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November 11, 2007

Health care plan needs more work on costs

Assembly speaker Fabian Nunez and Senate President Pro Tem Don Perata have devised a new health care proposal that comes closer to the one advocated by Gov. Arnold Schwarzenegger. However, it is riddled with problems that illustrate why health care reform is such a difficult task.

The idea behind both the governor's and the Legislative leaders' plans is to extend health care insurance to most of the estimated 5 million Californians who are not covered. That is a noble goal, but one not easily achieved without considerable expense and changes in the way medical care is financed and delivered.

Perata and Nunez have moved a bit nearer the governor on health care reform, but neither plan goes far enough in reducing skyrocketing medical costs.

High and rapidly rising medical costs are the main reasons many lower- and middle-income Californians do not have health insurance, and why too many people use emergency rooms as their first choice for medical care.

On the positive side, the Nunez-Perata plan (as well as the governor's) would insure more children with comprehensive benefits.

Also, government subsidies would help low-income adults get similar coverage through the state's Health Families program.

Unfortunately, these benefits come at a considerable cost to businesses and taxpayers. Most employers would have to pay a 6.5 percent payroll tax or provide the equivalent in health benefits for their employees.

Even small businesses, many of which cannot afford to pay health benefits, would have to pay a tax of 2 percent to 4 percent of their payrolls.

But insurance companies would be able to raise monthly rates as they see fit. There would be huge subsidies for private insurers, via tax credits for families earning 250 percent to 450 percent of the federal poverty level to buy private insurance, which would not have price caps.

Nunez and Perata agreed with Schwarzenegger to make health insurance mandatory, something many Democrats and labor unions opposed because of affordability issues.

There would be an exemption from the requirement for people whose insurance costs exceed 6.5 percent of household income. Most insured families or their employers already pay more than 6.5 percent of household income for health care.

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Posted by healthinsurance at November 11, 2007 04:25 PM