As Gov. Arnold Schwarzenegger and the Legislature's Democratic leadership work to reconcile funding and other elements of their competing healthcare reform plans during a special legislative session, the California Medical Association, hospitals and businesses are staking out their positions.

The CMA opposes funding any reform with a tax on doctors' revenues, as Schwarzenegger's plan requires, maintaining that too much of the burden falls on primary care physicians, who are already undercompensated. "For now, the 2-percent tax on doctors is off the table," says Dustin Corcoran, CMA vice president of government relations. "We don't anticipate it playing a role in discussions during the special session, but are on the alert for anything that indicates otherwise."

"We are looking very forward to seeing a proposal that we can support so that we can make history, as the governor has pointed out," said CMA President-Elect Richard Frankenstein, MD, at a Sept. 14 press conference at the California Hospital Medical Center in Los Angeles.

But some hospitals and business groups are signing on to the governor's plan, strengthening his bargaining position. "The California Hospital Association and Catholic Healthcare West support a 4-percent hospital fee," said Lloyd Dean, president and CEO of Catholic Healthcare West, at the press conference.

According to the California Department of Healthcare Services, the fee on private and district hospitals will amount to about $1.7 billion annually, which will draw down approximately $3.4 billion in Medi-Cal matching funds. The fee is based on the number of patient-days hospitals devote to managed care and fee-for-service clients, but it approximates 4 percent of revenue, says Jan Emerson, a CHA spokeswoman.

In return for the CHA's agreement, the governor promised that the fee will be pegged at its current rate, Medi-Cal will be indexed to the cost of care, hospital money will be devoted only to gaining federal funds, and current state hospital funding will continue. Also, the governor will put CHA's items on the ballot as a proposed constitutional amendment, which may protect them in the future, Emerson says.

The Los Angeles Chamber of Commerce on Sept. 17 signed on to the governor's 4-percent tax on employers of 10 or more. The Democratic plan includes a 7.5-percent payroll tax, while health insurance now costs an average company 13.8 percent of payroll, according to a Rand Corp. analysis.

Observers say the special session will likely result in incomplete healthcare reform legislation, with any unfinished business left to be settled through 2008 ballot initiatives. Funding for the reforms may be among the items settled through that route, including a possible sales tax increase proposed by business groups.