. He is also charged with proceeding at a speed that was excessive for the circumstances and failing to make full use of all available resources, including a tugboat, the Vessel Traffic Service of the Coast Guard, and his ship's lookout. The tug remained tethered to the ship's stern; the Vessel Traffic Service of the Coast Guard could have provided more information if Capt. Cota had requested it; and the ship's lookout could have been better instructed. The charges allege that Captain Cota's conduct warrants the suspension or revocation of his state pilot license.

The meaning of 'Legislature'

Rick Hasen thinks the Republican-based initiative to change the way California distributes its electoral votes could throw the 2008 presidential election to the US Supreme Court, again. The legal question here is whether the voters of California can do what the Constitution says is reserved for the Legislature: decide how to split up the electoral votes. California's Supreme Court has always ruled that the voters, via direct democracy, effectively act as the Legislature. But the U.S. Supreme Court might take a different view.

2005 all over again?

The governor is backing a redistricting initiative sponsored by Common Cause and some other reform groups. He is threatening to back a water bond being pushed by his business allies. And there is even talk that he would get behind a health care measure that the restaurant industry might push if he can't cut a deal with the Democrats in the Legislature.

So is he headed for another debacle at the polls, ala 2005?

The context is certainly different this time around. No one can argue that he didn't try to work with the Legislature on these issues. Many might suggest that he has tried too much. Also, these issues, while they expose ideological splits, are not as prone to being characterized as partisan as the issues he backed in '05, especially the union dues initiative. Finally, these measures would be on a regular ballot, not a special election, where the focus was all on him and the voters rebelled, in part, because of the process as much as the policy.

Still, it seems like a risky strategy. The health care and water bonds would likely face strong opposition from interest groups, labor in the case of the health care measure and environmentalists on the water bond. There might even be competing initiatives on both topics. And if the Democrats oppose the
redistricting initiative, it will almost certainly go down. Recent history around the country -- and here -- suggests that no attempt to reform redistricting can succeed without the support of the majority party.

On the other hand, the risk is simply that the measures he backs will lose. And he already is getting nowhere on these issues in the Legislature. Since he cannot run for another term and likely will not run for another office, Schwarzenegger need not worry about spending down his political capital. And since it won't be a special election, the focus won't be on him as much. If they lose, they lose, and while it would hurt his image, such a defeat wouldn't be fatal. Heck, even his disaster in 2005 was not fatal to his career.

So while taking this road would be a calculated risk, and winning on any of the three might be a longshot, Schwarzenegger still might see it as a risk worth taking. Given the wall he has hit in the Legislature, his only other alternative if he wants to get anything done is to truly become what a lot of his conservative critics say he already is: a Democrat posing as a Republican.

Confidence game

The Public Policy Institute of California sponsored an entertaining if not particularly enlightening event today titled "Restoring Confidence in the Legislative Process." Discussing the issue were Willie Brown, John Burton, Jim Brulte, Pete Wilson and Fabian Nunez.

They told some good stories -- you can never go wrong when topless dancers and legislators are mentioned in the same breath -- and gave each other some guff, but didn't shed a lot of new light on this very old topic.

For openers, three of them -- with Brown and Burton on the short end -- agreed that the Legislature was "dysfunctional." although Burton sort of came around to that point of view the more he talked.

Brulte said most legislatures are "incapable of adult action" but said California's could be improved with looser term limits, independent redistricting, and a spending limit. Brown thinks they are doing pretty well already, and what problems they have would be best hidden behind closed doors like in the good old days before open meeting laws.

"All of the openness," he said, "has played a major role in making it difficult...to put the votes together."

Burton lamented the fact that lawmakers and lobbyists can't schmooze as much anymore because of limits on what lobbyists can spend to buy them dinner. He told the story of a now-dead Republican senator whom Burton thought was a real right-winger until they ended up in a topless bar together and the gentleman told Burton he could "crawl through an acre of topless women on his hands and knees." After that the liberal sage had newfound respect for his ideological opponent, and if that sort of thing still went on, he said, more would get done in the Legislature.

"You got to know people," he said.

Nunez blamed the two-thirds budget vote requirement for most of the Legislature's problems but also noted that in 2006, lawmakers and the governor found common ground on global warming, infrastructure, the minimum wage and prescription drug discounts. They had a "blockbuster" year, he said, but now they're being held to that standard every year, and it will be impossible to meet.

My sense is that the Legislature's popularity rises and falls on two things: one, the state of the economy, which affects how people feel about government generally, and two, the public's perception of whether or not stuff is getting done. It doesn't really matter that much what is getting done or how well it is getting done, but if the budget is passed on time, big bills are enacted, and lawmakers and the governor are getting along, most people are happy. A tax hike -- or maybe benefits for illegal immigrants -- are about the only pieces of legislation they could pass that would make them less popular than squabbling over the state's problems.

Here is a PPIC white paper that formed the basis for today's discussion.

Oprah and post-partisanship

In a Wall Street Journal commentary today, former Lieberman aide Dan Gerstein describes Oprah as "post-partisan." He says this makes her a powerful weapon on Obama's behalf.

An excerpt:

Let's start with the "O-factor." Oprah is the Swiss Army knife of political validators, a spectacularly accomplished black woman who is admired by Americans across every demographic, and would thus be a boon to any candidate. But her particular potency for Sen. Obama in this contest is not her race or gender or even the sum of her many parts, but what she is perceived to be lacking -- a political agenda.

More than anything, Oprah is a uniquely transcendent figure in our public life: engaged in serious debates and willing to put her money where her mouth is, yet unsullied by the ugly political and culture wars of the past two decades, and independent in her thinking and affiliations. In this, she personifies the new post-Bush, post-partisan, post-boomer politics Sen. Obama is preaching. She is the way we want things to be (at least those of us outside the narrow margins of the ideological extremes): genuine, unifying, trustworthy, aspirational.

I agree, her support will help Obama. But I still am not sure Obama deseves the cred he gets for being post-partisan or even bipartisan. He talks the talk, but does he really have any positions that reach across the aisle and embrace an idea more commonly associated with Republicans?