Health plan may fall short of cash
Feds might not OK funds the governor is counting on
Tom Chorneau

San Francisco Chronicle

Friday, February 16, 2007

(02-16) 04:00 PST Sacramento -- Financial assumptions in Gov. Arnold Schwarzenegger's overhaul of the state's health care system may have underestimated costs to the state by as much as $3 billion a year, the Legislature's nonpartisan analyst's office reported Thursday.

The legislative analyst said the biggest uncertainty surrounds $1.3 billion in federal money that might not be approved.

The state could also face costs of hundreds of millions of dollars above the governor's estimates if the administration has undercounted the number of uninsured residents living in the state. Hundreds of millions more could come if health care costs overall escalate faster than the administration has predicted.

The warning came during the Legislature's first hearing on Schwarzenegger's $12 billion health care program, which would extend coverage to 6.5 million uninsured Californians. The hearing, held before the state Senate's health committee, drew representatives from a wide spectrum of interest groups -- employers, doctors and hospital groups, as well as consumers.

While most said there are aspects of the governor's plan they do not support, virtually all said they will continue to work with lawmakers on finding compromise.

"There seems to be a spoken or unspoken compact among everyone interested in this not to give up points of disagreement but to find ways to make this work," said Sen. Darrell Steinberg, D-Sacramento. "That's a good sign."

The governor's plan will require all residents to have health insurance and mandate that employers with 10 workers or more offer insurance or pay into a state pool that would offer policies.

Government-run health care programs would be expanded to provide care to poor people and insurance companies would be required to offer policies to anyone who applied.

Reimbursement rates for doctors and hospitals providing care in government insurance plans would be raised substantially. But in exchange, providers would have to pay a tax to help the state pay for more insurance coverage.

A key component of the plan is $5.5 billion in new federal support.

But the legislative analyst pointed out that about $1 billion of that money will require new agreements with the federal government on sharing the cost of care of the uninsured. Another $350 million will require Congress to reauthorize support of hospitals that provide care to the indigent.

Herb Schultz, senior adviser to the governor on health care, said most of the money the state could get under existing rules.

Based on recent conversations with federal officials, he said, only a small portion of the money -- about $250 million -- would require new agreements with the federal government.

Among the other issues raised at the hearing were concerns that middle-income residents would be required to have coverage but the governor's plan imposes no controls on what insurance companies can charge.

"The individual mandate is not shared responsibility," said Beth Capell, a lobbyist who represents the Service Employees International Union. "The individual's liability is unlimited."

E. Richard Brown, director of the UCLA Center for Health Policy Research, said the governor's plan could require families earning $60,000 a year -- just above the subsidy limit -- to spend as much as 20 percent of their income on insurance premiums. He advocated for subsidy levels to be raised.

Dustin Corcoran, lobbyist for the California Medical Association, said most doctors support the governor's plan to raise reimbursements paid to providers of care to residents enrolled in state-sponsored insurance programs.

But, he pointed out, only a small number of doctors would benefit because most do not participate in the Medi-Cal or Healthy Families programs. He said doctors are far more concerned about the governor's plan to impose a tax on provider services -- something all doctors would be required to pay.

Return to : Single Payer Articles