Research & Commentary: California Should Reject Single Payer Health Care

Published June 14, 2017

Healthy California is a new proposal to create a single statewide insurance plan for every Californian – including undocumented residents, seniors currently receiving Medicare, and residents now receiving health coverage through work – without co-pays or deductibles. Under a single-payer health care system, the financing of health care services and health insurance coverage are governed by a single source: the government.

Single-payer systems face major obstacles that will make implementation difficult, if not impossible. Healthy California’s creators have greatly underestimated the costs of implementing and maintaining a single-payer health insurance system and the effects it would have on individual patients and the health care market as a whole. Coverage would include all medical care, including inpatient, outpatient, emergency care, dental, vision, mental health, and nursing home care while allowing patients to choose from a list of health care providers rather than an insurer’s network.

Similar to single-payer programs offered in Colorado and Vermont, the plan’s supporters have not laid out a way to pay for the new program. According to a legislative analysis of the plan, the single-payer program would cost $400 billion annually. The analysis says $200 billion of existing federal, state, and local funds could be used to fund the single-payer system and the remaining $200 billion would need to be raised through tax increases. The analysis provided one possible funding source: a 15 percent increase to the state’s payroll tax, which would dramatically decrease the take-home pay of most Californians.

In another study, analysts at UMass Amherst found Healthy California proposes increasing the state’s sales tax and imposing a new gross receipts tax to finance the plan. Eric Boehm of the Reason Foundation points out that even if the most optimistic cost projections were correct, the cost of a single-payer system would almost double the state’s current tax burden.

Single-payer proposals have not fared well in other states. In Vermont, a single-payer program failed when Gov. Peter Shumlin (D) discovered its high costs would require too many taxes. In a study commissioned for the Vermont state legislature by the University of Massachusetts, the study’s authors estimated Vermont would need to raise $1.6 billion in new revenues each year to support Green Mountain Care. In fiscal year 2012, Vermont collected only $2.7 billion in total tax revenues. Vermont’s plan would have required large-scale increases to the state’s payroll or income taxes to survive. In Colorado, 80 percent of voters rejected a single-payer proposal that would have imposed a 10 percent payroll tax and nearly doubled the state’s $27 billion budget.

The program’s free coverage for undocumented immigrants would likely create an incentive for people to come to the state to obtain free care. This will create a burden on the system that funding may not be able to cover. It is not clear how long a person would need to reside in California to receive a full year’s coverage.

Supporters of single-payer plans have long argued health care is a natural right of all citizens and that a government-controlled system would and should make health insurance available to everyone. Single-payer systems, however, have proven unsuccessful when tried elsewhere. In a report examining single-payer systems, John C. Goodman and Devon M. Herrick, both then at the National Center for Policy Analysis, argued other single-payer systems across the world have largely failed to provide needed care: “When health care is made free at the point of consumption, rationing by waiting is inevitable. Government control of the health care system makes the rationing problem worse as governments attempt to slow the use of services by limiting access to modern medical technology. Under government management, both efficiency and quality of patient care steadily deteriorate.”

California should resist moving to a single payer model instead pursue policies emphasizing consumer-driven health care.

The following documents offer additional information about single-payer health care systems.

California’s Single-Payer Health Care Plan Would Cost More Than the State’s Whole Budget
Eric Boehm of the Reason Foundation examines the proposed single-payer system in California and the high cost of maintaining such a program. “This year’s state budget in California, by the way, is about $180 billion. That means that implementing a single-payer health care system would require doubling (at least) the state’s current tax burden. The analysis of the health care proposal presented to lawmakers on Monday suggests a 15 percent increase to the state’s payroll tax to provide the necessary revenue,” wrote Boehm.

Ten Principles of Health Care Policy
This pamphlet in The Heartland Institute’s Legislative Principles series describes the proper role of government in financing and delivering health care and provides reform suggestions to remedy current health care policy problems.

Twenty Myths About Single-Payer Health Insurance: International Evidence of the Effects of National Health Insurance in Countries Around the World
Health care experts John C. Goodman and Devon M. Herrick identify 20 myths about single-payer health care and provide evidence single-payer is inferior to our admittedly flawed current system.

Issue Brief: Healthcare & Single Payer
The Ethan Allen Institute examines recent developments in health care reform in Vermont, including the state’s single payer proposal. The author describes the single payer program and concludes it may not work the way its supporters claim.

Single-Payer Health Care Is Not Right for Colorado or Any State
In this article published by The Daily Sentinel (Grand Junction, CO), Heartland Senior Policy Analyst Matthew Glans argues against single-payer health care in any state. “Single-payer systems across the world have failed to provide needed care and have caused rationing and a deterioration of medical innovation. When government sets prices on health care products and services—limiting the profit incentive of providers—efficiency, quality, and innovation will always suffer. Instead of imposing a monolithic single-payer system on Coloradans, the government should pursue policies emphasizing consumer-driven health care, such as health savings accounts, which empower individuals by giving them more control over their hard-earned dollars,” Glans wrote.

Single Payer: Why Government-Run Health Care Will Harm Both Patients and Doctors
Robert A. Book, a senior research fellow at The Heritage Foundation, argues in this paper the establishment of a single-payer health care system would inevitably result in lower payments for physicians and other health care providers. “The immediate effect of having a single (‘stingy’) payer would be lower incomes for physicians and a reduction in the supply of active physicians, thereby impairing access to health care for all patients. However, the result of ‘single/stingy payer’ health care will not only be lower incomes for physicians now but reduced access and lower quality health care for future generations as well.”

Decoding the Language of Green Mountain Care
John McClaughry of the Ethan Allen Institute argues Vermont’s single payer plan is likely to result in “rationing, waiting lines, maddening bureaucracies, demoralized doctors and nurses, shabby facilities, obsolete technology, declining quality of care, and of course much higher taxation.”

Ten Hard Questions about Single Payer Health Care
The Ethan Allen Institute identifies ten important problems with Vermont’s single payer health care plan, in the form of ten questions about the program’s structure, funding, and prospects for long-term success.

Vermont Single-Payer Plan Full of Holes
Joshua Archambault of the Pioneer Institute argues Vermont’s single-payer plan has many serious, fundamental problems that should not be lost in the excitement that seems to arrive whenever a state tries something big. “Many of the issues that a single payer system is attempting to address can be dealt with by greater consumer engagement, a federal tax policy change to delink insurance from employment status, and greater transparency in the health system,” he wrote.

Amendment 69: What You Need to Know About the “ColoradoCare” Single-Payer Health Care Measure
Linda Gorman, director of the Health Care Policy Center at the Independence Institute, was appointed in 2015 to the Colorado Commission on Affordable Health Care. This Issue Brief highlights seven things people need to know about Amendment 69, “a state constitutional amendment which would create ‘ColoradoCare,’ a single-payer, government run health care system in Colorado.”

Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Health Care News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database. 

If you have any questions about this issue or The Heartland Institute’s website, contact John Nothdurft, The Heartland Institute’s government relations director, at [email protected] or 312/377-4000.