The high cost of paying for Canadian-style health care for all Californians has for more than two decades killed proposals by politicians to adopt such a system.
But advocates of the model have some ideas for two Democratic state senators trying to remake California’s health care market into a taxpayer funded model that gets rid of the need for insurance companies and covers everyone regardless of immigration status or ability to pay.
A report by economists at the University of Massachusetts Amherst, released Wednesday, found that overall health care spending in California would fall 18 percent under the proposal from state Sens. Ricardo Lara, D-Bell Gardens, and Toni Atkins, D-San Diego.
Accounting for savings achieved with their Senate Bill 562, it would cost $331 billion per year to run a universal coverage system in which state government, with taxpayer dollars, pays for medical services and procedures – down from more than $404 billion in spending under today’s system, according to the economic analysis. It was paid for by the California Nurses Association, the bill’s lead sponsor, which also endorsed Lara in his 2018 run for state insurance commissioner.
The report proposes a complete overhaul of the state’s current health care system. People would no longer have to purchase insurance through Kaiser or Anthem Blue Cross, for example. Instead, health care payments would be reorganized under a single state-run system funded, in part, by new taxes on consumer purchases like new cars and dining out at restaurants, and business revenue.
There would be no insurance premiums. No out-of-pocket costs for prescription drugs. No more deductibles.
To make the universal care proposal work, however, existing state and federal funding that subsidizes health care for low-income people, seniors and people with disabilities would have to remain in place. That could be a challenge under President Donald Trump and the Republican-controlled Congress. Of the $331 billion needed to run the system, $225 billion would come from state and federal sources, a portion of which is currently spent on MediCal and Medicare.
Cost savings would come through reductions in executive salaries and administrative costs for health care billing, as well as unnecessary or or inefficient medical services. The state could also negotiate with pharmaceutical companies for lower drug prices and restructure reimbursement rates paid to providers – the current fee structure pays based on the quantity and complexity of medical services provided.
Providing universal access to care would also lower costs by allowing people to see the doctor when they need to instead of delaying doctor visits because they can’t pay, the report found.
“We are on a collision course for rising health care costs and a crisis for California’s middle class,” Lara said at a news conference Wednesday. “The good news is California can get a lot more for our money when the Legislature passes the Healthy California Act. We will actually spend less than we do on health care, families will pay less...businesses will also pay far less.”
Business groups, including the California Chamber of Commerce, and health insurers like Kaiser oppose the proposal.
Micah Weinberg, president of the economic institute at the employer-backed Bay Area Council, called it “nutso” and argued it would actually increase health care spending.
“The idea that you can reduce unnecessary and inefficient delivery of services in a system with unlimited free health care where doctors determine medical necessity is just nonsense,” Weinberg said. “With everything going on in D.C., I understand the desire to meet crazy with crazy. But that’s just what we’re doing here.”
The findings represent a complete reversal from current thinking. Among the politicians who have publicly expressed concerns about the cost are Gov. Jerry Brown, who would have to sign off on the bill for it to become law.
Assembly Speaker Anthony Rendon has also questioned the cost and uncertainty in Washington, but “any single-payer proposal will receive full consideration in the Assembly,” according to his spokesman Kevin Liao. California Senate leader Kevin de León has been more receptive. He said recently that he welcomed Lara and Atkins to bring forth their proposal.
Lara said he will use the economic analysis to build the financing plan for the bill. It must pass the Senate floor by Friday to move to the Assembly.
The report proposes a two-fold tax structure: Sales taxes on everything except basic needs – grocery store purchases, housing, utilities – would go up 2.3 percent. Businesses that take in more than $2 million per year would pay an additional 2.3 percent in taxes on gross receipts.
There are tax exemptions for low-income people and small businesses. The report’s authors and sponsors argued that implementing its recommendations would actually save people money by lowering overall health care costs. It estimates that though taxes would go up, reductions in health care costs would save California households 9 percent of total income.
Savings from reduced health care costs for businesses are estimated, overall, at 22 percent, and 13 percent for medium-sized businesses. Large employers would see a smaller sliver of savings.
The findings echo total health care spending of roughly $400 billion today in California, also identified by the Senate Appropriations committee last week. It found that the state would need to find an additional $200 billion per year.
Under the nurses’ proposal, the state would need to come up with an additional $106.9 billion. Most of that would come from taxes on businesses ($92.6 billion), with $14.3 billion from increasing sales taxes.
Angela Hart: 916-326-5528, @ahartreports