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Posted by on Jan 9, 2007 in At TMV | 102 comments

Schwarzenegger Proposes Universal Health Care Coverage

Arnold Schwarzenegger, the conservative Austrian governor of California, has now truly broken with the far right.

Joe noted on several occasions by now that Schwarzenegger seems to be re-reinventing himself as a (true) centrist. His latest proposal is one that leaves no room for doubt:

“Prices for health care and insurance are rising twice as fast as inflation, twice as fast as wages. That is a terrible drain on everyone, and it is a drain on our economy,” Schwarzenegger said. “My solution is that everyone in California must have insurance. If you can’t afford it, the state will help you buy it, but you must be insured.”

Schwarzenegger’s plan would require everyone living in California — even illegal immigrants — to have health insurance, at an estimated cost of $12 billion. Individuals who refuse to carry insurance could face reductions in their state income tax refunds or the garnishment of their wages. All businesses with 10 or more employees would have to offer coverage or pay a fee of 4 percent of their payroll into a fund to help the uninsured buy health insurance.

Schwarzenegger also recommended expanding the state’s existing program for children’s health insurance to families that earn less than three times the poverty level, or about $60,000 for a family of four.

The governor also wants to force insurers to offer coverage to people with existing medical conditions. Currently many insurers will not cover older people, those with major illnesses or even people with relatively minor complaints such as asthma or varicose veins.

Schwarzenegger also would require insurance providers to use 85 percent of their premium proceeds on patient care.

The state would increase reimbursements to doctors and hospitals by a total of $4 billion. Money for the program would come from new taxes on doctors (2 percent of their revenue) and hospitals (4 percent), federal funds, and county funds that now pay for emergency care for the uninsured.

As the Post article points out, most opposition will most likely come from fellow Republicans. Ed Morrissey for instance:

The plan appears to be a populist’s dream. While not a single-payor system on the surface, the new regulation would dictate the terms for insurers in such a way that government will effectively take over most of the decision-making for medical coverage and payouts. It takes the bill out of the hands of the consumer and puts it onto both businesses large and small as well as the people who actually provide the medical care.

If California had a reputation for efficiency and good management of insurance programs, this might almost make sense. However, the state has a disastrous workers-comp program that has already provided a large incentive for businesses to look eastward for relocation. It costs employers a fortune and leaves them vulnerable for abuse. Schwarzenegger promised to overhaul the system, but reform has been slow in coming.

Kevin Drum is more positive:

Problems? Sure. California Republicans are already lining up to oppose it, and this matters since tax and budget issues require a two-thirds majority to pass. (Apparently some Democratic supporters are claiming the plan needs only majority support, but this seems pretty iffy to me.) Steve Burd, the CEO of Safeway, points out that the 4% payroll tax is too low a figure to provide a level playing field, since healthcare sets back the average company about 7% of payroll. That may actually encourage companies to stop offering health insurance and instead simply pay the tax. Finally, although I haven’t seen an independent analysis of the numbers, my gut tells me they look lowballed. I have a feeling the plan is going to cost more than Schwarzenegger is fessing up to.

Overall, I’m not a big fan of individual mandates. On the other hand, I am a big fan of community rating, and the whole plan might be worth passing simply to get that enshrined into law. Once community rating becomes established, I suspect there’s no going back, and that might eventually lead to a more rational system all by itself.

So two-and-a-half cheers for Arnold’s plan. It’s not perfect, but few things in life are. For now, it’s probably about as good as we’re likely to get.

Your thoughts on Schwarzenegger’s plan?

As I see it, government influence should be limited as much as possible. However, health insurance is one of those areas in which the government could play a role simply because without this role, many people will be uninsured. Many people meaning “many poor people”.

That being said, any plan for universal health coverage should be based on the idea that the government should only be involved as much as necessary. First try to find other ways of accomplishing the main goal.

Schwarzenegger’s plan is ambitious. It has its errors, as others have pointed out, but it seems to me that a plan must be made and it is – as such – a good development and a good decision by Schwarzenegger to try and deal with this now. The present status quote can no longer be accepted.

Also be sure to read Pat’s post on this over at Stubborn Facts. Pat thinks that “there are several small, not that politically difficult steps which can be taken which would reduce costs and improve access to health care.”

Want to find out what those ‘steps’ are? Go to Stubborn Facts (and leave a comment there or here).

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