Schwarzenegger Proposes Universal Health Care for California

Gov. Arnold Schwarzenegger announced a sweeping proposal to extend health coverage to nearly all of California's 6.5 million uninsured people, promising to share the cost among businesses, individuals, hospitals, doctors, insurers and government.

The plan contains elements that are likely to provoke opposition from a wide range of powerful health-care interests, including doctors, hospitals and insurers, as well as employers and unions. But it also contains incentives for each of them.

All Californians will be required to have insurance, and all but the smallest businesses will have to offer it to their workers. Insurers will no longer be allowed to deny coverage to people because of their medical problems.

All children, regardless of their immigration status, will be covered through an expansion of the state and federal Healthy Families program.

"I don't think it is a question or a debate if they ought to be covered ... The federal courts have made that decision -- that no one can be turned away," Schwarzenegger said. "The question really isn't to treat them or not to treat them. The question really is how can you treat them in the most cost-effective way."

The governor was supposed to give his address in person to a panel of health care stakeholders. Instead, he spoke via video link. He is still recuperating from breaking his right femur during a December ski vacation in Idaho.

Largest State So Far

California wouldn't be the first state to tackle universal health care, but it would be the largest state to undertake such a task. The state's 6.5 million uninsured, equivalent to 20% of the population, includes 750,000 children, reported CNBC's Jane Wells. Massachusetts, Vermont and Maine have enacted laws covering all residents, while Illinois has a health plan covering children. Missouri is working on a healthcare plan involving small businesses, she said.

Under Schwarzenegger's plan, all Californians will be required to have insurance, although the poorest will be subsidized. Businesses with 10 or more employees will have to offer insurance to their workers or pay 4% of their payroll into a state fund. Smaller businesses will be exempt.

Kim Belshe, Schwarzenegger's health secretary, said requiring people to obtain health insurance is vital to the plan's success. Hospitals, doctors and insurers will benefit if everyone has insurance and if Medi-Cal reimbursement rates are increased, she said.

"We must come together to create a more functional health care system that provides care for everyone," Belshe said.

She said $10 billion to $15 billion in new money will go to doctors and hospitals under Schwarzenegger's plan, which is more than they will be asked to pay.

Still Resistance Likely

The insurance mandate is likely to be met with stiff resistance. Unions will balk at the individual requirement, while business groups and Republican legislators will protest the business aspect.

The state will subsidize the estimated 1.2 million low-income people who do not currently qualify for coverage under Medi-Cal. They would be able to buy insurance through a state-run pool and will have to make a small contribution toward their premiums.

Schwarzenegger is betting that his plan will save $10 billion a year by cutting health care costs, an ambitious goal. He says savings will offset the new fees he is asking doctors and hospitals to pay.

Hospitals will have to pay 4% of their revenues, while doctors will pay 2%.

The state also will increase what it pays doctors and hospitals through Medi-Cal, which is widely seen as woefully underfunded.

"Today's plan is a starting point for one of the most important debates California will have had in recent history," said Adam Mendelsohn, the governor's deputy chief of staff. "The governor has said, 'Let all of us put our plan on the table.' And now we must have a bipartisan, cooperative dialogue about how we achieve real health care reform."