California universal health care scheme fails

A California Senate committee controlled by US Democrats has rejected a proposal to introduce a universal health care program by seven votes to one after revelations that a similar scheme in Massachusetts is facing financial difficulties after less than two years (Marketletter February 4). The bipartisan vote followed a report by the State Legislative Analyst, Elizabeth Hill, who warned of a deficit in the program of $4.0 billion over five years to add to California's overall $14.0-billion annual state budget shortfall.

So far, there is no evidence that this has had any effect on the national debate, where both leading Democrat candidates, Senator Hillary Clinton (New York) and Senator Barack Obama (Illinois) have argued that savings in free care provided to uninsured patients (often in emergency rooms) will help to finance a universal subsidized scheme for people who do not have employer coverage. The evidence from Massachusetts suggests that the number of uninsured people applying for coverage is likely to be underestimated, especially in a state such as California, where the population is growing through migration. In addition, the Massachusetts scheme (Commonwealth Care) relied on employers paying fines for not providing coverage to employees.

To date, reports from the New England state show that revenues from businesses, at only $5.0 million, have fallen a long way short of expectations. The federal government has been asked to make up the shortfall, at a time when President Bush is looking to make health care-related cutbacks in his recently-unveiled $4,100.0 billion budget for fiscal 2009.