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California Health Overhaul Effort Lesson for the Nation, Experts Say

By Phil Mattingly, CQ Staff

March 10, 2008 --The January defeat of Gov. Arnold Schwarzenegger's more than $14 billion health care overhaul in the California Senate may have been a setback for the Republican governor, but the plan could serve as the basis for a national debate on health care that is growing stronger in the days leading up to the presidential election.

At a health policy forum Friday by the New America Foundation, seven panelists who were at the heart of debate in California explored the possible national implications of Schwarzenegger's plan.

"This debate is really at the forefront of what is going to be a great national debate," said Peter Harbage, a fellow at the Center for American Progress. "It makes what happened in California just that much more important."

Schwarzenegger's massively ambitious plan was conceived almost entirely through bipartisan negotiations. The overhaul would have required all state residents to obtain coverage, provided subsidies for low income residents and created an insurance pool for the uninsured. The legislation also would have given all applicants insurance, regardless of any pre-existing conditions. In all, the plan was expected to provide insurance to 70 percent of an estimated 5.1 million uninsured state residents.

Portions of the Massachusetts health insurance plan, another state that requires its residents to have health insurance, served as a boiler plate for the California plan. But due to California's size and diverse population, the effort was considered much larger than that of Massachusetts'.

"The product was groundbreaking," said Richard Figueroa, one of Schwarzenegger's top health care policy advisors. "We believe it is a template for what can be the national health care model about how to fix the problem."

Figueroa said politics and outside opposition—but more than anything else, the budget constraints of the state—scuttled the plan. But Schwarzenegger plans to regroup and come back to the plan during his next three years in office, he said.

In the effort to extend insurance to all residents, employer and employee mandates were considered as possibilities. While the overall plan was considered a breakthrough in Schwarzenegger's "Post-Partisan" politics, the mandates brought out some of the strongest opposition to the plan.

Among those opposed was the National Federation of Independent Businesses, a lobbying firm that represents over 350,000 small businesses nationally. To them, the governor's plan "was similar to the problems in the movie Armageddon" in the scope of how bad it would have been, said Michael Shaw, a legislative director with the organization.

Small businesses also opposed the plan because of uncertainty over its affordability, something even Betsy Imholz, an ardent supporter of the plan, agreed was a problem.

"Frankly we have more to do on that as we move forward in the national debate," said Imholz, a special projects director with the Consumers Union of U.S., Inc. Imholz was involved in the ground level negotiations surrounding the plan. "We need a lot more policy work. We basically just looked at what people were paying and gave it our best shot."

A concern on the national front is the current state of the economy. One of the final blows to the Schwarzenegger plan was a larger-than-normal state deficit. Along with strong leadership, Imholz noted "timing and pacing" as two of the most important aspects of a successful plan. With the American economy in turmoil, questions of whether or not the country is prepared to undertake such a large debate linger.

But the national debate is only expected to grow hotter in the upcoming months with the looming presidential election in November. Both Sen. Barack Obama, D-Ill., and Sen. Hillary Rodham Clinton, D-N.Y., have proposed overhaul plans similar in concept to the California plan in their emphasis on cutting into the nearly 47 million uninsured Americans.

Sen. John McCain's health care plan is focused more on reining in the costs of health insurance. During the unveiling of his health plan in October 2007, McCain cited health care costs accounting for 16 percent of the gross domestic product—over $2 trillion—as the rationale for his plan.

No matter the plan, the question today is whether the roadblocks that led to the failure of Schwarzenegger's plan will serve as a learning experience candidates and involved parties on the national level - or if it will simply serve as foreshadowing, panelists said.

"Polarization, personalities and process," summarized Daniel Weintraub, a columnist with the Sacramento Bee on why the legislation failed. "Personalities will change, the process is correctable, but I think it's going to take a while to see whether the current polarization will change, either in California or in the national situation."

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