Hours after lawmakers struck a deal on overhauling California's ailing workers' compensation system, Gov. Gray Davis quickly vowed Wednesday to sign the package into law.

Calling it a spark to the state's sputtering economy, the governor said the billions of dollars the legislation will slash from the system will send a strong message to employers that relief from skyrocketing insurance premiums is on the way.

"I'm confident these reforms will keep jobs in California," Davis said. "Employers will take a new attitude. The savings ... will encourage more hiring."
While backers are confident the package adopted late Tuesday by a joint legislative committee will win approval in the Assembly and Senate this week, opponents are gearing up for a floor fight. Health-care groups argue that some of the proposed cuts go too deep and threaten the treatment intended for the 1 million workers injured on the job every year.

"There's still some battles to be fought. There's still lobbying to be done," said Charles Bacchi, a lobbyist for the California Chamber of Commerce.

A similar fight is expected over another bill, SB 2, which would require companies with 200 or more employees to provide medical coverage for their workers and their families or pay fees to a state insurance pool that would cover the employees.

On workers' comp, business leaders and some Republican lawmakers have yet to embrace the legislation. They are scrambling to determine if the bills indeed will result in saving billions of dollars and ultimately save the workers' comp system from financial collapse.

"The numbers aren't reliable. I don't know what the right numbers are," said Sen. Chuck Poochigian, R-Fresno, a member of the conference committee that crafted the package.

But Democratic leaders and state Insurance Commissioner John Garamendi on Wednesday stood by their estimates -- $5.3 billion in one-time savings next year as well as $4.9 billion to $5.6 billion in annual cuts to the state's burgeoning $29 billion workers' comp system.

Those savings would be enough to wipe out a proposed 12 percent rate increase that businesses were expecting to see in their insurance bills starting Jan. 1. Furthermore, proponents say, the package would allow a 7 percent reduction on rates.

"This was a tough job. Nobody is completely happy about this," said Sen. Richard Alarcón, D-Sun Valley, one of the chief architects of the legislation. "It is not about a pot of money for people to get rich on."

Indeed, lawmakers took a butcher knife to workers' comp medical costs, which have more than tripled in the past decade and outpaced the price increase experienced in the overall health-care industry.

Insurers say medical costs have fueled the surge in premiums. The result has been an outcry from employers who have seen their insurance bills double and triple in recent years. To combat the increases, many businesses have boosted prices to their customers and cut costs, including laying off workers. Others have threatened to leave California and some have even closed their doors.

One of the biggest targets has been outpatient surgery centers that some lawmakers have labeled as cash cows. The legislation calls for regulating the centers' fees for the first time and sets the reimbursement rates at 120 percent of the federal Medicare level. That would generate a one-time savings of $3.2 billion and subsequent savings of about $930 million a year.

Arthur Casey, incoming president of the California Ambulatory Surgery Association, said the fee schedule won't cover the cost of many services and will force centers to stop taking workers' comp cases.

"It's going to get to a point where the injured worker isn't going to have any option to get care," Casey said.

Pharmacies, too, have vowed to fight the plan. They say a pharmaceutical fee schedule tied to Medi-Cal rates -- projected to save $407 million annually -- will be too low and prompt drug stores to stop filling workers' comp prescriptions.

"It doesn't work for us. Reimbursements are so low that it's hard to make ends meet for pharmacists," said Bill Bradley, a spokesman for the California Pharmacists Association.

The legislation also calls for cutting physician and hospital fees by 5 percent -- saving $100 million -- as well as allowing administrative review of a doctor's treatment program for injured workers, which would produce a one-time savings of $2 billion.

Other provisions include:

* Capping chiropractic and physical therapy visits at 24, saving a combined $1.1 billion a year.

* Eliminating a vocational rehabilitation program and replacing it with education grants, saving $1.2 billion a year.

* Broadening worker and employer rights to seek second opinions or object to treatment decisions by a physician.

* Establishing medical guidelines that also would be used to keep the number of treatment and services under control.

Despite the overhauls, lawmakers say the system will need more fixes next year.

"This is a great first bite," said Assemblyman Juan Vargas, D-San Diego.