The price tag is in: It would cost $400 billion to remake California’s health insurance marketplace and create a publicly funded universal health care system, according to a state financial analysis released Monday.
California would have to find an additional $200 billion per year, including in new tax revenues, to create a so-called “single-payer” system, the analysis by the Senate Appropriations Committee found. The estimate assumes the state would retain the existing $200 billion in local, state and federal funding it currently receives to offset the total $400 billion price tag.
The cost analysis is seen as the biggest hurdle to creating a universal system, proposed by Sens. Ricardo Lara, D-Bell Gardens, and Toni Atkins, D-San Diego.
It remains a long-shot bid. Steep projected costs have derailed efforts over the past two decades to establish such a health care system in California. The cost is higher than the $180 billion in proposed general fund and special fund spending for the budget year beginning July 1.
Employers currently spend between $100 billion to $150 billion per year, which could be available to help offset total costs, according to the analysis. Under that scenario, total new spending to implement the system would be between $50 billion and $100 billion per year.
“Health care spending is growing faster than the overall economy ... yet we do not have better health outcomes and we cover fewer people,” Lara said at Monday’s appropriations hearing. “Given this picture of increasing costs, health care inefficiencies and the uncertainty created by Congress, it is critical that California chart our own path.”
The idea behind Senate Bill 562 is to overhaul California’s insurance marketplace, reduce overall health care costs and expand coverage to everyone in the state regardless of immigration status or ability to pay. Instead of private insurers, state government would be the “single payer” for everyone’s health care through a new payroll taxing structure, similar to the way Medicare operates.
Lara and Atkins say they are driven by the belief that health care is a human right and should be guaranteed to everyone, similar to public services like safe roads and clean drinking water. They seek to rein in rising health care costs by lowering administrative expenses, reducing expensive emergency room visits, and eliminating insurance company profits and executive salaries.
In addition to covering undocumented people, Lara said the goal is to expand health access to people who, even with insurance, may skip doctor visits or stretch out medications due to high copays and deductibles.
“Doctors and hospitals would no longer need to negotiate rates and deal with insurance companies to seek reimbursement,” Lara said.
Insurance groups, health plans and Kaiser Permanente are against the bill. Industry representatives say California should focus on improving the Affordable Care Act. Business groups, including the California Chamber of Commerce, have deemed the bill a “job-killer.”
“A single-payer system is massively, if not prohibitively expensive,” said Nick Louizos, vice president of legislative affairs for the California Association of Health Plans.
“It will cost employers and taxpayers billions of dollars and result in significant loss of jobs in the state,” the Chamber of Commerce said in its opposition letter.
Underlying the debate is uncertainty at the federal level over what President Donald Trump and the Republican-controlled Congress will do with Obamacare. The House Republican bill advanced earlier this month would dismantle it by removing its foundation – the individual mandate that requires everyone to have coverage or pay a tax penalty.
Republican-led efforts to repeal and replace Obamacare is fueling political support for the bill, Atkins said at a universal health care rally this past weekend in Sacramento hosted by the California Nurses Association, a co-sponsor.
“This is a high-ticket expense ... We have to figure out how to cover everyone and work on addressing the costs in the long-term – that’s our challenge,” Atkins said. “I’m optimistic.”
The bill has to get approval on the Senate floor by June 2 to advance to the Assembly. A financing plan is underway, which could suggest diverting money employers pay for workers’ compensation insurance to a state-run coverage system.
Lara said he believes California can and should play a prominent role in improving people’s lives.
“We can do better,” he said.