NCPA - National Center for Policy Analysis


January 9, 2007

California Gov. Arnold Schwarzenegger proposed a sweeping plan to mandate universal health care in the nation's most-populous state, putting forth measures that would require employers to pay into the health-care system as well as tax hospitals and doctors to help offset medical coverage's spiraling costs.

California, with 36 million residents, could influence other states to follow suit.  But Schwarzenegger also faces potentially one of the fiercest battles of his political career, because his plan calls for some level of sacrifice from many of the parties affected:

  • The governor said his plan to charge a "dividend" of 2 percent on doctors' revenue and 4 percent on hospitals' would be more than offset by what his office estimates would be $10 billion to $15 billion in new money coming into the medical system from so many people being insured, as well as a proposed increase in the state's Medi-Cal plan.
  • California now has about 6.5 million people who are uninsured or underinsured, a higher level than any other state; according to the Census Bureau, 15.9 percent of Americans lacked health insurance in 2005; in California, it was 19.4 percent.

The Schwarzenegger plan drew some criticism.  There may be some unintended consequences, said Joel Fox, president of the Small Business Action Committee in Sacramento.  For example, will some businesses opt out of covering employees and go into the pool (of state-insured workers), thus overwhelming the pool?  Will some companies cherry-pick their employees so that they hire the young and more easily covered?

Allan Zaremberg, president of the California Chamber of Commerce, questioned whether the plan would really make health care more affordable for those who already are insured.  Zaremberg said the taxes on doctor and hospital revenues could be passed onto consumers and the companies that already provide insurance in higher premiums.

Source: Jim Carlton, "Schwarzenegger Embarks On Fight for Health Plan," Wall Street Journal, January 9, 2007.

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