Report: Single-payer health care in California would cost double state budget

SACRAMENTO – During the California Democratic Party convention in Sacramento last weekend, the spiciest news was outgoing chairman John Burton dropping an f-bomb on a group of activists demanding that the party embrace a single-payer health system. It’s not really news when the notoriously foul-mouthed Burton says such things, but the fracas highlighted the pressure party leadership faces to embrace government-run medical care.

Yet the foulest rebuke to advocates for single payer this week did not take place at the convention. It took place nearby at the state Capitol, in the form of an appropriations committee report that found that a single-payer bill working its way through the state Senate would cost more than double the state’s total budget.

Senate Bill 562, which had previously passed the Senate health committee, was placed in the “suspense file” by the appropriations committee on Monday as legislators analyze the huge price tag. They have until the end of the week to move it out of the file, or it will die this year.

The committee made clear the size of the undertaking: “The fiscal estimates below are subject to enormous uncertainty,” it explained. “Completely rebuilding the California health care system from a multi-payer system into a single payer, fee-for-service system would be an unprecedented change in a large health care market.”

The appropriations analysts estimate an annual cost of $400 billion a year, which soars above the projected $180 billion state budget. Of that cost, the committee explained, about half of it would be covered by existing federal, state and local health care funding. That leaves a $200-billion hole, which the committee says could be covered by a 15 percent payroll tax. Even if the calculation includes reduced health care spending by employers and employees, the committee still estimates a $50-billion to $100-billion shortfall.

And, quite significantly, these costs could be understated given the kind of demand that would be created by this system. Its main advocates, Sens. Ricardo Lara, D-Bell Gardens, and Toni Atkins, D-San Diego, view health care as a “human right,” so the system the bill would create would provide nearly unlimited access to medical care. In fact, the Senate health committee report opined that “SB562 will change health care in California from commodity to a right.”

“Under the bill, enrollee access to services would be largely unconstrained by utilization management tools commonly used by health care payers, including Medi-Cal,” according to the committee report. “The ability for enrollees to see any willing provider, to receive any service deemed medically appropriate by a licensed provider, and the lack of cost sharing, in combination, would make it difficult for the program to make use of utilization management tools … . Therefore, it is very likely that there would be increased utilization of health care services under this bill.”

And the committee only is talking about predicted costs. It’s not its job to engage other policy debates, such as those touching on subjects including rationing, waiting lists for services if the demand overwhelms supply and the quality of care. The bill would apply to illegal immigrants, which raise critics’ concerns about the state becoming a worldwide magnet for “free” health care.

The bill is fairly short given the complexity of the subject. But the Mercury News captured the gist of the single-payer approach in a March news article: “Instead of buying health insurance and paying for premiums, residents pay higher taxes. And those taxes are then used to fund the insurance plan — in the same way Medicare taxes are used to provide insurance for Americans 65 and over.”

This bill would put control of health care in the state under the authority of a nine-member panel and essentially eliminate the role of insurance companies – thus replacing them with a government bureaucracy. But the size of the tax bill and state costs even have Democratic Gov. Jerry Brown expressing what the newspaper calls “deep skepticism.”

The analysis makes some other important points. For instance, it’s not clear that the federal government would go along with this, and it is totally discretionary whether the feds would grant the necessary waivers involving Medicare and Medicaid services. The bill’s funding is based heavily on the ability to divert federal funds from those programs.

The analysis also notes, “There are several provisions of the state constitution that would prevent the Legislature from creating the single-payer system envisioned in the bill without voter approval.” In Colorado this past November, voters defeated a single-payer initiative, Amendment 69, with an overwhelming 79 percent to 21 percent “no” vote.

Supporters of the measure claim that it will reduce “waste” by putting all health plans under a single umbrella, thus ending the duplication of multi-plan systems. But critics note that competition is the best way to keep costs low – not putting a system under one giant governmental entity. Advocates see it as a way to ensure proper health care for everyone, but the appropriations report confirms critics’ concerns that such a system could obliterate the state budget and kill job-creating private enterprise because of the high tax bite.

As the Democratic Party protests illustrated, we can expect the debate to become even more acrimonious and obscenity laden as the days go on.

Steven Greenhut is Western region director for the R Street Institute. Write to him at [email protected].