Young: Single-Payer Update

Wednesday, June 7, 2017 | 0

Senate Bill 562 (the Healthy California Act) passed the California Senate on a 23-14 vote last week.

Julius Young

The bill, to create a California single-payer health care system for all state residents, now goes to the Assembly for consideration.

If passed by the Assembly (likely) and signed by Gov. Jerry Brown (perhaps not so likely), California workers’ comp would eventually be entirely reshaped along with the rest of the California health care system. How this would work is not clear, but the bill requires a study of how workers’ comp medical services should be covered under a proposed California single-payer system.

My last post focused on SB 562 and noted a Senate committee analysis that put a $400 billion price tag on the proposal. There are many hurdles, including unknown financing or taxes.

Several things happened since my last post. SB 562 was amended to include the following provision:

“This bill would prohibit this act from becoming operative until the secretary of California Health and Human Services gives written notice to the secretary of the Senate and the chief clerk of the Assembly that the Healthy California Trust Fund has the revenues to fund the costs of implementing the act. The California Health and Human Services Agency would be required to publish a copy of the notice on its internet website.”

A cynic could say that this gives politicians a way to cast a popular vote knowing that the result is not likely to happen. Supporters may say that this is just an early step in this bold, aspirational process.

In recent days an alternative analysis of SB 562 was unveiled, this one by the Political Economy Research Institute at the University of Massachusetts Amherst, done by Robert Pollin, James Heinz, Peter Arno and Jeannette Wicks-Lim. They claim that California single payer could achieve significant savings:

“The State of California is considering a bill to create a statewide single-payer health care system. This study provides an economic analysis of the proposed measure, The Healthy California Act (SB 562). The study includes four major sections: 1) Cost Estimate of Universal Health Care Coverage in California; 2) Cost Saving Potential Under Healthy California; 3) Financing Healthy California; and 4) Impact on Individual California Families and Businesses. The primary goal of Healthy California is to provide high-quality health care to all California residents, including those who are presently either uninsured or underinsured. The study finds that providing full universal coverage would increase overall system costs by about 10%, but that the single-payer system could produce savings of about 18%. The study thus finds that the proposed single-payer system could provide decent health care for all California residents while still reducing net overall costs by about 8% relative to the existing system. We propose two new taxes to generate the revenue required to offset the loss of private insurance spending: a gross receipts tax of 2.3% and a sales tax of 2.3%, along with exemptions and tax credits for small-business owners and low-income families, to promote tax-burden equity. Within this proposed tax framework, Healthy California can achieve both lower costs and greater equity in the provision of health care in California for both families and businesses of all sizes. Thus, net health care spending for middle-income families will fall by between 2.6 %-9.1% of income. Small firms that have been providing private health care coverage for their workers will experience a 22% decline in their health-care costs as a share of payroll. The small firms that have not provided coverage will still make zero payments for health care under Healthy California through their gross receipts tax exemption. Medium-sized firms will see their health care costs fall by between 6.8% and 13.4% as a share of payroll relative to the existing system. Firms with up to 500 employees will experience a 5.7% fall, and the largest firms, with over 500 employees, will experience a 0.6% fall as a share of payroll relative to the existing system.”

Instead of the California Senate's $400 billion price tag, U. Mass Amherst estimates that California single payer would cost $331 billion. Assuming that the federal government would agree to send California $225 billion (federal cost of various federal health programs), there would be a $106 billion shortfall. That means higher taxes for Californians.

The U. Mass Amherst study does not focus on workers’ comp medical spending, which isn’t surprising, since SB 562 really is vague about how that spending might be handled under single payer.

So are we seeing the first signs of sun rising on a new era that will eventually fold California workers’ comp into “24 Hour Care?" Hard to know now.

Clearly a significant slice of California Democrats aren’t willing to wait around to see how the political winds blow for the Affordable Care Act or the American Health Care Act. Given the deep hole Democrats are in nationally, single payer on a national level might not occur for a decade or more. Opponents of SB 562 might well get opposition in primaries.

I expect it to pass, but have no idea what the governor will do.

SB 562 is sponsored by the California Nurses Association, and here is an update on its proposal.

Julius Young is a claimants' attorney for the Boxer & Gerson law firm in Oakland. This column was reprinted with his permission from his blog, www.workerscompzone.com.