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POLICY: California’s Healthcare Plan: Setting the National Debate By Bart Mongoven

Bart Mongoven is an analyst with Austin-based Stratfor.com and the author of the Stratfor Public Policy Intelligence Report. In this piece he examines the obstacles facing the Schwarzenegger health care plan on the national and local levels and reaches a contrarian conclusion —  the proposal is likely to succeed after a major fight with special interests. Mongroven predicts "a victory within the year" for Schwarzenegger, a bold claim that if true will clearly have major national implications.  If you’re unfamiliar with their work, Stratfor is the private corporate intelligence firm founded by political scientist Dr. George Friedman. While most of the firm’s work focuses on national security and foreign policy issues, its analysts also track domestic policy issues — as in this case. You may not agree with Mongoven’s conclusions, but his analysis is insightful and his arguments well worth noting.  The piece remains copyright Stratfor.com of course. — John Irvine

California Gov. Arnold Schwarzenegger outlined
a proposal Jan. 8 for a massive overhaul of California’s healthcare system.
In his State of the State speech, the Republican governor only lightly
touched on the core elements of the ambitious plan. But as even a few details
of his proposal have become known, controversy has begun to roil.

At
present, just about no one in California seems happy with the proposal. The
California Chamber of Commerce has called it a tax on employers. The
California Nurses Association condemned it as a gift to big business.
Conservatives call it socialized medicine. Liberals say the
pro-health-insurer GOP has co-opted the proposal.

National interest
groups, meanwhile, have been silent. The voices of business — the U.S.
Chamber of Commerce and the National Federation of Independent Businesses —
have not issued press releases either supporting or criticizing the proposal.
National labor organizations are not issuing press releases, and neither are
healthcare advocacy organizations, like the AARP or Families USA. On the
surface, a number of reasons explain why the national organizations have left
this battle to state lobbyists in Sacramento.

Most observers in
Sacramento agree that the proposal, in some form, will pass through the
legislature in 2007. The current state of the healthcare issue in the United
States strongly suggests that what is happening in California will emerge as
the basis for national policy. With this being likely, it soon will become
untenable for national-level players to allow the California debate to remain
isolated. Some of the major national special interests therefore will find an
advantage in establishing the California debate as the foundation for a
national discussion.

Schwarzenegger’s Proposal
<!–
D(["mb","In his\naddress, Schwarzenegger described a plan that would guarantee every\nCalifornian — legal resident or not — a baseline of medical coverage in\nmany ways similar to the measure Massachusetts passed in 2006. The\ngovernor's plan would require uninsured citizens to purchase healthcare\ncoverage, the cost of which would be shared between individuals, employers,\nthe government and the healthcare industry. Companies with 10 or more\nemployees would be required to provide health coverage or to pay 4 percent of\ntheir payroll to a government health coverage fund. The plan would represent\nsignificant progress on covering the nearly 20 percent of Californians who\nare uninsured and who currently tend to receive some emergency treatment, the\ncosts of which are not well accounted for. The plan also includes "Healthy\nActions" benefits to promote healthy behaviors. Schwarzenegger's\nplan does not represent a significant step toward restructuring the ways in\nwhich medical services are priced or the extent to which customers share in\nthe burden of that pricing. This leaves employers with several large areas\nstill requiring creative solutions at the state or federal level. The\ngovernor's proposal raises the question of what will get modified and how\nthese changes will play out. Opposition to the current proposal runs quite\ndeep. The state Republican Party has opposed the introduction of such\nmeasures for almost a decade; it now finds itself fighting a popular\nRepublican governor on the issue. The California Chamber of Commerce has\nargued the proposal is essentially an additional employment tax that will\nharm business and employment in the state. Physicians oppose the long range\nof controls that the proposal will place upon them. The California Nurses\nAssociation, for its part, has argued that the bill is a gift to the health\ninsurance industry and still does not reflect patients' best interests. The\nstate Democratic Party has expressed concern that the proposal will not\nprovide adequate coverage across the board. And because the proposed law\nwould affect any business with more than 10 employees, the small-business\nlobby is adamantly opposed.”,1]
);
//–>
In his
address, Schwarzenegger described a plan that would guarantee every
Californian — legal resident or not — a baseline of medical coverage in
many ways similar to the measure Massachusetts passed in 2006.

The
governor’s plan would require uninsured citizens to purchase healthcare
coverage, the cost of which would be shared between individuals, employers,
the government and the healthcare industry. Companies with 10 or more
employees would be required to provide health coverage or to pay 4 percent of
their payroll to a government health coverage fund. The plan would represent
significant progress on covering the nearly 20 percent of Californians who
are uninsured and who currently tend to receive some emergency treatment, the
costs of which are not well accounted for. The plan also includes "Healthy
Actions" benefits to promote healthy behaviors.

Schwarzenegger’s
plan does not represent a significant step toward restructuring the ways in
which medical services are priced or the extent to which customers share in
the burden of that pricing. This leaves employers with several large areas
still requiring creative solutions at the state or federal level.

The
governor’s proposal raises the question of what will get modified and how
these changes will play out. Opposition to the current proposal runs quite
deep. The state Republican Party has opposed the introduction of such
measures for almost a decade; it now finds itself fighting a popular
Republican governor on the issue. The California Chamber of Commerce has
argued the proposal is essentially an additional employment tax that will
harm business and employment in the state. Physicians oppose the long range
of controls that the proposal will place upon them. The California Nurses
Association, for its part, has argued that the bill is a gift to the health
insurance industry and still does not reflect patients’ best interests. The
state Democratic Party has expressed concern that the proposal will not
provide adequate coverage across the board. And because the proposed law
would affect any business with more than 10 employees, the small-business
lobby is adamantly opposed.
<!–
D(["mb"," That a proposal can anger so many groups\nfor so many reasons and still be considered very likely to pass shows the\nstark divide between the public and special interests, and also the degree to\nwhich healthcare needs a big fix. All of the special interests with a\nsizeable stake in the healthcare debate know that the system is no longer\neffective for any of the participants — patients, insurers, government or\nbusinesses — and needs to be changed soon. None of them, however,\nwants to be the first to champion a particular plan. And every special\ninterest's solution to the healthcare system's problems threatens many or\nmost of the other interests involved. As a result, whoever lays out a\ncomprehensive plan is pilloried, while those doing the attacking need not\nadvocate their own plan. The political debate has devolved to a level where\nnone of the major players is willing to offer anything positive of any\nsubstance. Instead, they would rather sit back and defend their interests\nwhen others threaten them. Despite the defensive posture of the\nspecial interests, according to observers in Sacramento, Schwarzenegger's\nproposal will in all likelihood lead to a plan passed within a year. That the\ninterests are sniping and protecting their own turf while the political\nmachinery creates change around them shows the degree to which playing\ndefense is no longer tenable for the special interests. An\nAbsence of National Attention The general strategy in debates\nlike this is for the national lobbies — be it the U.S. Chamber or the\nAFL-CIO — to invest as much national money as possible, but to stay out of a\nstate battle publicly and allow state affiliates to lead the fight. Keeping\nout of view is generally a sound strategy. First, it keeps the issue local.\nThe organization avoids the perception of having brought a bunch of hired\nguns to interfere in a state issue. Staying away also provides the national\nlobby with wiggle room, meaning it does not have to go on record nationally\ndue to the efforts of one state. Finally, it keeps the national lobbies from\nhaving to reveal all their strategies and tactics in one state battle.”,1]
);
//–>

That a proposal can anger so many groups
for so many reasons and still be considered very likely to pass shows the
stark divide between the public and special interests, and also the degree to
which healthcare needs a big fix. All of the special interests with a
sizeable stake in the healthcare debate know that the system is no longer
effective for any of the participants — patients, insurers, government or
businesses — and needs to be changed soon.

None of them, however,
wants to be the first to champion a particular plan. And every special
interest’s solution to the healthcare system’s problems threatens many or
most of the other interests involved. As a result, whoever lays out a
comprehensive plan is pilloried, while those doing the attacking need not
advocate their own plan. The political debate has devolved to a level where
none of the major players is willing to offer anything positive of any
substance. Instead, they would rather sit back and defend their interests
when others threaten them.

Despite the defensive posture of the
special interests, according to observers in Sacramento, Schwarzenegger’s
proposal will in all likelihood lead to a plan passed within a year. That the
interests are sniping and protecting their own turf while the political
machinery creates change around them shows the degree to which playing
defense is no longer tenable for the special interests.

An
Absence of National Attention

The general strategy in debates
like this is for the national lobbies — be it the U.S. Chamber or the
AFL-CIO — to invest as much national money as possible, but to stay out of a
state battle publicly and allow state affiliates to lead the fight. Keeping
out of view is generally a sound strategy. First, it keeps the issue local.
The organization avoids the perception of having brought a bunch of hired
guns to interfere in a state issue. Staying away also provides the national
lobby with wiggle room, meaning it does not have to go on record nationally
due to the efforts of one state. Finally, it keeps the national lobbies from
having to reveal all their strategies and tactics in one state battle.
<!–
D(["mb","\nThis battle is different, however. It is a political cliche that\nwhat happens is California is a preview of what is coming to the country. In\nmany ways, the cliche developed for good reason, since California is a large\ndynamic state that is also prone to experiment with policy — even though\nmany of its experiments have failed miserably. These failures give the lie to\nassertions that California moves always provide a preview of federal\npolicymaking, but they do bolster the notion that the states are laboratories\nfor the federal government (and California is clearly among the country's\nbusiest laboratories). In the case of healthcare, however,\nCalifornia's debate is indeed a preview of what will happen at the federal\nlevel. Massachusetts debated the issue in 2006, and passed a significant\npiece of legislation, but the country was not in its present mood and\nCongress was unlikely to address the issue at the time. Since then, Congress\nhas come into Democratic hands at a time when the public is actively seeking\npoliticians who will tackle healthcare issues. Most important,\nhowever, is the sense that issues relating to healthcare are now on the\npolitical front burner. Despite the national lobbying stalemate over\nhealthcare reform, even at the federal level, the question is not whether\nsomething will get done in the next three years, but what. The risk at the\nfederal level is of being on the wrong side of the issue completely, which is\nto say being in a position where the politics are working squarely against\nyour particular interest. This is where California comes in. In\naddition to being a policy laboratory, in the case of healthcare California\nwill be a political laboratory. By making everyone angry, Schwarzenegger has\nshown that his healthcare remedy will not gang up on one villain, placing\nthat single interest at a significant policy disadvantage (like the health\ninsurance industry, which saw former President Bill Clinton's\nmuch-anticipated 1994 healthcare proposal as a strategic threat to its\nbusiness, fighting it with all its might). “,1]
);
//–>

This battle is different, however.

It is a political cliche that
what happens is California is a preview of what is coming to the country. In
many ways, the cliche developed for good reason, since California is a large
dynamic state that is also prone to experiment with policy — even though
many of its experiments have failed miserably. These failures give the lie to
assertions that California moves always provide a preview of federal
policymaking, but they do bolster the notion that the states are laboratories
for the federal government (and California is clearly among the country’s
busiest laboratories).

In the case of healthcare, however,
California’s debate is indeed a preview of what will happen at the federal
level. Massachusetts debated the issue in 2006, and passed a significant
piece of legislation, but the country was not in its present mood and
Congress was unlikely to address the issue at the time. Since then, Congress
has come into Democratic hands at a time when the public is actively seeking
politicians who will tackle healthcare issues.

Most important,
however, is the sense that issues relating to healthcare are now on the
political front burner. Despite the national lobbying stalemate over
healthcare reform, even at the federal level, the question is not whether
something will get done in the next three years, but what. The risk at the
federal level is of being on the wrong side of the issue completely, which is
to say being in a position where the politics are working squarely against
your particular interest.

This is where California comes in. In
addition to being a policy laboratory, in the case of healthcare California
will be a political laboratory. By making everyone angry, Schwarzenegger has
shown that his healthcare remedy will not gang up on one villain, placing
that single interest at a significant policy disadvantage (like the health
insurance industry, which saw former President Bill Clinton’s
much-anticipated 1994 healthcare proposal as a strategic threat to its
business, fighting it with all its might).
<!–
D(["mb","Schwarzenegger, by\ncontrast, has asked everyone to share the pain of making a new system. As far\nas this approach goes, the key is to make sure the system is sustainable.\nThus, in return for the short-term pain associated with adjusting to the new\nsystem, the companies, consumers, unions and professionals will find a new\neconomic equilibrium that will not present one interest with continual\nchallenges or the threat of being placed out of business. If\nCalifornia can develop a system that assuages the worst fears of insurers,\nemployers, hospitals, physicians, unions, moderate Republicans and most\nDemocrats, it will have created a model that can work nationwide.\nCalifornians know this. Accordingly, they are astounded that the national\npolitical parties and special-interest groups not only have failed to descend\nupon Sacramento to stake their national position, but in fact are not even\ntalking about it. Seizing the Initiative Soon,\nhowever, one of the major national players will recognize the stakes, and the\nopportunity to be on record nationally regarding certain elements of\nCalifornia law. It is only a matter of time before other players begin to\nview the proposal as, at the very least, setting the stage for action by\nother states or the federal government. This alone would spur a race among\nsome actors, such as corporations or healthcare providers, to push for a\nfederal version of the plan if it appears that other states are interested in\npursuing something that will work against their interests. While\nrisks certainly exist in taking an early stand in the debate, a lobbying\ngroup — be it a trade union, labor union, or consumer association — that\ndoes so will set itself apart as dedicated to solving the problems and\nwilling to make sacrifices. It is highly unlikely that any of the interests\ninvolved in the healthcare debate will be hurt in the long term by\nacknowledging what everyone knows — namely, that resolving the U.S.\nhealthcare morass will take sacrifices by many. In return for the risk, the\nearly advocate of a plan will win national attention and a national stage –\nin the process becoming the good guy. “,1]
);
//–>

Schwarzenegger, by
contrast, has asked everyone to share the pain of making a new system. As far
as this approach goes, the key is to make sure the system is sustainable.
Thus, in return for the short-term pain associated with adjusting to the new
system, the companies, consumers, unions and professionals will find a new
economic equilibrium that will not present one interest with continual
challenges or the threat of being placed out of business.

If
California can develop a system that assuages the worst fears of insurers,
employers, hospitals, physicians, unions, moderate Republicans and most
Democrats, it will have created a model that can work nationwide.
Californians know this. Accordingly, they are astounded that the national
political parties and special-interest groups not only have failed to descend
upon Sacramento to stake their national position, but in fact are not even
talking about it.

Seizing the Initiative

Soon,
however, one of the major national players will recognize the stakes, and the
opportunity to be on record nationally regarding certain elements of
California law. It is only a matter of time before other players begin to
view the proposal as, at the very least, setting the stage for action by
other states or the federal government. This alone would spur a race among
some actors, such as corporations or healthcare providers, to push for a
federal version of the plan if it appears that other states are interested in
pursuing something that will work against their interests.

While
risks certainly exist in taking an early stand in the debate, a lobbying
group — be it a trade union, labor union, or consumer association — that
does so will set itself apart as dedicated to solving the problems and
willing to make sacrifices. It is highly unlikely that any of the interests
involved in the healthcare debate will be hurt in the long term by
acknowledging what everyone knows — namely, that resolving the U.S.
healthcare morass will take sacrifices by many. In return for the risk, the
early advocate of a plan will win national attention and a national stage —
in the process becoming the good guy.
<!–
D(["mb"," The most likely candidate for\nthis role is the Service Employees International Union, or the larger Change\nto Win umbrella of unions. The Change to Win leadership actually crossed a\npicket line established by AFL-CIO-affiliated unions by taking part in a\nroundtable discussion with Schwarzenegger on the issue during his 2006\nre-election campaign. The California Nurses Association saw the governor's\nroundtable as a political ploy to appear concerned about the issue and an\nattempt to co-opt liberal groups. The Change to Win leadership argued that it\ndid not care whether a Republican or Democrat enacted a strong universal\nhealthcare proposal and that, regardless of who created such a plan, workers\nwould win. Change to Win has situated itself perfectly to take a\nstand in this debate. It is within the political fray — it was a major donor\nto Democratic candidates in 2006 (and strongly endorsed Schwarzenegger's\nopponent, Phil Angelides) — but in an attempt to distinguish itself from the\nAFL-CIO, it also has shown it would rather be clearly effective outside of\npartisanship.

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