Single-Payer Health Care

2022 Business Issues Guide

Single-Payer Health Care

Government-Run Health Care Reduces Choice, Increases Costs

During the 2021 legislative session, California legislators reintroduced a bill identifying the government-run, single-payer health care model as the preferred method of health care coverage. This convoluted and extremely expensive system eradicates personal choice by forcing every resident to use an assigned system or physician. A 2018 CalChamber poll found that voters preferred keeping their own health care coverage rather than switching to a government-run program by a 3 to 1 margin. Considering the costs associated with single-payer health care and Californians’ preference for coverage of their choosing, the Legislature should respect the will of those they represent.

Single-Payer Health Care Defined

In an authentic single-payer health care system, private and employer-provided health insurance is nonexistent. Rather, health care is delivered through public or private hospitals and health care providers. The expenses associated with the care are paid for by public financing, which means the government obtains the money by taxing employers, employees and individuals. Although the health care typically is delivered at low-to-no cost at the point of use, it is in no sense “free” because higher taxes and consumer copays foot the bill for the care.

Single-Payer Health Care Not Free Health Care

There’s nothing free about a government-run health plan. During the 2021 legislative session, AB 1400 was introduced by Assemblymember Ash Kalra (D-San Jose). AB 1400 was similar to SB 562, which was introduced by Senator Ricardo Lara (D-Bell Gardens) in 2017. According to the Senate Floor analysis on SB 562, a single-payer proposal in California was estimated to cost more than $400 billion annually.

In 2019, the Committee for a Responsible Federal Budget conducted a Medicare for All analysis and found that such a model would potentially be funded by payroll tax increases, income surtaxes, value-added taxes, mandated public premiums, doubling individual and corporate income tax rates, or a combination thereof.

In 2008, the Legislative Analyst’s Office (LAO) analyzed the cost of a single-payer system in California and concluded that more than $210 billion would be needed in the first year to sustain such a system and the amount would increase up to $250 billion in subsequent years. Even with a 12% payroll tax paid both by employers and employees under that measure, the report predicted a net shortfall of $42 billion in its first full year of implementation and even higher thereafter. Just to cover the shortfall would require a 16% tax on employers and employees, according to the LAO’s estimate, resulting in a multibillion-dollar-tax increase on Californians.

Vermont attempted to enact a single-payer system in 2011, but the efforts were derailed in 2014 when the Legislature failed to approve an accompanying 11.5% payroll tax on all employers and an individual income tax increase of up to 9.5%. Vermont’s plan would have doubled the state budget and Governor Peter Shumlin (D) said the burden would have posed “a risk of economic shock.” When asked about the failed single-payer effort, Governor Shumlin said, “What I learned the hard way, is it isn’t just about reforming the broken payment system. Public financing will not work until you get costs under control.”

Health Care Coverage Already Available

When health care data is examined, it is clear that coverage is available to Californians. In 2019, data released from the California Department of Managed Health Care and the California Department of Insurance showed that 32.7 million Californians were enrolled in health care coverage. Of this number, more than 10 million Californians had Medi-Cal coverage. As of October 2020, 6,439,998 California residents had Medicare coverage. Covered California reported 1.6 million people enrolled in their plans in 2021.

According to data from the U.S. Census Bureau, 7.1% of Californians were without health care coverage in 2020. The LAO stated that undocumented immigrants represented 40% of California’s remaining uninsured individuals. However, California has been expanding Medi-Cal coverage for undocumented residents over the last several years: 536,000 undocumented people age 25 and under have enrolled as full-scale beneficiaries while approximately 345,000 undocumented adults are receiving limited coverage. The state’s latest expansion of coverage for this population will qualify all income-eligible residents age 50 and older for full-fledged benefits starting in May 2022, and is expected to enlarge Medi-Cal demographics by about 235,000 people.

Government-Run Single-Payer Health Care Reduces Patient Access to Quality Providers

Interestingly, a single-payer model would likely reduce patient access to providers. This system typically requires a general practitioner, or primary care provider, be the initial point of contact. In a general sense, health maintenance organizations (HMOs) operate similarly. The current multi-provider system, however, offers variety in relation to coverage, meaning not all patients rely on a primary care provider to be their initial point of contact (for example, preferred provider organization (PPO) patients). This leads to tremendous scheduling and wait time issues. Additionally, patients receive very little interaction with their provider. Furthermore, because the general practitioner is the primary point of contact, the “free” health care services often are overutilized, which may lead to government rationing of health care services.

Personal freedom and choice also are precluded in a single-payer system, forcing every resident to use an assigned system or physician rather than a health plan or physician of their choosing. Additionally, a single-payer health care system can result in decreased quality of care since competition is eliminated and rates are set by the government. Under such a system, each type of health care provider is designated a set payment amount; thus there is no incentive to provide higher quality of care or be innovative in the care provided.

Californians Have Rejected Government-Run Health Care

California voters have twice rejected a government-run health care system at the ballot box — in 1994 and 2004. In addition, a CalChamber-conducted poll in 2018 found that voters overwhelmingly preferred to keep their current health insurance (78%) over switching to a single-payer approach (22%). Voters strongly support subsidies for people who cannot afford their own health care (75%) and for those who have pre-existing health conditions (81%) but were not ready to embrace government-run health care.

Constitutional and Federal Challenges

The constitutional barriers to a single-payer system include the Proposition 4 appropriations limit and the Proposition 98 education finance guarantee. The Proposition 4 limit constrains overall state spending to growth based on population and inflation factors. The large tax increase required by a single-payer system would push spending above the limit.

Proposition 98 creates a school finance formula that requires a portion of any new general revenues to be dedicated to schools. The tax increases necessary to pay for single-payer health care would require a companion amendment to the California Constitution that exempts the new revenues from both the Proposition 4 appropriations limit and the Proposition 98 school finance formula. The constitutional amendment would require voter approval.

Even if constitutional amendments were approved, California would have to obtain approval from the federal government to allocate federal Medicare and Medicaid funding to a California government-operated, single-payer health care system. Without the necessary federal funding, California could not afford to proceed with a single-payer system.

HealthY California for All Commission

California’s 2019 budget allocated funding to create the Healthy California for All Commission. According to the 2019 budget, the commission is charged to “Develop a plan that includes options for advancing progress toward achieving a health care delivery system in California that provides coverage and access through a unified financing system, including, but not limited to, a single-payer financing system, for all Californians.”

The commission first met in January 2020 and is comprised of 13 voting members, including California Health and Human Services Secretary Mark Ghaly, who chairs the commission, eight gubernatorial appointees and four legislative appointees. The pandemic sidetracked a consistent meeting schedule and has delayed the commission’s final report, which will be provided to the Governor, and chairs of the Senate and Assembly Health committees. It is anticipated the commission will issue its final report in February 2022.

CalChamber Position

Californians need to have affordable health care coverage when they access their quality health care providers. While Californians experience premium increases on an annual basis, a $200 billion tax increase and complete restructuring of the health care system is not the answer to insuring the uninsured and making unaffordability affordable. A single-payer system abrogates the freedom individuals have to pursue health care coverage of their choosing.

Single-payer health care does not equate to free health care, and the exorbitant taxes and costs associated with this system will systemically eradicate new jobs while driving out existing industries. The consequences associated with adopting a single-payer health care model should give the Legislature serious pause in pushing forward any proposal in California.

January 2022

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Preston YoungPreston Young
Policy Advocate
Health Care, Taxation