Press Release: Gov. Schwarzenegger Tackles California's Broken Health Care System

Gov. Schwarzenegger Tackles California's Broken Health Care System, Proposes Comprehensive Plan to Help All Californians

With 6.5 million Californians uninsured for all or part of the year - more than any other state in the nation - Gov. Arnold Schwarzenegger today shared his comprehensive plans to reform California's broken health care system by addressing the hidden costs that result in billions of dollars in higher premiums and taxes.

In a speech before hundreds of stakeholders, Gov. Schwarzenegger articulated why the broken system is in desperate need of repair.

"More than 60 emergency rooms have closed over the past decade because they didn't want to keep treating people without insurance. Unpaid medical bills mean billions of dollars in hidden taxes for the rest of us because those services all have to be paid for. So we pay higher deductibles, costs for treatment, premiums and co-pays," said Gov. Schwarzenegger "Companies stop offering coverage, which leads to more people without insurance and the whole cycle keeps repeating. Nearly three million people in California whose jobs do provide coverage turn it down because they think they're healthy and don't need it, or they don't want to pay their share of ever-higher premiums. We have to aim high and attack the entire system from top to bottom. We can create a model the rest of the nation can follow."

Gov. Schwarzenegger also talked about the drain on the state's economy caused by health care premiums growing more than twice as fast as prices overall or workers' earnings, as reported in a recent study by the Health Research and Educational Trust and the Kaiser Family Foundation.

A recent New America Foundation white paper estimates the average family pays about $1,186 a year in "hidden taxes" through health insurance premiums to cover the uninsured. According to the Centers for Disease Control and Prevention, chronic illnesses - such as cardiovascular disease, cancer and diabetes - are responsible for $445 billion in direct medical costs and $409 billion in lost productivity nationally.

The Governor's health care reform proposal will reduce the hidden tax, lower costs, support better care and create a healthier California through three essential elements of reform:

> Prevention, health promotion, and wellness
> Coverage for all Californians
> Affordability and cost containment

"The Governor's plan recognizes that health coverage for all Californians will benefit all Californians," said California Health and Human Services Secretary Kim Belshé. "Just as all sectors of society share in the benefits of coverage for all Californians, we have to share responsibility across the board. Fixing our broken health care system requires changes from all of us - individuals, government, doctors and hospitals, insurers and employers."

All of the details of the Governor's plan are found at www.gov.ca.gov. The Governor's proposal is built on "shared responsibility, shared benefit" where every segment of the healthcare system realizes a benefit and has some responsibility. Highlights include:

Securing health coverage: All Californians will be required to have health insurance coverage. Coverage must be substantial enough to protect families against catastrophic costs as well as minimize the "cost shift" that occurs when large numbers of persons are receiving care without paying the full cost of that care. By ensuring all Californians are insured, this proposal will stop burdening those with health coverage from paying the bills of those without insurance.

Guaranteeing coverage: Insurers will be required to guarantee coverage so that all individuals have access to affordable products. Californians will no longer live in fear of losing their health coverage.

Encouraging personal responsibility for health and wellness: Implement "Healthy Action Incentives/Rewards" programs in both the public and private sectors to encourage the adoption of healthy behaviors. Californians, who take personal responsibility to increase healthy practices and behaviors, thereby reducing their risk of chronic medical conditions and the incidence of infectious diseases, will benefit from participation in this groundbreaking program.

Providing low-income individuals affordable coverage: Very low-income Californians will be provided expanded access to public programs, such as Medi-Cal, and lower-income working residents will be provided financial assistance to help with the cost of coverage through a new state-administered purchasing pool.

Increasing Medi-Cal rates significantly: To reduce the "hidden tax" associated with low Medi-Cal reimbursement and to encourage greater provider participation in the Medi-Cal program, increase Medi-Cal rates for providers, hospitals and health plans.

Improving insurer and hospital efficiency: Require health plans (HMO's), insurers and hospitals to spend 85% of every premium dollar on patient care.

Enhancing Tax Breaks for Individuals and Employers for the Purchase of Insurance: Align state tax laws with federal laws by allowing persons to make pre-tax contributions to individual health care insurance Health Savings Accounts. In addition, require employers to establish "Section 125" plans so that employees can make tax-sheltered contributions to health insurance and save employers additional FICA contributions.

Contributing to the cost of coverage: Increased Medi-Cal rates and eliminating the uninsured will direct $10-$15 billion in new money to hospitals and doctors. Therefore, a coverage dividend of 2% on doctors and 4% on hospitals will be assessed to help cover the increased Medi-Cal rates. Employers of 10 or more (small businesses, which make up 80% of California business, are exempt) who do not provide coverage will pay an "in-lieu fee" of 4% of payroll. Without this fee, the system will see "crowd-out," a system creating an incentive for employers to drop coverage.

"My proposal is a beginning. I look forward to a vigorous and open debate. Everything will be on the table and I want to hear from everyone. If we have the will - and I believe that we do - we can heal our broken system," said Gov. Schwarzenegger.

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