Arnold’s comp

The governor is getting into the thick of a tricky new campaign season, and among the things he needs to watch out for—if he wants Californians to side with him—is his propensity for cheerily dismissing behavior on his part that doesn’t sit so well with others.

You’re a sly one if you guessed I was going to talk about the insurance and health industries. These fat cats used to give scads of money to Governor Gray Davis, and now some have begun to pour fortunes into the coffers of Arnold Schwarzenegger’s various campaign committees.

Unless you’ve been stuck for months in solitary confinement, you know that Schwarzenegger very publicly refuses to take money from public employee unions he must negotiate with, from American Indian tribes and from prison guards. These are among the most powerful, high-pressure lobbying groups Schwarzenegger must deal with in hopes of saving California billions of dollars.

Schwarzenegger says he doesn’t want to create even the suggestion of influence by accepting their money, and I’m not quibbling with his thinking. If I were to pick three groups that had poured more money or muscle into political campaigns than other groups, and who enjoyed lucrative deals or laws signed by Davis that cost California billions of dollars, I, too, would have selected the same bunch to cut off.

Yet, Schwarzenegger has opened up the floodgates to many other sorts of groups, apparently not taking too seriously the chance that certain givers will taint his efforts and perhaps even backfire on him.

Recent fund-raising reports for finance committees created by Schwarzenegger illustrate the dramatic effort he has undertaken to pay for the campaign for his March 2 bond and budget-cap measures. The reports also hint at who might back his possible November campaign to reform workers’ compensation.

In fact, if the Legislature fails to rid workers’ compensation of the greed that has driven premiums up by as much as 1,000 percent for some small businesses and nonprofits, come November, Californians could see the most expensive mud fest ever over a ballot measure. A huge amount of cash is going to be spent on the March election, as well.

There’s potential for great good in what the governor is doing, but there’s also potential for great mischief.

What concerns me are the huge insurers who’ve been pouring money into his various committees just as he’s been pushing for massive reform of workers’ comp. Since he was elected, Schwarzenegger has received $100,000 from American International Group (motto: “We know money”), the biggest workers’-comp insurer in California, at $500 million a year. Other checks came from lesser players in workers’ comp here, such as Travelers, which gave $49,000, and Chubb, which gave $29,000. By press time, I counted nearly half a million dollars from various workers’-comp insurers into Schwarzenegger committees.

I’m thinking this smells. And I’m not one of those hysterical types who believe the groaning $29 billion annual cost of workers’ comp is caused by insurers. It ain’t. In fact, most insurers have avoided California because it’s so jammed with people gaming the system at every level, at the expense of the truly injured, that even huge premiums don’t make California alluring to insurers.

Medical and legal costs are out of control in large part because, unlike most states, the California Legislature bowed to powerful unions—which see workers’ comp as a paid vacation perk—and actually banned the use of objective medical criteria, such as standards used by the American Medical Association, to assess injuries. Moreover, our utterly phony “no fault” system was purposely designed to ensure that serious claims are fought for months or years in court—this to keep the gluttonous workers’-compensation-lawyers lobby fat and happy.

As a result, while states such as Utah see about 4 percent of serious workers’-comp cases end up in court, about 50 percent of California’s go through the extremely costly court process.

So many hands are snatching money from the system that ours is the most expensive workers’ comp in the United States, yet we pay the lowest benefits to injured workers. There’s just not much left for them.

We desperately need to cut out these awful middlemen and increase benefits for workers. But it won’t help Schwarzenegger sell reform if the Legislature fails to fix workers’ comp and the issue goes on the ballot in November, only to have the biggest funders of reform turn out to be huge insurers.

With James Carville and other political strategists offering advice to opponents of reform, it won’t take much to move the public focus off of the system’s leeches, like the workers’-comp lawyers and doctors. (Some of these doctors, we learned in legislative-committee testimony in Sacramento last year, see patients dozens of times for ailments that require 10 visits in the real world.)

Somebody should tell Schwarzenegger that if there’s a group the public hates more than lawyers and greedy doctors, it’s big insurers.

Left-leaning consumer-activist groups like the Foundation for Taxpayer and Consumer Rights are trying to rehabilitate the reputation of workers’-comp lawyers in anticipation of the battle, promoting them as fighters for the common worker.

But at a recent speech by strategist Carville to a roomful of workers’-compensation attorneys, the lawyers quickly coughed up $2.1 million to fight reform—and it wasn’t because they’re humanitarians.

Nevertheless, Doug Heller, of the foundation, had a point when he told me, “The giving to Schwarzenegger in amounts like $100,000 are very large sums, and we are talking about his reputation, upon which he has staked his governorship.”

Another big industry pouring money into Schwarzenegger’s committees is that of health-care entities. These groups may be affected directly by his $400 million proposed cost-saving efforts, which include plans to trim Medi-Cal and expenditures in the Healthy Families program. Healthy Families provides nearly free health coverage to children of working-class families.

Others among the huge health-care firms giving to the governor almost certainly will be affected by what Schwarzenegger does about Senate Bill 2, signed by Davis last fall, presenting yet another conflict. SB 2 requires California companies with more than 50 employees to provide state-controlled health care to employees by 2007.

A January Field Poll showed voters strongly support this sadly misguided new law. Few voters realize the law will require millions of Californians who like their private insurance to give it up and accept the state-run, health-maintenance-organization-like insurance and that it also will force people who are fully covered by their spouse’s insurance to go on state-run insurance. What a mess I predict that will be.

I hope the governor fights SB 2 (business groups already have qualified a measure for the November ballot to repeal SB 2). I also agree with some details of his plan to fix Medi-Cal by charging the non-poor a slight fee, and I think his plan has merit to charge the non-poor $15 per month per child under Healthy Families.

But all of these efforts will be called into question the more Schwarzenegger accepts huge donations from industries that will benefit directly from his positions.

It should make us all feel somewhat queasy that Schwarzenegger’s committees have, in recent weeks, received $21,200 from Health Net, a health-maintenance organization that is a state contractor (and that gave six figures to Davis); $31,200 from PacifiCare; and $21,200 from Dennis Weinberg, an executive of WellPoint.

A lot of issues that present conflicts like these for the governor will come up. For example, a federal audit just revealed that the inept Davis administration failed to collect $1.3 billion from pharmaceutical companies in California—money that could help meet this year’s budget shortfall, if collected.

Some of the pharmaceutical companies and executives who gave to Davis are now giving to Schwarzenegger. How quickly will he move to collect the dough they owe the treasury? It had better be with lightning speed.

This is the knotty problem presented by huge campaign contributions, which voters tried to end when they passed campaign reform a few years ago. Unfortunately, the scam reform voters were tricked into approving by the Legislature has more holes in it than a bullet-riddled body.

Some observers say Schwarzenegger’s wealth makes the public see him as independent of political debts. Indeed, when a judge recently ruled that Schwarzenegger illegally took out a $4.5 million loan during the recall campaign—after having been told the loan was legal by California’s utterly useless Fair Political Practices Commission—the governor announced that he was repaying it himself and had intended to all along.

Darry Sragow, a respected Democratic political consultant, says voters won’t judge him—for now. “I think voters understand that the governor is now involved in politics, and in politics, you have the unsavory problem of fund-raising and that he is going to have to do it to get things done. I would say this kind of fund-raising in general won’t hurt him.”

Probably not. But it may give special interests the opening they need to once again take our attention off crucial issues that we Californians need to discuss—like who is really getting all that workers’-comp money. I hope the governor is ready to pay that price.