California’s Single-Payer Health Care Plan Would Be Costly and Risky

MedizinSingle-payer health care is e a major issue in California’s 2018 gubernatorial election. Democratic candidate Gavin Newsom has strongly endorsed the idea, while Republican candidate John Cox is opposed. Last year, a single-payer bill, SB 562: The Healthy California Act, passed the state Senate but was placed on hold in the Assembly.

SB 562 would replace the current health care system with a state program under which all provider claims are paid centrally with no network restrictions, deductibles, co-pays, or other limitations. One governing body would replace the current array of public and private insurers. Medicare, Medi-Cal, and the Children’s Health Insurance Program (CHIP) would be integrated into the new system.

Proponents of single-payer primarily tout its ability to move the state towards universal coverage. However, California is already fairly close to achieving universal coverage. The June 2017 CDC report states that only 6.8 percent of Californians are uninsured. The other 93.2 percent already have private insurance, Medi-Cal, or gained insurance through Covered California during the Affordable Care Act (ACA) expansion.

Creating a single-payer health care system would be enormously costly, time-consuming, and difficult from a political and implementation standpoint. If achieving universal coverage is the primary goal, existing insurance schemes and government programs could be expanded to cover the uninsured instead. If Medi-Cal coverage is considered insufficient, it could be enhanced without impacting other categories of insurance.

A major argument from proponents of single-payer is the claim that it saves money by eliminating profits and administrative overhead — money that is going to insurance providers. Relative to all health care costs, these amounts are quite small. Most California residents already have coverage either through the government (Medi-Cal or Medicare) or a non-profit provider (Kaiser Permanente or Blue Shield), so profits only enter into the equation for a minority of Californians. Second, SB 562 would remove incentives to control costs, eliminating managed care. As a result, provider charges would probably increase substantially, overwhelming any savings from the elimination of middlemen.

Kaiser Permanente, the nation’s largest non-profit health plan and the insurer for many Californians, is known for its high quality of care and cost-conscious decision-making. A single-payer system would eliminate managed care organizations, and with them, the years of efficiency gains made to eliminate wasteful spending and improve quality. A statement by Kaiser’s CEO last year emphasized the difference between universal coverage and single-payer, mentioning his hesitations with single payer’s outdated fee-for-service model.

Perhaps the most daunting challenge of a single-payer system is the price tag. Analyses estimate that implementing a single-payer system would cost California between $330 billion and $400 billion per year, and there are reasons to believe that these estimates are too low. To put the potential costs in perspective, the entire California state budget for 2018-2019 is $201.4 billion. SB 562 does not provide details about how funds would be raised to pay for single-payer.

Furthermore, SB 562 has no mention of cost control measures, while explicitly saying there will be no co-pays, deductibles, or premiums. It plans to cover all medically necessary care, including medical, vision, dental, hearing, and reproductive services. Other services like chiropractic care and acupuncture would also be fully covered under the new program.

Many other countries have universal health care coverage and better health outcomes than the United States, an argument frequently used in favor of single-payer. However, many of these countries utilize free-market mechanisms that promote cost-conscious decision-making. These include price transparency, fewer regulations, consumer choice, and cost-sharing to prevent overuse of services.

Aside from the fundamental problems aforementioned, there are considerable political and legal roadblocks associated with implementing a single-payer system in California. Assuming that tax increases would be a necessity for funding purposes, a key obstacle would be gaining the two-thirds vote requirement for passing any such increases in the state legislature. Other obstacles include Proposition 4 of 1979, referred to as the Gann Limit, which limits state and local appropriations. Implementation of a taxpayer-funded single-payer system would necessitate repealing the Gann Limit or exempting the new taxes from the limit. Proposition 98, passed in 1988, requires that a certain amount of state tax revenues be diverted toward education funding and taxes for a single-payer system would fall into this category. So, once again, voters would have to approve exempting these new taxes from Prop. 98.

Proponents of the single-payer system believe that the new taxes needed to fund it could be addressed in legislation without requiring voter approval. The California Budget & Policy Center sees this as “very unlikely,” since it would require amending the state Constitution. When it comes to Proposition 98, the likelihood of exempting new taxes is less clear, since it depends on differences between the General Fund and Special Fund, potentially opening the door to a lawsuit.

Much uncertainty exists about the possibility of rolling federal funding into the California Health Fund (a new fund from which the state government would pay all medical expenses). The federal government funds Medicare and most of Medi-Cal, setting or at least influencing eligibility rules. This creates a hurdle to covering undocumented immigrants; federal funds are currently not allowed to finance any of the social services provided to this population.

The combination of the political and legal complications, SB 562’s enormous price tag, and the lack of cost-control measures and long-term funding uncertainties need to be carefully considered by Californians. Vermont tried to implement a single-payer health care system in 2014 but ultimately abandoned it following a myriad of challenges. Vermont had a population of 625,000 residents at the time. California’s is home to nearly 40 million people. Increasing access to health care is a laudable goal, but changes to the system should focus on improving health care outcomes for patients and  improving the quality and affordability of care. Increasing the state government’s role in health care is unlikely to deliver those results.

This article was originally published by Reason.com

Comments

  1. Of course they want to weed out the “evil corporations” without realizing that their neighbors work there or the majority of coverage is provided by non profits or the state…
    Emotion driven decision making devoid of any logic or insight…this is why California is so messed up…
    Feelers dominate the voting populace instead of engaged thinkers…

    • Shear fantasy by the far left economic cave dwellers! Ya can’t make a money tree to feed off of out of thin air! This insanity will bankrupt an already broken system pushing us closer to the Venezuela model. Great going librocraps! Way to go!

  2. Name one thing that government does that is cost effective. In a nutshell that is why socialized medicine is bad medicine. Let the providers run the system competitively and government help the people that can not afford a true market cost of services and medicine.

    • ….more like the California State Government. DMV anyone? i was a Canadian taxpaying health card carrying resident for 5 years. it was a good system for one who didn’t abuse alcohol, drugs, tobacco, food or generally bad habits. get it? live right. but don’t let anyone use Canada as an example for the United States. Canada is not the United States. Get it?

  3. It could be the DMV of Health-care

  4. The state government running all healthcare in commie-fornia.
    Oh boy. I can hardly wait!
    And that will also mean that all healthcare employees will become members of a labor union, right? Maybe the SEIU union?
    And we already know from past experience with those people just how caring and compassionate those heartless mobsters are, don’t we?
    And what pray-tell will happen not if, but when they all decide, for whatever reason, to go out on strike? Having a heart attack? A stroke? Just been involved in a serious accident? Sorry, you will have to drive yourself to the hospital because all the ambulance drivers and paramedics are out on strike. And when you get to the hospital, you won’t be allowed to cross the picket line there either to go in due to the strike. And even if you did find a way in to the hospital, you’d quickly realize that all the doctors and nurses and healthcare personnel are all outside on that same picket line you just managed to sneak past. So they tell you to come back tomorrow. Maybe our strike will be over by then and maybe you’ll still be alive to seek treatment then.
    Maybe.

    Fox.
    Out.

  5. If California goes single payer I’m moving to Arizona. The
    The care in California is awful. Arizona has much better care
    Than California. In California doctors are paid next to nothing. There are no more private offices. The docs all work for large corporations.

  6. Vote for John Cox if you don’t want single payer in California…
    This article states that Walgreens is maxing their political contribution to Newsom and that Cox is trailing in contributions…
    Vote with your wallet as well as your conscience for Cox!!!

    https://calmatters.org/articles/newsletters/california-kavanaugh-newsoms-ppic-numbers/

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