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California’s Path to Single Payer Health Care Will Be Long and Arduous

Amy Donovan 7/26/2017
Amy Donovan

As Congress struggles with what to do about the Affordable Care Act (ACA), the California Senate passed SB 562, the “Healthy California Act” to propose a universal, single-payer health care coverage system in California. Healthy California would cover every resident of California, including undocumented Californians and current Medi-Cal beneficiaries, with no enrollee premiums or cost-sharing. This ambitious proposal for the state to go its own way includes an equally ambitious funding requirement of $400 billion annually. Added to the existing state spending, Healthy California would more than triple the current California budget. We issued a Briefing last month summarizing the Healthy California Act as passed by the Senate.

For now, it appears this single payer plan will go no further this year. In the Assembly, Speaker Anthony Rendon has effectively put SB 562 on hold in the Assembly Rules Committee. Rendon stated that the bill “does not address many serious issues, such as financing, delivery of care, cost controls or the realities of needed action by the Trump administration and voters to make SB 562 a genuine piece of legislation.” Because this is the first year of a two-year legislative session, it is still possible that the bill could be brought up for further consideration in 2018.

It’s notable that the Speaker did not assign the bill to the Suspense File, where most undesirably costly legislation goes to die. Instead, Rendon has made it clear that he wants the Senate to go back and fill in the gaps that are missing before taking it up in the Assembly. But adding in the financial and logistical details in the legislation may be the least difficult part of the uphill climb Healthy California would encounter.

While there are estimates that federal money would cover about $200 billion of the program costs, the rest would require another $200 billion in new state revenues – well in excess of California’s 2016-2017 fiscal year budget of $167 billion. The hypothetical approach discussed for raising this revenue is a 15% payroll tax on earned income. This also presupposes that the current level of federal funding remains unchanged. Both the U.S. House of Representatives and Senate versions of ACA repeal and replace would take significant bites out of federal funding for Medi-Cal.

Some advocates of SB 562 argue that despite the enormous cost, the single payer plan could save Californians as much as $37 billion each year because residents would pay no premiums or cost sharing for their medical care, and that the remaining 3 million uninsured in the state would be covered. Yet even as California considers blazing its own path, much will still depend on how Washington, D.C. decides to grant funding to the states. At this point, the direction of that debate remains very uncertain.

Keenan will continue to follow and report on the progress of health care policy in both Sacramento and Washington. For the latest updates on these developments, please visit our Health Care Reform site at http://www.keenan.com/hcr/.