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Cal. single-payer health bill could cost $400B/year

May 25, 2017
  • SB 562, also called “The Healthy California Act,” which would create a single-payer healthcare system in California, would cost $400 billion, half of which the state would need to fund via tax increases, according to a California Senate Committee on Appropriations report. Existing programs could pay the other half of the price tag.
  • If the state creates an additional payroll tax to pay for the program, the committee predicted the payroll tax rate would increase by 15 percentage points. However, the program’s new tax revenues would be offset largely by “reduced spending on healthcare coverage by employers and employees.”
  • The committee estimated that employer-sponsored health insurance costs between $100 billion and $150 billion annually.

The Senate Committee on Appropriations warned that “completely rebuilding the California healthcare system” would be “an unprecedented change in a large healthcare market.” They added that there are “numerous uncertainties” about how a new system would affect enrollees, providers, employers, and the state.

Though a few states have discussed single-payer options, none have taken the plunge yet. That’s unsurprising, as healthcare accounts for one-sixth of the nation’s economy, and a single-payer system would cause massive changes to the system.

In addition to providing cost estimates, the report highlighted potential implementation issues, including how to transition to a new system, whether the federal government would cooperate and the economic impact in going to a single-payer system.

“Even after accounting for the fact that employers would see a reduction in their costs for providing employer-sponsored insurance, the bill would result in a significant overall increase in the cost of healthcare for employees,” predicted the committee. “The statewide economic impacts of such an overall tax increase on employment is beyond the scope of this analysis,” according to the report.

Employer-sponsored health insurance makes up about 45% of the California population, 26% are covered by Medi-Cal, 10% by Medicare, 9% by the individual market and 2% by other federal government programs. About 8% of the state’s population is uninsured, according to the report.

Can a state create a single-payer system without skyrocketing healthcare costs and massive upheaval to the industry? Some providers are so sick of the system that are willing to give it a shot, but policymakers and industry heavyweights will approach a single-payer system more conservatively. Voters may also have to be persuaded. Colorado voted down a single-payer proposal in November, largely from fears of disruption to the system.

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