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Single-Payer Health Care Would Cost California More Than Triple Its Budget

The annual price tag for California's proposed universal, single-payer health care system would come to a staggering $400 billion and possibly trigger substantial tax increases, according to a state review released Monday.

By Tracy Seipel

The annual price tag for California's proposed universal, single-payer health care system would come to a staggering $400 billion and possibly trigger substantial tax increases, according to a state review released Monday.

That eye-popping number means the cost of Senate Bill 562, known as The Healthy California Act, would be three times higher than the state's proposed $124 billion general fund budget for next year.

But the eight-page report -- which is a preliminary review of the proposed legislation to provide government-run health coverage with virtually no out-of-pocket costs to consumers -- said that existing federal, state and local funding for programs like Medicare and Medicaid would pay half the amount -- $200 billion.

To make up the balance, Californians could expect to be on the hook for up to $200 billion in additional tax revenues, likely through an added payroll tax they would share with their employer and which could be as much as 15 percent of their income, the report said. The bill's sponsor -- the California Nurses Association -- disputes the 15 percent figure.

Overall costs of the new taxes, the report said, would be largely offset by reduced spending on health care coverage by employers and employees under a state-run plan.

The report noted that the estimated annual cost for employer sponsored health insurance in California is between $100 billion to $150 billion. Taking that into account, the report said, could mean total new spending required under SB 562 would fall to $50 billion to $100 billion annually.

"Americans pay more than any industrialized nation for health care, almost $10,000 per person,'' Senator Ricardo Lara, D-Bell Gardens -- who co-authored the legislation with Sen. Toni Atkins, D-San Diego -- told the appropriations committee on Monday.

"Yet we do not have better health outcomes and we cover fewer people.''

The ambitious health care plan -- which would cover all Californians including undocumented residents --  was introduced by the two legislators in response to President Donald Trump and the Republican-majority Congress' plans to dismantle the Affordable Care Act, known as "Obamacare."

The federal health care law insures millions of Americans, including around 5 million Californians, most of them through an expanded Medicaid program for adults.

Indeed, the single-payer proposal numbers landed on the same day as news that Trump's budget, which will be unveiled Tuesday, includes $800 billion in cuts to Medicaid.

On Monday, Lara insisted SB 562 would "clamp down'' on health care costs in several ways, including eliminating the need for insurance companies and their administrative costs and profits. Doctors and hospitals also would no longer need to negotiate rates and deal with insurance companies to seek reimbursement.

He also noted, "by pooling health care funds in a publicly run fund, we get the bargaining power of the seventh largest economy in the world.''

Opponents of the bill were not surprised by the numbers.

"It brings to mind the old joke: 'If you think health care is expensive now, wait until it's free,''' Jon Coupal, president of the Howard Jarvis Taxpayers Association, said after Monday's hearing. The committee put the bill on hold until it votes to move it to the full Senate.

"Whenever there is a lack of competitive pressure as there is with any government program," said Coupal, "the costs run out of control.''

Insurers, too, are lobbying fiercely against the proposed legislation, including the California Association of Health Plans.

At Monday's hearing, Nick Louizos, that group's vice president of legislative affairs, disputed comments by Michael Lighty, public policy director for the California Nurses Association, about the percentage of money health insurers currently take in for, among other things, administration, marketing and profit.

Lighty said state figures reveal California health insurers had a net income of $27 billion between 2011 and 2016. He pointed out that in 2015, 104 executives from four California insurers made $102 million in total compensation. Under this plan, "those (costs) go away,'' said Lighty.

Moreover, he noted, fewer employees are getting employer-sponsored health insurance. In 2009, Lighty said, 73 percent of employers offered health insurance to their workers; that's now down to 55 percent.

"We have a publicly financed system and we are not getting our money's worth,'' said Lighty. "We are not getting our money's worth because too much of it is going to the private insurers.''

Sen. Jim Beall, D-San Jose, asked whether an independent organization had evaluated the proposal and its long-range costs.

Sen. Steven Bradford, D-Gardena, had the same question and said, "I don't want California to move toward a program that is not sustainable and one we cannot manage."

Lara said researchers at the University of Massachusetts, Amherst are conducting a financing study. But his office did not know how soon that would be available.

Medicare, the federally funded health coverage for seniors, is often held up as a model of what a single-payer system might look like.

The idea has periodically gained traction in the Golden State and elsewhere in the country. Vermont Sen. Bernie Sanders -- who nearly toppled Democrat Hillary Clinton during last year's presidential primary -- widened its popular appeal on the left.

But while other developed nations have achieved universal coverage through single-payer plans, none has taken off anywhere in the U.S.

Colorado voters overwhelmingly rejected a similar proposal last fall amid widespread concerns about costs. A well-known single-payer plan was approved in Vermont, but was never implemented because the state couldn't figure out how to finance it.

(c)2017 the San Jose Mercury News (San Jose, Calif.)

Caroline Cournoyer is GOVERNING's senior web editor.
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