Setting up what is certain to be a key debate in next fall’s presidential election, a California Senate committee strongly rejected Governor Arnold Schwarzenegger’s ballyhooed health care reform package on January 30th, sounding the death knell for state-based health care reform, at least until this fall’s election clarifies federal intentions.

LIUNA General Secretary Treasurer and New England Regional Manager Armand E. Sabitoni is familiar with Massachusetts’ reform effort, the model for the California plan. “Health care costs and coverage are a national problem,” he says. “Solving the problem on a state-by-state basis always seemed improbable. With the defeat in California, attention will now focus on the Presidential candidates, and that’s where it belongs.”

Health care reform has emerged as a top issue in the primaries and both Democratic contenders – Senators Hillary Clinton and Barak Obama – are touting national plans similar to those contemplated by Schwarzenegger and already enacted in Massachusetts. With former Massachusetts Governor Mitt Romney’s decision to withdraw from the Republican campaign – he presided over adoption of the Massachusetts plan – presumptive GOP nominee Senator John McCain is backing a more conservative approach.

Behind the California, Massachusetts, Clinton and Obama plans is the belief that the vast and growing number of people without health coverage – 47 million, about one in six Americans – requires aggressive action by the federal government, both because of the hardships on families and the way the coverage gap drives up the cost of care (people without insurance delay seeing doctors; when they get sick, their health is worse than it might have been and their treatments are more costly). For those on this side of the political divide, the key issue is establishing “universal” coverage, but critics lament increasing governmental involvement in health care, saying it is tantamount to socialized medicine and will prove costly and bureaucratic in the long run.

These critics – including McCain – acknowledge the hardships on families but stress the underlying problem of the extraordinarily high and rapidly rising cost of health care services. They would attack the problem through more price competition among health care providers and drug manufacturers, more tax benefits for individuals who purchase health care insurance in the private market and more accountability for every American for maintaining their own good health. Critics of this approach say that relying on market forces and behavioral change will be slow at best, providing small comfort to today’s uninsured families.

On the Democratic side, both candidates say more government involvement would make health care coverage affordable for everyone. In the biggest difference between them, Clinton’s proposal would impose penalties on anyone who does not buy insurance while Obama says, once the cost of coverage falls, such coercion will be unnecessary. Either way, both Democrat plans have been attacked for their potential to hike taxes. On the Republican side, costs would also increase because the government must absorb the expense of issuing tax credits under McCain’s plan.

Because the Democrats’ plan has been partially tested in a few states, its funding issues are more exposed. Which plan is ultimately more costly may be a quibble, but the debate over taxes and tax policy also looms large in the coming campaign.

Like much of the country, California is enduring an economic slowdown, and several opponents of the Schwarzenegger plan said it would be irresponsible to enact the sweeping proposal in hard times. Despite the fact that his plan would require all residents to purchase insurance, many people simply cannot afford it, and some kind of state subsidy would be required to close the gap. Under the proposed plan, employers would have had to pay a sliding fee on their payrolls – one percent on payrolls up to $250,000 and up to 6.5 percent for those larger than $15 million. The business community opposed the tax, saying it would further dampen the state’s economy. Critics also note that two years after passage, Massachusetts’ plan still faces major funding and implementation problems.

As Clinton and Obama advocate for a national plan similar in principle to the Massachusetts and California plans, they are going to have to address the same concern expressed by the opposition in these and other states: how will the federal government subsidize those who cannot afford to buy their own coverage?

On the other hand, McCain has the problem of convincing voters that he thinks health care is vital and that his plan will do something meaningful to extend it to those currently uninsured. The appeal of universal coverage is strong, and voters could accept the Democrats’ contention that elimination of “the Bush tax cuts” – that is, restoring higher taxes on wealthier Americans – is an acceptable way to ensure coverage for everyone as quickly as possible.

“Through our local health and welfare funds, virtually all Laborers already have health care benefits,” says Sabitoni, also the Labor Co-Chairman of the LHSFNA. “Still, universal coverage remains a top issue for us because our competition does not provide similar benefits. When non-union, uninsured workers need care and can’t afford it, they go to hospital emergency rooms which use their rate structure to recover losses through the payments of insured patients like us. Competitively, the union sector endures a double whammy – the cost of providing health care coverage in the first place and then the higher cost of that coverage due to cost-shifting by hospitals and other care providers. We need universal coverage to level this playing field.”

[Steve Clark]