California is studying a single payer system. It is doing the homework to make explicit the assumptions that are needed to make the system work. Modern Healthcare has some details:
SB562 would guarantee health coverage with no out-of-pocket costs for all California residents, including people living in the country illegally. The state would contract with hospitals, doctors and other healthcare providers and pay the bills for all residents similar to the way the federal government covers seniors through Medicare.
The measure envisions using all public money spent on healthcare — from Medicare, Medicaid, federal public health funds and “Obamacare” subsidies. That’s enough to cover about half of the $400 billion cost, according to the legislative analysis.
The rest would come from higher taxes on businesses, residents or both. It would take a 15% payroll tax to raise enough money, the analysis said.
Matt Bruenig makes one very good point before I want to look at some details:
After the implementation of single payer, the report says, health expenditures in the state of California would total $400 billion per year, or 15 percent of the state’s GDP. This is 3 percentage points lower than the share of GDP the US overall spends on health care.
I have a couple of questions about the finances.
Does the analysis assume or not assume the AHCA will be passed? If it does not assume the AHCA, there is a potential $10 billion Medicaid annual gap in the financing. More importantly it is assuming some incredibly complex and currently not authorized in law much less by rule making waivers.
What happens when there is a recession? California has a balance budget constraint. Wage and capital gains income taxes tend to be pro-cyclical. They go up in good times and crash in bad times. How is this program financed in bad years?
Finally, we need to look at the distributional fight inherent within universal access programs. Single payer is exceptional for the fifty two year old making $11 an hour with either no benefits or Bronze level benefits. It is not as good of a deal for a twenty nine year old independent contractor making $39,000 a year who has a cheap policy in the individual market. It is a really bad deal for the mid-40s couple making $200,000 with exceptional coverage through work.
The American political system is most responsive to people who have a lot to lose, people who have power and people who can mobilize significant resources. In this case, that is an apt set of descriptors for the mid-40s couple making very good money.
Single payer is hard. California is trying to make explicit the trade-offs needed to get a single payer system off the ground. There are choices to be made with winners and losers from each choice made. And each set of people whose current situation is changed for the worse will scream.
Update 1 And oh yeah, how does this play nicely with ERISA, the controlling law on most employer sponsored benefits including health insurance?
OzarkHillbilly
Yeah, I don’t see it happening.
Bradley
Why is it a bad deal for the middle American, independent actor type in the mid salary income band (“29 yo contractor at $39K”). He may pay more tax but the system as designed will give him more AV juice and reduce OOP. For an ER visit, a PCP visit or two, and some Rx’s its probably a wash, no? Plus you sleep with more protection, assuming that matters to some.
Horatius
Also California can negotiate bulk drug prices down unlike Medicare.
David Anderson
@Bradley: Because most 29 year olds with decent jobs barely touch the health care system. If you are barely touching the system, out of pocket barely matters. If he is getting an age-rated policy on Exchange, he’ll buy a $170 month Bronze instead of want to pay $500/month increased payroll taxes.
Single payer is an explicit transfer of resources from the healthy to the sick. Most healthy people are going to be better off and those who are hit by a bus will get judged as to whether or not they deemed to be deserving by the people who aren’t hit by the bus. There are trade-offs involved and some people are better off while other people are worse off.
Steeplejack
Even if California can’t pull this off, it seems like it’s a valuable exercise in research toward a better health-care/insurance system.
Radiumgirl
Do like the English. Single-payer but employers can still offer private insurance as a perk — single payer ensures a base level of care for everyone, but those who can afford it can buy a better level of benefits.
Ohio Mom
On a related note, my Republican Rep sent out yet another email yesterday telling us all not to worry about the AHCA, everything we’re reading about it is a lie and we’ll all be fine.
He must be getting a lot of flak from people besides me.
Heh. I’m enjoying watching him squirm.
namekarB
For all those who say it cannot be done, keep in mind that the population of Canada is less than the population of California
David Anderson
@namekarB: I am not saying it can not be done. I am saying that the institutional structure of the US system makes some very tough questions quite prominent. I am glad that California is actually trying to do the hard work of accurately scoping out these types of changes imply.
Rob in CT
@namekarB:
It’s not that it cannot be done. It’s that it is hard to get done, especially given our political system, culture, and the fact that we’re ~70 years down the road of rejecting SP.
We should try to get it, or something like it (universal coverage doesn’t have to be “true” single payer) anyway. But people need to realize that it’s not actually simple, let alone easy (it would be hard even if it were simple).
It’s been mentioned here before, but affluent healthy people aren’t the only group that will take a hit if we move to SP, and howl as a result. Providers – doctors, hospitals, etc. Most providers are, unlike Pharma, well-respected/liked. They have resources. They’ll fight.
None of the above is a reason to just give up. But you have to expect this and plan for it if you’re going to pull it off. You may have to make uncomfortable compromises with some of these groups to get it done (and be called a sellout because of it).
Laura
Prior analysis of single payer in the Schwarzenegger years estimated an 11% payroll tax (if my recollection is accurate). The 30% administrative overhead/profit would extend coverage to the unemployed/retired/disabled.
Cost curve bending by negotiating drug prices down.
The Lewin Group had done the analysis and it appeared to be a workable plan except for the howling of the insurance industry.
Ruckus
@namekarB:
It’s not just the healthcare payment system that is different in Canada. The healthcare providing system is different, in costs for one. I keep saying here on BJ that I get my healthcare from the VA. It is good, comprehensive and very up to date. But it is not nirvana, from a couple of points. First, I rarely have the same primary care provider for more than a year. And I get who they provide. I can ask for a change (never have the people are good and to me the results are what counts) but it takes time to wait for an opening so that you can. Easier to just wait. All that said everyone has been good. That wait part is one thing that some can not abide by. You wait. For appointments, for procedures…… If your need is emergent you will be taken care of, if it can wait, you most likely will. Next, for those in some groups you will pay copays, which can add up to a fair bit. There are medications that are not available because the costs are too high for the system and different, generic, may be available, which may or may not be as effective.
All that said, the service is very good, the procedures are up to date, but the overall system is quite different.
Ruckus
David, I have a question.
Would it be easier to change now or at some time far off in the future? Or would all the benefited stakeholders be worse off whenever, whatever change is made? Because it seems that the current course, with weak cost containment, is/becomes unsustainable, at some point, no matter what percentage of the population is covered.
sharl
This is a good discussion on the political challenges of making this worthy goal happen, whether single payer or something that does a similar thing under a different name.
I have huge respect for Matt Bruenig’s economic number-crunching skills, not so much because I understand a lot of what he does, but because a lot of other experts in the area hold him in high regard. But Bruenig rarely dives into the political challenges of making this happen, beyond occasionally acknowledging the difficulty. His expertise is in the number crunching, not the politics.
In my professional world, there is a process we have called “socializing” a proposal, to make would-be sponsors aware of how development of an idea into something real can help their mission, and why it is worth their support. The socialization process is often a long and frustrating thing, and that is just for my small world of a handful of technical specialists. Socializing single payer to the power brokers and citizenry of a large state – let alone the nation – will be no small task, but it will be a critical part of the process of making this happen.
Earl
I’m a Californian.
My guess is this isn’t happening, and I’d probably oppose it.
I’m one of those mid-40s couples making $200k. What that means is, given where we have to live for our careers, we can *barely* afford a 1100 ft^2 home built in the 70s. And even once we finish with a mortgage, we will permanently pay over $1.3k/mo in property taxes because of Prop 13. So I look at my budget, and I wonder where a $5k or $10k tax increase comes out of. If I owned that home and a car and were doing really well (that comes at the $350k level in my area of CA), I’d probably feel differently. But right now, that payroll tax increase is the savings we need to have any hope of staying here once we retire.
Second, who gets this health care? Does showing up anywhere in CA and renting the cheapest $400/mo studio you can find now entitle you to a blank check for health care? Including Mr. $1m/month from Iowa? It doesn’t take too many of them to create adverse selection between states. Not to mention fucking republicans; I read some famous Republican asshole pundit got his heart treatment done in France because the health care was so good. Again, do you get to skip paying for health insurance in Georgia, get sick, “move” to CA and rent a studio, get treated, then head back home? The residency requirements and enforcement thereof will be a nightmare. Even in blue CA, levying a giant tax increase, some of which will directly go to funding health care for non-citizens, will be an enormous fight.
David Anderson
@Ruckus: I think this is an awesome question. I don’t know is my best answer
feebog
@Earl:
What you didn’t say in your analysis (much of which I agree with) is what you pay for health care now, and what it covers. And believe me, as you get into your 50s and 60s the need for quality health care goes up on a pretty steep curve. I applaud California’s attempt to at least look at the potential challenges. This is by the way how it was done in Canada. And yes, I’m a fellow Golden Stater.
Brachiator
I hope to look at the links in more detail later. There have been some good coverage of this issue on the public radio program “Air Talk” on KPCC.
The projected costs make this look like a hard sell. Does anyone know what Massachusetts spent on their health care system?
Do the universal health care systems of other countries pay for the care of illegal immigrants?
Bob Power
No such discussion of California’s efforts is complete without at least a passing mention of ERISA preemption.
petesh
@feebog: Me too. We need to have this discussion, in detail, and in California there is a decent chance we can do so in a fairly civilized manner. If we can work it out, there is at least some chance that the rest of the country will follow. If we cannot, we are of course screwed. For too long, the “debate” has been between slogans (single payer vs free market) that actually serve to muddy the issues, and essentially lead to mudslinging on both sides. Now, basically we in California are committed to finding out what it would take to make some form of single payer work. This is great! Take the time and get it right.
David Anderson
@Brachiator: Most of the Massachusetts expansion was paid for with waivered Medicaid funds.
Felanius Kootea
We need the analysis at least to understand what can and cannot be done. Didn’t Vermont go through a similar exercise and in the end conclude that at that point in time, they couldn’t afford single payer?
David, is there a plausible scenario where several states (say, California, Washington, Oregon, New York, Massachusetts) pool resources to create a multi-state single payer option? Could such a thing work / have more benefits than a single state going it alone? Or do differences in state regulations make that impossible?
? Martin
From what I’ve read:
1) This proposal does not assume AHCA passes.
2) Because the bill that passed the Senate has relatively little detail (by design) the proposal assumes minimal savings from negotiating drug pricing and so on. So it’s believed that there are some cost savings that can be achieved as the language of the bill firms up. The question is how much.
3) This is an everything proposal by design. The state may not be able to do everything (dental, vision, etc.) with no co-pays. As it works its way along, they may add some cost recovery like modest co-pays, they may also scale back the scope of the plan somewhat.
? Martin
@Felanius Kootea: California has a pretty strong history of going it alone and then recruiting other states to adopt its standards. Its like a little federal government in that respect. CARB standards are adhered to in about ⅓ of the country. California’s cap and trade marketplace is tied to several others in Canada. I can’t imagine that CA wouldn’t immediately go to Oregon and Washington and see if they would adopt a similar policy, using CA as a blueprint and test pilot.
Miss Bianca
@sharl:
And this, this right here, is I think what so spectacularly failed to happen in CO when we had our “single-payer” attempt. Well, that and the whole concept was so convoluted and hard to grok – “it’s not a governmental agency! But its budget is going to be the single biggest line item in the state budget, so yeah, it kind of is! Its Board of Directors isn’t going to be elected, it’s going to be appointed, but appointed by whom, well…that’s hard to say!” – that it went down by something like 80% – 20%.
? Martin
@Earl: Home affordability is a topic that the governor is also taking up. I would imagine that it would get tied to this in some way. Not as a public funding exercise, but as a deregulation one. Local communities need to knock this NIMBY shit off and allow development to take place. It’s now a statewide problem. To it’s credit my city has shifted primarily to high-density rentals/condos. It’s done a decent job of stabilizing prices and brought them down at the low-end ($500K is low-end here, probably worse where you are).
I suspect the residency issue will be studied carefully. It’s one of the biggest risks to the effort.
VFX Lurker
@? Martin:
As I recall, Canada requires a residency of six months before one can use their healthcare system. Alberta allows one extra month for snowbirds.
? Martin
@VFX Lurker: That sounds reasonable on paper, but if there is no local insurance market, what do you do in the meantime? It’s not like the hospital can turn them away. It’s a tricky problem to solve.
Daniel O'Neil
Why not something like medicare where there is a baseline level of care that can be supplemented with additional coverage?
silvery
From an interview I heard by one the bill’s authors, the intention is to replace CA employer-provided healthcare completely. This would then free-up the money we are currently paying into our employee systems to pay into the CA system. I’m a CA resident with decent benefits, paying about $4500/yr for two adults through my employer, plus whatever my employer has to pay. The thinking is that this will help CA attract more employers to relocate here for the healthcare savings. Whether this makes sense or adds up economically I don’t know; at least CA is looking at ways to improve/protect healthcare.