California Dreaming: Single Payer Health Care

single payer

My last article, and a number of the comments that followed, acknowledged the importance of health insurance to the social safety net, and lamented the resistance of Congressional Republicans to maintenance–let alone extension– of current coverage.

Fortunately, Washington isn’t the only game in town.

With the collapse of anything remotely resembling governance coming from Washington, D.C., California has become the de facto adult in the room. Those of us appalled at Trump’s retreat from environmental protections, for example, take comfort in the fact that California, with its huge and important markets, is insisting upon fuel-efficient cars and other environmentally-sensitive measures.

In healthcare, apparently, California is also proposing to go where Congress won’t.

In the face of the GOP assault on the Affordable Care Act and Medicaid, California is preparing to vote on a statewide single-payer plan. Californians currently spend about $370 billion annually in a typical, insurance-dominated system that leaves 40 percent of the state’s  population uninsured or underinsured. The single-payer measure is working its way through the legislature, and a fiscal analysis was presented to lawmakers and the public last week by the bill’s sponsor and the California Nurses Association.

The analysis was done by a team led by Robert Pollin, the co-director of the Political Economy Research Institute at the University of Massachusetts and a former UC Riverside faculty member. At a Sacramento press conference, he explained how a single-payer system would enable all Californians to be completely covered. That includes 3.7 million currently uninsured residents and another 12 million who are underinsured, meaning they cannot afford their policy’s co-pays and deductibles.

The universal coverage would be paid for by combining all government healthcare subsidies, which accounts for about 70 percent of California’s current spending, and by two proposed tax increases: a 2.3 percent gross receipt taxes on businesses (which kicks in after the first $2 million in earnings and which exempts small businesses); and a 2.3 percent increase in the sales tax, with exemptions for necessities such as food, housing, utilities, and other services.

Those combined revenue streams would raise an estimated $400 billion annually to pay for universal coverage under a single-payer system.

Assuming the law passes, California will actually spend less than it currently does on healthcare, and the average middle-class family will see out-of-pocket costs fall by 9 percent.

Most businesses will also save money, Pollin explained, because they will no longer be paying for their employees’ health care. Even with the proposed gross receipts tax exempting the first $2 million, typical California businesses employing 10 to 19 people would see costs fall by 13.8 percent, he said. Businesses employing 20 to 99 people would see costs fall by 6.8 percent, he said. Businesses employing up to 500 would see costs fall by 5.7 percent, and the 500-plus businesses would see costs fall by 0.6 percent.

The law would establish a system paying hospitals and providers what they are currently paid under the federal Medicare program. That’s about 22 percent less than what private insurers pay. The new system would also negotiate bulk purchases of drugs, and it would achieve the same sort of administrative efficiencies of scale that Medicare has achieved. Medicare’s overhead, as I’ve indicated previously, runs around 3%, while overhead for private insurers (who must market their policies and pay their top management competitive private sector salaries) runs between 22-25%.

As I write this, the measure is not a “done deal.” But a similar bill passed a few years ago, only to be vetoed by then-Governor Schwarzenegger. Assuming passage of the pending measure, it is likely that Governor Jerry Brown will sign it.

California has a bit over 12% of the U.S. population. If it passes single-payer, it will be a game-changer. (Already, New York’s legislature has begun discussing a similar approach.)

This could get very interesting. I’m gaining a new appreciation for federalism.

[Originally published at SheilaKennedy.net on June 12, 2017]

Sheila Kennedy is a former high school English teacher, former lawyer, former Republican, former Executive Director of Indiana’s ACLU, former columnist for the Indianapolis Star, and former young person. She is currently an (increasingly cranky) old person, a Professor of Law and Public Policy at Indiana University Purdue University in Indianapolis, and Director of IUPUI’s Center for Civic Literacy. She writes for the Indianapolis Business Journal, PA Times, and the Indiana Word, and blogs at www.sheilakennedy.net. For those who are interested in more detail, links to an abbreviated CV and academic publications can be found on her blog, along with links to her books..

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