California Takes Steps Toward Single-Payer Health Care

May 19--While Republicans in Washington work to scale back government's role in health care, Democrats in Sacramento are moving forward with a single-payer proposal that would virtually eliminate health insurance companies in California and put a $370-billion statewide system in bureaucrats' hands.

The plan going to the state Senate Appropriations Committee on Monday could cost Californians more and faces substantial hurdles to enact. But it promises to provide everybody in the state -- including those here illegally -- with care that in most cases would be superior and easier to access than what they have now.

"It's the only way to guarantee health care for every Californian in a sustainable way, especially given efforts in Washington to roll back coverage," said Michael Lighty, director of public policy for the California Nurses Association. The union is sponsoring the measure.

Unlike Obamacare or the GOP proposal to replace it, there would be no out-of-pocket expenses -- no deductibles or co-pays. Californians could visit any doctor without a referral and the plan would include dental, vision, mental health and nursing home coverage.

But huge questions loom about costs. The Democrat-backed bill, known as SB 562 or the Healthy California Act, passed the Senate Health Committee on a party-line vote in April although it lacked a detailed financial analysis or a comprehensive funding plan. Lighty said more details will be presented to the Appropriations Committee on Monday, although funding possibilities to be unveiled will be designed to "start the conversation" rather than provide definitive solutions.

That's not good enough for Sen. Janet Nguyen, who is vice chair of the Health Committee and voted against the measure last month.

"I believe it won't work and that's why there aren't any details," the Fountain Valley Republican said. "I think (Democrats) think it will just all work out. But this is people's health. We can't take this lightly and hope it will all work out."

Nadereh Pourat, director of research at UCLA's Center for Health Policy Research, agreed there were thorny details to be resolved but suggested a wait-and-see approach as the proposal is fleshed out.

"This says, 'We're going to completely overhaul everything,'" Pourat said. "It's ambitious and that makes the path to approval uphill. The broad brush strokes are there. But the question is how it's going to navigate a very complex health care system."

Allure of single-payer

The California Legislature twice before approved a single-payer health plan -- in 2006 and 2008 -- only to watch then-Gov. Arnold Schwarzenegger veto both. In doing so, he cited cost, financial burdens on employers and the complicated task of transitioning to a huge new bureaucracy.

At least 10 other states have pursued the idea, but only Vermont actually put a plan in place. That effort lasted less than three years before being abandoned in 2014. An analysis by Forbes magazine attributed the failure to the system being overly generous to participants -- Forbes dubbed it "platinum-plated insurance" -- as well as inadequate financial planning and big tax hikes.

But the allure remains strong.

The most recent data from the World Bank shows that the United States spends 17 percent of its gross domestic product on health care. The next highest among developed countries is Sweden, at 12 percent. Despite that spending, the U.S. ranks 39th for infant mortality and 36th for life expectancy, according to the New England Journal of Medicine.

Consultant Scott Bain's analysis of SB 562 for the Senate Health Committee notes that savings are possible by eliminating insurance companies and reducing administrative chores required of employers and healthcare providers. Proponents also point to the advantages of simplifying access to health care and insuring everyone is covered. The number of uninsured in California, even with Obamacare, is an estimated 3 million.

Lighty, the nurses' union policy chief, dismissed Vermont's failure to lack of political will and to the state's small population.

"In a small state, it's harder," Lighty said. "California has the sixth largest economy in the world. We have the resources of a nation."

Even so, the $367 billion that UCLA calculated California spent on healthcare in 2016 is more than twice the size of the state's $126 billion general fund budget for the upcoming year. Gov. Jerry Brown, whose signature would be needed, hasn't taken a definitive public position but has expressed concerns about the cost.

Additionally, the state would need the cooperation of Washington to funnel current federal funding into a new program. That would include the federal share of Medicare and Medi-Cal revenue, which accounted for 27 percent of the state's 2016 healthcare spending. In all, government spending accounted for 71 percent of 2016 costs in the state with the rest coming from private sources, primarily employer contributions.

But public sentiment could prove favorable, according to UCLA's Pourat. Sen. Bernie Sanders won positive feedback for a "Medicare for all" proposal in his presidential campaign. And those benefiting from Barack Obama's Affordable Care Act could want state relief if they lose those benefits, while those who've seen their costs rocket under Obamacare might also prefer a state-run alternative.

"It's a popular approach and with the ACA being repealed, it could find a lot of support," Pourat said.

Job killer?

Beside predictable opposition from health insurance companies, the single-payer proposal has drawn fire from other key business interests, including the California Chamber of Commerce.

The 2006 proposal vetoed by Schwarzenegger would have levied new payroll taxes of unspecified amounts on employers and employees, as well as new taxes on unearned income and those who made more than $200,000.

The 2008 proposal was based on a payroll taxes of 8.2 percent on employers and 3.9 percent on employees, with the Legislative Analyst's Office countering that a combined payroll tax of 16 percent would be necessary to operate in the black.

Lighty says the latest version would not rely so heavily on payroll taxes because of concerns the burden on employers cost result in jobs being eliminated. But the California Chamber isn't mollified and continues to dub the bill a "job killer."

"California just passed a $52-billion tax over 10 years (for transportation) of which the business community pays a significant share," reads the position paper from the chamber, which supported the transportation tax. "Adding another tax burden under SB 562 will cost employers and taxpayers billions of dollars and result in significant loss of jobs in the state. California employers cannot sustain an added new tax burden."

The Howard Jarvis Taxpayers Association opposes the bill in part because he says the lack of competition in the health market would increase costs.

"There's an old saying: If you think healthcare is expensive now, wait until it's free," quipped association President Jon Coupal.

And while Health Committee consultant Bain enumerated administrative savings under the proposal, he wrote that an overall reduction in costs was unlikely. Among reasons listed were government's limited ability to dictate costs to providers, the absence of any co-pays or deductibles and "a broad benefit package that exceeds the benefits in most employer-based plans."

Insuring an additional 3 million residents would also add to the price tag, while any Republican replacement of Obamacare would likely reduce federal healthcare revenue to the state.

But Lighty promises those issues and others will be addressed in due time. He said funding would come from "broad-based progressive financing" that won't hurt job growth or be over-reliant on income taxes.

"We're going to show that this will cost less," he said. "We're going to answer all those questions."

If the Appropriations Committee -- chaired by SB 562 co-sponsor Sen. Ricardo Lara, D-Bell Gardens -- approves the measure Monday, it would be voted on by the full Senate by June 2. The Assembly would then have until Sept. 15 to send it to the governor's desk for final approval.

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