The California Senate has approved a bill that would establish a universal, single-payer health care system in the state at an expected cost of $400 billion per year, or $10,256 per resident.
Senate Bill 562, the Healthy California Act, passed by a 23–14 vote on June 2. The bill would establish the single-payer Healthy California Program and prohibit health insurers from providing coverage for any service covered by the state program.
The bill would also eliminate all cost sharing for enrollees, such as premiums, copayments, and deductibles.
Big Tax Hike
SB 562 would cost California $400 billion per year, according to a fiscal analysis by the California Senate Appropriations Committee, which is chaired by the bill’s sponsor, state Sen. Ricardo Lara (D-Bell Gardens). Approximately $200 billion of existing federal, state, and local funding could be repurposed to pay for the single-payer system, the analysis states.
The state would have to raise taxes to fund the remaining $200 billion, at an initial average annual cost of $5,128 per resident. A new payroll tax amounting to 15 percent of earned income could cover the program’s costs, according to the analysis.
California’s current annual budget is $180 billion.
SB 562 faces opposition from the California Association of Health Plans and the California Chamber of Commerce, which has labeled the bill a “job killer” because of its high taxes and the number of insurance industry workers who would likely lose their jobs under a single-payer system.
Weak Cost Controls
The Healthy California Act would rely on a fee-for-service (FFS) payment model for health care instead of a capitated system, in which a provider network would receive a flat fee per patient per year.
Mark Joffe, director of policy research at the California Policy Center, says the FFS model encourages providers to overcharge third-party payers, including government-sponsored insurers.
“Fee for service systems, when coupled with third-party payment, do not provide strong incentives to control costs,” Joffe said. “Providers have an incentive to provide as many services as possible, and patients have little incentive to push back, because they’re not paying.”
Capping payments to providers on a per-patient basis would give providers a disincentive to overprescribe, Joffe says.
“Capitated systems like Kaiser Permanente create incentives for the provider to withhold unnecessary or marginal services,” Joffe said.
Medi-Cal, the state’s Medicaid program, demonstrates how government price-fixing in an FFS model causes health care shortages, Joffe says.
“Medi-Cal controls costs by providing low provider reimbursement rates,” Joffe said. “As a result, many providers are reluctant to accept Medi-Cal patients. If California adopts a single-payer plan, we may see the same thing happen. This measure would increase the demand for medical care. Unless steps are taken to increase the supply, we will experience shortages.”
Sally Pipes, president and CEO of the Pacific Research Institute, says the bill would exacerbate shortages, further restricting access to health care.
“Taxpayers and employers alike should beware of the backbreaking tax increases that will surely be proposed to pay for ‘free’ health care,” Pipes told Health Care News. “And it is likely that doctors will flee the state or retire early. The brightest medical graduates will not come to California to set up their practices.”
Canada’s single-payer system serves its population poorly, Pipes says.
“As I experienced in my native Canada, a single-payer, government-run monopoly system would condemn sick patients to life-threatening wait times and rationed, low-quality care,” Pipes said.
Brandon Best ([email protected]) writes from Cedarville, Ohio.
Dr. Jane Orient, “Universal Coverage Means Less Care,” Association of American Physicians and Surgeons, May 17, 2017: https://heartland.org/news-opinion/news/universal-coverage-means-less-care
Donald Kendal and John Nothdurft, “Trump Supporter Polls, Anti-Fracking Fail, and California Single-Payer Health Care,” In the Tank Podcast, The Heartland Institute, May 5, 2017: https://heartland.org/multimedia/podcasts/in-the-tank-ep87–trump-supporter-polls-anti-fracking-fail-california-single-payer-health-care
Michael McGrady, “Colorado Voters Reject Single-Payer System, 79–21 Percent,” Health Care News, The Heartland Institute, December 14, 2016: https://heartland.org/news-opinion/news/colorado-voters-reject-single-payer-system-7921-percent
California state Sen. Ricardo Lara (D-Bell Gardens): http://sd33.senate.ca.gov/
Image via Thinkstock