California Gov. Arnold Schwarzenegger (R) on Tuesday introduced a revised $14 billion proposal to require all state residents to obtain health insurance, financed in large part by leasing the California lottery to a private firm, the Los Angeles Times reports. Schwarzenegger's new plan largely maintains the framework of a proposal he outlined in January, "although it contains a number of concessions intended to appease labor unions, physicians and some small businesses, all of which have persistently opposed his vision," according to the Times (Rau, Los Angeles Times, 10/10). The revised plan would cost about $2 billion more than the original proposal (Kurtzman, AP/San Francisco Chronicle, 10/9).

Under the revised proposal, all residents would be required to obtain coverage, either individually or through their employer, and the state would subsidize coverage for individuals with annual incomes less than $25,525 and for families with annual incomes less than $51,625. Lower-income workers who do not qualify for the subsidies but whose health insurance costs exceed 5% of their family's income would receive a tax credit.

The plan would be funded in part by leasing the state lottery program to a private firm. Administration officials estimate a 40-year lease could generate $2 billion if the state can increase lottery sales to the national average. Those payments could increase to $4.5 billion annually to keep pace with medical inflation. However the funds would run out in as little as 15 years unless other sources of revenue are identified (Los Angeles Times, 10/10).

Schwarzenegger altered a provision of his original plan that would require employers with 10 or more employees to contribute 4% of their payrolls to help fund health insurance. The revised proposal would require employers who do not offer health coverage to contribute based on a sliding scale fee from 0% to 4% based on their total payroll (Rojas, Sacramento Bee, 10/10). The new plan would double to $2 billion the amount businesses contribute, while allowing small businesses to contribute less, according to the Times (Los Angeles Times, 10/10).

In addition, physicians would not be required to contribute 2% of their revenues to help subsidize a health insurance purchasing pool for low-income residents. Under the proposal, the state Health and Human Services Agency would establish a minimum benefit level for medical, hospital, preventive and prescription drug coverage (Sacramento Bee, 10/10).

Prospects
The new plan still needs to be negotiated with the Democratic-controlled Legislature, Schwarzenegger said during a press conference on Tuesday. According to the Times, his proposal "did not immediately win any new converts in the [state] Legislature." Republican leaders indicated that they still oppose requiring employers to fund the proposal, while Democratic leaders indicated that they prefer their own legislation that would require employers to spend the equivalent of 7.5% of their payrolls on health coverage, the Times reports (Los Angeles Times, 10/10).

The governor called a special legislative session of the state Legislature in September to focus on health care (Sacramento Bee, 10/10). The proposal would be part of a larger health care financing measure on the November 2008 statewide ballot (Zapler, Contra Costa Times, 10/10).

Democrats also expressed concern over the longevity of lottery revenue, while some with "moral qualms about gambling" were apprehensive about allowing a private firm, which might more aggressively pursue players, to run the lottery. Wall Street investment firms Goldman Sachs and Lehman Brothers "have expressed interest in helping the state find a private manager," the Times reports (Los Angeles Times, 10/10).

Reaction
Schwarzenegger said, "Our original proposal is now fleshed out and much stronger" (Los Angeles Times, 10/10). He added, " We have the best opportunity for comprehensive health care reform in 100 years because the more people study our plan, the more they agree with what we have been saying since day one: If everyone pitches in and does their part, then everyone will benefit" (Reuters, 10/9).

Assembly Speaker Fabian Núñez (D) said, "I am pleased the governor will be putting his health care proposal into a bill that can be properly studied and evaluated" (Sacramento Bee, 10/10).

Robert Ross, president of the California Endowment, said, "In recent weeks we had downgraded our confidence level from optimistic to merely hopeful because we were concerned the governor was not engaged enough. This is certainly an encouraging sign that he is willing to respond to reasonable criticisms to his approach" (Los Angeles Times, 10/10).

Art Pulaski, executive secretary-treasurer of the California Labor Federation, called Schwarzenegger's proposal an "enormous step backward," adding, "The governor has opted to ignore the (Democrats') wildly popular bill, which is currently awaiting his signature, in favor of his own unpopular and regressive plan." Pulaski said, "Middle-class families would be left on their own to figure out how to pay thousands of dollars in deductibles, premiums, copays, prescriptions and other out-of-pocket expenses" (Sacramento Bee, 10/10).