Widening of Health Care in States Hits Roadblocks

By Kevin Sack
The New York Times

Tuesday 25 December 2007

Sacramento - A year that began with great ambition for major expansions of health insurance here and in other state capitals is ending with considerable uncertainty, as a second wave of change runs headlong into a darkening economy and political divisions over how to apportion the cost.

Though the governors of three big states - California, Illinois and Pennsylvania - proposed sweeping plans to restructure health care this year, none will finish 2007 with bills passed and signed. In each state, the initiatives confronted entrenched opposition from insurance and other business lobbies that made it far more difficult to build a consensus for change than in the smaller New England states that acted in recent years.

Yet it also was a year of intriguing achievement, here above all, where the Republican governor, Arnold Schwarzenegger, and the Democratic Assembly speaker, Fabian Núñez, drew up a bipartisan blueprint for bringing near-universal coverage to the country's most populous state.

Mr. Schwarzenegger and Mr. Núñez have yet to close the deal by gaining the support of the State Senate. But they demonstrated in their yearlong negotiations that a consensus on basic principles could be reached, perhaps setting a template for other states and for Washington.

"It's significant that what they've been talking about in California is similar to what many of the leading Democratic presidential candidates are talking about as well," said Larry Levitt, vice president of the Kaiser Family Foundation, which researches health care issues. "There seems to be some convergence at least on the part of those supporting universal health care on how to get there."

In addition to being the most populous state, California has among the country's highest proportions of uninsured residents, about 20 percent. Indeed, there are more uninsured in California than there are total residents of Massachusetts, Maine or Vermont, the states that have set the pace for overhauling health care. Success here, therefore, would send a signal that such plans could be enacted in states with the heaviest burdens.

The Schwarzenegger-Núñez plan, which passed the Democratic-controlled Assembly last week, expands on the universal coverage law that Massachusetts passed in 2006. That state now requires insurance companies to offer coverage regardless of an applicant's health status and mandates that most residents have insurance by Dec. 31, or face a tax penalty of $219.

State officials project that more than 300,000 previously uninsured people will sign up in time, a third of them in a surge over the last month. That has put Massachusetts more than halfway to its goal of insuring everyone.

The downside, and one noted by states with widening budget gaps, is that the program is expected to exceed its first-year budget by at least $150 million. And state officials are struggling to prevent double-digit premium increases next year.

Whether the momentum that began with State of the State addresses last January will continue into 2008 is not clear. It had been widely felt by health reform advocates that this nonelection year provided the best political climate for change.

Now the focus may shift to the presidential campaign, where the leading candidates for the Democratic nomination have each proposed major overhauls. Some state leaders may be tempted to wait out the year to gauge whether the next president will push for a national health plan that might subsume state efforts.

The essential problem, meanwhile, continues to worsen. The Census Bureau reported that the number of uninsured grew to 47 million in 2006, a one-year increase of 2.2 million. The share of United States residents who had employer-based coverage dropped to 60 percent from 64 percent in 2000, according to the Economic Policy Institute, a liberal research group. And though the rate of growth has slowed, the cost of employer-sponsored premiums still rose by 6.1 percent in 2007, more than double the inflation rate, according to the Kaiser Family Foundation.

Because of its national influence, California will continue to command attention as Mr. Schwarzenegger and Mr. Núñez try to bring along the Senate president pro tem, Don Perata, a Democrat. While supportive of universal coverage, Mr. Perata has said he is concerned about the plan's $14.4 billion price tag when the state faces a budget gap of commensurate size.

As in Massachusetts, the California plan would mandate coverage for most individuals. It would raise money to subsidize policies for low-income residents through what Mr. Schwarzenegger calls shared responsibility - a tax on hospital revenues, a hefty increase in tobacco taxes and assessments on employers who do not contribute to their workers' health care.

In a California innovation, the assessment rates would be graduated according to the size of the company. If the Senate passes the measure, voters will be asked to approve the revenue measures in a November referendum that would become the truest test of public support for change.

California, of course, is an idiosyncratic state, and at no time more than now, with its movie star governor and his mantra of "postpartisanship." But even in a state as comparatively progressive as this one, the coalition that has formed around overhauling health care is notable.

At a postvote news conference beneath the Capitol rotunda last week, Mr. Schwarzenegger and Mr. Núñez stood with the chairman of Safeway grocery stores and the president of the San Diego Chamber of Commerce, as well as leaders of unions representing service workers, government employees and carpenters.

Andrew L. Stern, president of the Service Employees International Union, seemed to speak for many of those in attendance when he said in an interview that successful health reform would depend on "not letting the perfect be the enemy of the good."

Against that backdrop, the bipartisan partnership between Mr. Schwarzenegger and Mr. Núñez seemed almost unremarkable. The two men need each other - Mr. Schwarzenegger to play on the big stage he enjoys, Mr. Núñez to leave a legacy before term limits may force him from office - and they praise each other lavishly in public.

That is not to say support for their plan is universal; it won not a single Republican vote in the Assembly. Some unions oppose it because they fear that mandatory insurance policies would not be affordable, even with government subsidies. The California Nurses Association opposes the plan because it would preserve private insurance rather than replacing it with universal government coverage.

Other governors, in more centrist states, made less headway this year in overcoming opposition generated by efforts to contain health costs and to raise the revenues needed to subsidize premiums.

Illinois' Democratic governor, Rod R. Blagojevich, got nowhere with his proposals to pay for universal access to insurance by taxing gross business receipts and assessing employers who do not offer coverage to their employees. He then instigated a fight with his legislature and provoked a lawsuit by using his executive authority to widen eligibility for state-subsidized insurance programs.

In Pennsylvania, Gov. Edward G. Rendell, also a Democrat, failed to persuade his politically divided legislature to cover the state's 900,000 uninsured through an employer assessment. Like the California leaders, Mr. Rendell has now proposed increasing cigarette taxes, as well as raiding the surplus in a state fund designed to help doctors pay for malpractice insurance.

In both New York and Connecticut, governors expect to receive plans for universal health coverage from advisory groups in 2008 and then to begin their own legislative battles.

"It remains incredibly difficult for states by themselves to get all the uninsured covered," said Robert Blendon, a Harvard professor of health policy and political analysis. "There just is not a consensus on who should pay."

While only a few states considered universal coverage plans, it was an active year for more incremental measures, said Laura Tobler, a health policy analyst for the National Conference of State Legislatures.

Maryland and Texas joined the 15 states that have created programs to subsidize insurance for small businesses and individuals, she said. Four states effectively guaranteed that all children could be insured through expanded eligibility for Medicaid and the State Children's Health Insurance Program, known as S-chip. An additional 13 states passed more modest expansions for children.

Any continuation of that trend in 2008 would likely depend on Congress and President Bush settling their considerable differences over financing for S-chip.

Mr. Bush this year twice vetoed large increases approved by the Democratic-controlled Congress, and his administration used regulatory powers to restrict the ability of states to extend the program beyond its original target: the children of the working poor.

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