Imagine a plan that guarantees citizens, legal residents and undocumented immigrants taxpayer-funded health care. This plan would give patients a rich list of benefits without co-pays, deductibles or premiums. Even better, this plan would do all of this while also cutting current health care spending. So what’s the catch?
The catch is that this plan would be run by the same state government struggling to fund basic services. Embracing a fantasy that promises everything to everybody, the Senate recently passed Senate Bill 562, which would create a government-run health care monopoly that would essentially outlaw private health insurance.
It establishes a “single-payer” health care system run by political appointees, includes provisions yet to be detailed and is paid for with new taxes yet to be announced. Because of the lack of specifics and the negative effects that monopolies generally bring, I opposed SB 562 on the Senate floor. The Assembly may vote on the bill later this year.
“Single-payer” sounds like an innocuous term that implies that it is simply cutting out the health insurance industry between physicians and patients. But SB 562 would do more — it would give Sacramento total control over California’s health care system. The state alone would decide how much physicians, nurses and other health professionals will be paid — making them de facto government employees.
Sacramento would have this power because SB 562 eliminates private insurance, Medicare, Medi-Cal, coverage for military retirees and Covered California. It instead creates a public monopoly. It also eliminates employer-paid health benefits, which means single-payer would likely shift some health care costs from employers to employees.
SB 562 is grounded in the belief that government bureaucrats know best. With the difficulties that the state already has in properly funding schools, fixing our roads (the state recently passed a massive car and gas tax increase) and completing huge projects without going over budget (i.e. high-speed rail), I doubt government bureaucrats will somehow magically make health care a more affordable and better experience for everyone.
According to a Senate analysis, it would cost at least $400 billion a year to provide for the health care of all Californians. I think the $400 billion estimate is too conservative. If SB 562 were to become law, the annual cost would certainly be much higher than advertised as supporters assume provider reimbursement rates close to those for Medicare, yet the bill gives doctors and nurses the right to negotiate rates. We can assume doctors and nurses will not embrace pay cuts for government health care.
The Senate’s fiscal estimate also assumes the state would retain the existing $200 billion in local, state and federal funding it currently receives to offset the total $400 billion cost. However, there is no guarantee that the federal government will cooperate and grant the necessary waivers or change the laws to allow California to incorporate Medicare, Medi-Cal and Covered California subsidies into a single state program. The denial of a waiver would fatally cripple the implementation of SB 562.
Even assuming that the federal government does grant the waiver, California would still have to find an additional $200 billion per year to fulfill SB 562’s requirements. For perspective, this cost is higher than the $183 billion that Gov. Jerry Brown has proposed in his 2017-18 state budget (general and special funds) to pay for schools, law enforcement and everything else. The Legislature would have to significantly raise taxes on everyone to come up with $200 billion.
Even if the Legislature did find that money, it would still have to pay its other obligations. For example, the state owes anywhere between $450 billion and $1 trillion in unfunded pensions for retired state workers.
As the federal government grapples with the failures we are seeing with the Affordable Care Act, California should not create a new, massive and untested health care bureaucracy through SB 562. The Legislature should refocus its efforts on improving existing health programs and on helping those who do not have access to necessary care.
I hope Gov. Brown vetoes SB 562 should it land on his desk. Single-payer is a false promise that would ruin the state’s precarious finances and threaten funding for other critical priorities.