Single-payer healthcare promises to be 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 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% of Californians are uninsured. The other 93.2% already have private insurance, Medi-Cal, or gained insurance through Covered California during the ACA expansion.
Creating a single payer 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 for single payer is the claim that it saves money by eliminating profits and administrative overhead 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 or Blue Shield), so profits only enter into the equation for a minority of Californians. Second, SB 562 removes 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, and there are reasons to believe that these estimates are too low. To put this in perspective, the entire state budget for 2018-2019 is $201.4 billion. SB 562 does not provide details about how funds would be raised.
Furthermore, SB 562 has no mention of cost control measures, and explicitly says 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 Legislature. Other obstacles include Proposition 4 of 1979, referred to as the Gann Limit, which limits state and local appropriations. Implementation of a tax funded single-payer system would necessitate repealing the Gann Limit or exempting the new taxes from the limit. Proposition 98 of 1988 requires that a certain amount of tax revenues be diverted toward education funding, and taxes for a single-payer system would fall into this category. 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 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 political and legal complications, SB 562’s enormous price tag, and lack of cost-control measures and long-term funding uncertainties need to be carefully considered. Vermont tried to implement a single payer system in 2014, but ultimately abandoned it following a myriad of challenges. Vermont had a population of 625,000 residents then. California’s is nearly 40 million. California voters should take note of this as they go to the polls this fall.