Initial Response to Arnold's Proposal

Just about everyone in Sacramento has offered their view on Arnold's health care proposal. As John Meyers noted last night, the only ones offering unqualified praise are the two Democratic leaders Nunez and Perata. It is a curious thing, however, given some context it is not all that surprising.

Arnold has just set the rightmost goal post on health care legislation. Negotiation will now begin and pull the legislation to the left. Nunez and Perata's plans are both significantly better than Arnold proposal.

One thing is for sure, we are not going to be talking about a single-payor system. Any reform passed this year will be heavily reliant on the current insurance system. There is no logical way to negotiate from one to the other. Instead, Nunez and Perata decided to reform the existing system, where they knew they could get Arnold to play ball.

Here is my take on the proposal. It isn't terrible, but there is a lot of room for improvement. We are starting out in a good place with the goal of universal coverage as its central focus. It move things in a better direction than Masscare.

There are a few serious sticking points, including the insistence on individual mandates for coverage. We need mandates, see Weintraub for the why. The question is do we require employers to simply contribute to coverage and criminalize individuals if they do not get insurance? Or do we require employers to ensure their employees have coverage? Perata and Nunez have proposed the latter, while Arnold opted for the former.

[UPDATE] See more from Health Access on the difference in how mandates are administrated between Nunez's and Schwarzenegger's proposal.

Arnold's proposal forces all businesses with more than 10 employees to provide coverage or contribute 4% of revenue into a state pool to help cover them. This is way too low. Walmart already contributes 7% to their crappy system and in fact, companies on average contribute 7.2% of revenues to health care. This low contribution level would encourage employers to drop their better system for Arnoldcare.

To further make things worse, Arnold is proposing a relatively low subsidy level for the poor compared to other plans across the country. Sen. Wyden's plan subsidizes up to 400% of the poverty line, Masscare is at 300%, while Arnold is 250%. That is too low and sure to be part of the negotiations. This is how his current proposal would work.

Those earning more than 2 1/2 times the federal poverty level — a total of $41,500 a year for a family of three — would not receive a subsidy but would still have to buy insurance if their employer did not offer it. The cheapest plan would require families to pay $2,000 a year in premiums, and as much as $10,000 in out-of-pocket medical costs.

80% of the uninsured make less than 300% of the poverty level.

One of the more thorny pieces of Arnold's proposal pulls $2 billion in governmental dollars that usually goes to hospitals to offset the cost of caring for the uninsured to help pay for insurance for that very population. First of all, there is no real way to make that transition. Hospitals would experience a huge drop in dollars flowing in, while the attempts to ensure this population begins.

And hospitals may still have to deal with uninsured patients. The homeless, unemployed and illegal immigrants might not obtain insurance even if fully subsidized, and the administration plans to enforce the mandate through the state's income tax boards.

If you don't have income, you don't pay your taxes. How they plan to enforce this is beyond me.

Insurance company's have long deliberately inflated their overhead to increase their profits. Arnold's proposal mandates that 85% of revenue go to patient care. That isn't good enough. In contrast, Medicare spends 98% on patient care.

While, Arnold would require insurance companies to cover all people regardless of their health, he would not regulate rates.

Insurers would receive a huge business boon, since the mandate for coverage would provide them with a captive audience, but without having their rates regulated as those of auto and home insurers are.

Insurers will love this. They get a guaranteed 15% to keep and get to sell a bunch of expensive plans to a captive audience.

I am sure I missed a few things. This issue is extremely complicated. I will have more coverage in the weeks and months to come. We have just begun the negotiations. The state is moving in the right direction on health care, but we need to ensure that real reforms, not punishments or window dressings are enacted.