EDITORIAL: Hospital fee is a long-overdue cure

In this time of state budget crisis, California should be shaking every tree it can find to avoid big cuts at home.

One area is health care.

California has a big opportunity to leverage federal stimulus dollars to help hospitals that serve the state's poorest residents and to provide health coverage to uninsured children.

That is, if Gov. Arnold Schwarzenegger signs Assembly Bill 1383 by Assemblyman Dave Jones, D--Sacramento.

This bill revives a key portion of Schwarzenegger's health care reform proposal of the last session: a hospital fee.

Under Jones' bill, if hospitals paid $2 billion in fees to the state, the federal government then would provide $2.3 billion in new matching money to hospitals. In addition, a portion of the fee would provide $320 million to cover uninsured children and $310 million to public hospitals.

The bill is co--sponsored by the California Hospital Association, the California Children's Hospital Association and the Daughters of Charity Health System. It is broadly supported by hospitals.

It would help California's health care system a lot, considering the state's budget troubles.

This bill would have no impact on the state general fund or on taxpayers. Hospitals would bear the sole responsibility for paying the fee.

It is critical that Schwarzenegger sign AB 1383 into law immediately to take advantage of this one--time enhanced federal funding. California already has missed 12 months in taking full advantage of the new stimulus funds o which go from October 2008 until December 2010.

So what's the hang--up? Jones accepted amendments from the governor's office to assure flexibility in setting the fee formula.

Apparently, the governor is worried that the carefully constructed fee on hospitals may be challenged by anti--tax groups as a "tax" since it passed by a majority vote, not a two--thirds vote.

However, the Legislature has secured two strong legal opinions o from the legislative counsel and a private opinion from Daniel Kolkey of Gibson, Dunn and Crutcher o that the fee is in fact a fee.

First, hospitals can choose not to pay o at the cost of losing the right to participate in state--funded health insurance programs.

Second, the money would be collected from a particular industry and used to provide narrow benefits to that industry. Specifically, as the legislative counsel writes, the charge is "a charge upon participating providers to defray the costs of the benefits received by those care providers."

Kolkey frames it slightly differently. The charge is not imposed to generate revenue but specifically benefits the group that pays it: "The very hospitals that pay the fee will reap its benefits."

In other words, anti--tax groups can sue all they want, but the state can fend off the challenge.

California should not bypass the opportunity to tap new federal health dollars out of fear of the usual protest noises from groups such as the Howard Jarvis Taxpayers Association. The reality is that this proposal would not raise Californians' tax bills.

As Schwarzenegger himself has said, "California has a great opportunity to bring in additional federal dollars through a hospital provider fee." He should sign the bill before California misses another month of federal health funds.