Shades of Grey: Arnold Schwarzenegger and the road to national health care

Ted Kennedy, the nation's most persistent backer of nationalized health care, must be smiling at the irony. Almost four decades after he first proposed the idea, Gov. Arnold Schwarzenegger, a Kennedy relative by marriage, is touting his own version of universal coverage, and, if adopted, the idea could go nationwide quickly. It's no wonder critics are already dubbing the ostensibly Republican chief executive "Schwarzenkennedy."

This isn't the first time Mr. Kennedy has found a Republican to carry water for him. In 1971, after Medicare spending had increased by more than 70% in five years (although the number of people enrolled grew by only 6%), Richard Nixon declared a "health-care cost crisis" and worked with Mr. Kennedy to propose mandatory employer-provided health insurance. The idea foundered, but a modified version now has been revived by Mr. Schwarzenegger, who wants to require that every person buy health insurance, or be covered by an employer or the government. Massachusetts has a more modest law in place, and an adviser to Mitt Romney helped Schwarzenegger aides on their plan.

Liberals are overjoyed at the about-face by a governor who in 2005 vetoed a Democratic bill that would have merely expanded the state's coverage of children, saying the $300 million price tag was too high. Assembly Speaker Fabian Nunez praises the governor's new proposal: "This is a plan Assembly Democrats could have written."

Indeed, they already have--and Mr. Schwarzenegger fiercely opposed it at the time. In 2003, then-Gov. Gray Davis, fighting to stave off his recall, signed a law mandating employers with 20 or more employees provide health coverage or pay into a state fund that would provide it. After Mr. Davis was recalled, Mr. Schwarzenegger helped lead an effort to repeal what he called a "job-killing health-care tax." In 2004, 51% of voters agreed and repealed universal coverage in the same election in which George W. Bush lost the state by 10 percentage points and the highly liberal Sen. Barbara Boxer was re-elected by 20 points.

But the next year, Mr. Schwarzenegger suffered a stinging defeat as public employee unions spent $130 million in a special election to defeat four reform initiatives he supported. A chastened governator swung left by hiring as top aides Susan Kennedy and Daniel Zingale, two former deputy chiefs of staff to the recalled Mr. Davis; Jason Kinney, a Davis speechwriter, joked that he had decided "to finish the second term of Gray Davis." No one is laughing now. The behind-the-scenes architects of much of the governor's plan were Ms. Kennedy and Mr. Zingale, who also served as Mr. Davis's director of managed health care.

Last November, Gov. Schwarzenegger won landslide re-election in part by winning 91% of Republicans with an ironclad pledge not to raise taxes. He pounded Phil Angelides, his Democratic opponent, for wanting to raise taxes by $7 billion to pay for universal health care. But now the estimated cost of the Schwarzenegger plan to cover California's uninsured, including two million illegal aliens, is $12 billion. State subsidies for people to buy insurance will extend to those earning up to $50,000 a year, more than California's median income. "He's creating a welfare state where more than half the people are in the wagon being pulled than outside the wagon pulling," says one health-care analyst.

As bad as the policy implications are, the governor's plan may be fatally flawed, politically. He insists it doesn't raise taxes, despite billions in new charges on doctors, hospitals and employers. He prefers to call the new revenue "in-lieu fees" and "coverage dividends." "He excoriated Phil Angelides, rightly, for proposing the same tax increases he has put on the table," says GOP state Sen. Tom McClintock. "He is now pushing the second largest tax increase in California history. I won't be able to trust anything he says."

Whether the new revenue is a tax or not is important, because if it is a tax the plan must garner a very difficult two-thirds vote in both legislative houses. Barring that, the California Supreme Court will have trouble with the concept. A fee on employers who don't offer health insurance probably requires only a majority vote. However, the imposition of a levy on the gross revenues of doctors and hospitals is almost certainly a tax that would require two-thirds approval.

Then there are the feds. The $5 billion a year in extra federal Medicaid money, which the governor is banking on, is shaky. An even greater barrier is Erisa, the 1974 federal pension law that preempts all state laws that regulate employee benefits. Last summer, a federal judge threw out Maryland's so-called "Wal-Mart law" requiring large firms to spend 8% of their payroll on health care because "state laws which impose health or welfare mandates on employers are invalid under Erisa." Just yesterday a federal appeals court upheld the ruling voiding the Maryland law.

Rather than pursue a legally dubious universal coverage proposal, Mr. Schwarzenegger should have pursued the universal access he used to tout. He could sign up more of the nearly one million Californians eligible for current health programs but not yet enrolled. The 49 coverage mandates that make insurance so expensive (Idaho has only 13) could be reduced and residents allowed to buy coverage from other states. Nurse practitioners could be allowed to set up their own clinics. Instead, the governor's plan piles on a new mandate that bars insurers from turning down anyone based on health status or age. When New Jersey instituted a similar rule in 1993, premiums jumped 500%.

Mr. Schwarzenegger insists he is pursuing a centrist course that borrows from both the right and left. But more realistically, he is imitating Richard Nixon's old strategy of throwing rhetorical bones to his right while attempting to appease the left with liberal programs. Emmet John Hughes, an Eisenhower speechwriter who knew Nixon well, once said he "judged any declaration of speech not by its content but by its impact." That explains Nixon's dramatic lurches into or toward wage price controls, a guaranteed annual income and mandatory employer health insurance.

Arnold Schwarzenegger used to claim he admired Ronald Reagan most "because he stuck by his principles when others wouldn't." But with his Rube Goldberg health plan Mr. Schwarzenegger has demonstrated that at his core he prefers roles more suited to Tricky Dick than the Gipper. Should he succeed, the long-term dream of nationalized health care held by Ted Kennedy, and Hillary Clinton, will be closer to reality than ever.

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For greatest efficiency, lowest cost and maximum choice, ALL hospitals and health insurance schemes should be privately owned and run -- with government-paid vouchers for the very poor and minimal regulation. Both Australia and Sweden have large private sector health systems with government reimbursement for privately-provided services so can a purely private system with some level of government reimbursement or insurance for the poor be so hard to do?

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