Marchers at a Medicare-for-all rally in Los Angeles, California on February 4, 2017Ronen Tivony/ZUMA
As Donald Trump and congressional Republicans struggle to repeal Obamacare, Democrats in the nation’s most populous state are pushing a very different reform proposal that would radically change the way health care is paid for. Last week, the California Senate overwhelmingly passed a bill that would demolish the state’s current insurance plans and replace them with a single-payer system that would provide comprehensive treatment to all residents free of charge. The measure is still a long way from becoming law, but progressives already see it as a model for how states can expand access to care even as Republicans at the national level try to roll back coverage.
In many ways, the single-payer bill is quite simple; for consumers, it would mean no more copays, no more figuring out which doctors are in-network or out-of-network, and no more searching the health care marketplace for the plan that’s right for you. At the same time, it’s an immensely complicated scheme that would fundamentally alter the state’s health care system and its relationship with the federal government. Here’s what you need to know:
What’s going on?
On June 1, the California state Senate passed SB 562 by a vote of 23-to-14. One Democrat and every Republican voted against it (with three other Democrats not voting). The bill would essentially end private health insurance and most current forms of government insurance in the state, replacing those with a single, government-run insurance program that would pay health care providers (doctors, hospitals, pharmacies, etc.) for treating patients. Californians would no longer get insurance from work or through Medicaid. Instead, all state residents would be eligible to enroll in a program that supporters have dubbed Healthy California. That program would come with zero out-of-pocket costs for patients. The bill now heads to the state Assembly, which will have to figure out a way to pay for it.
Who’d be covered under the single-payer system?
Everyone who lives in California (including college students, if their university decides to pay for the coverage). The rate of people without health insurance in the state has improved since Obamacare went into effect, dropping from 17 percent in 2013 to 7 percent today. But that still leaves 3 million Californians without coverage, along with many residents who are paying more in premiums, copays, and deductibles than they’d like. Everyone would be eligible to enroll in Healthy California. That includes undocumented immigrants, who are currently shut out from Obamacare.
What would be covered?
Pretty much everything you can imagine. Healthy California would cover almost any sort of medical care, including things like dental, vision, and long-term care that are typically excluded from other government-funded insurance programs in the United States. There would be no more restrictive HMO plans or out-of-network providers; instead, you’d be able to see any licensed doctor, and they’d be free to prescribe treatments they deem necessary.
How much would health care cost me under the plan?
Nothing. The state wouldn’t charge any premiums. There would be no copay charge during a visit, no co-insurance, no deductibles. Prescriptions would be also be free. Out-of-pocket expenses would completely disappear.
So it’s free?
Well, not exactly. While personal out-of-pocket costs would disappear, health care doesn’t magically become free overnight. Doctors and pharmaceutical companies aren’t just going to start providing their services on a volunteer basis. But instead of having individuals bear the costs of health care through out-of-pocket fees, the state government will assume that entire burden. Ultimately, that would mean significantly higher taxes for Californians.
The new system would cost a lot of money. The Senate committee in charge of the bill calculated that Healthy California would cost the state $400 billion per year. For context, that’s more than double the state’s current budget. Of course, much of that spending would replace money that is already being spent. Last year, individuals, the state, and the federal government spent an estimated total of $367 billion on health care in California.
According to the Senate report, about $200 billion in funding for the single-payer plan could be scraped together from existing federal and state health spending, including Medicaid and Medicare. Of the remaining $200 billion in needed funding, the report finds that employers in the state already spend somewhere between $100 billion and $150 billion on health insurance, so new spending would be about $50 billion to $100 billion under the bill.
But estimating the costs of a single-payer plan is an inexact science. Advocates of single-payer argue that cutting out the insurance industry would lower overall health spending. The California Nurses Association, which has spearheaded the single-payer push, commissioned a study from economists at the University of Massachusetts Amherst. That study projected that the single-payer bill would cost just $331 billion, thanks to the state’s ability to negotiate lower costs for prescription drugs and reimbursement rates for doctors.
Lawmakers still need to figure out the exact mechanism for funding the program. The Senate report suggested that a 15 percent payroll tax increase could provide all the necessary revenue. The CNA study instead proposed a 2.3 percentage point increase to both the sales tax and business revenue taxes.
If I like my plan, can I keep it?
Not unless you go to the VA, the only non-Healthy California system that would remain in place. Private insurance would no longer exist. The roughly 50 percent of people who get insurance through their employers would switch over. Medicare, the federal program that provides insurance for the elderly, would cease to operate in the state. So would Medicaid, which insures low-income people. Companies would be banned from selling any form of supplemental insurance that covers the same things as the state’s program. It is single payer after all, with the singular entity being the California government.
Single-payer is often described by advocates as a Medicare-for-all system—and in many ways the California bill would mirror the federal program. But the legislation would actually enroll all current Medicare recipients into the new plan. That could actually be a pretty good deal for the elderly: Healthy California would offer more generous benefits than current Medicare plans—in particular, it would include long-term care and more generous drug benefits. “What we’re doing is we’re not destructing Medicare,” says Michael Lighty, the director of policy for the nurses association. “We’re simply taking those parts that have been carved out and given to the private insurance industry, and taking them back for public financing.”
How will medical providers get paid?
The bill would create a nine-person panel, appointed by both the governor and state Legislature to write the regulations on how exactly Healthy California will work.
Despite redirecting Medicare patients into the state program, Healthy California would still use national Medicare’s reimbursement policy as its model for paying doctors and hospitals. “What the study we’ve done proposes is adoption of Medicare rates,” Lighty says, “and we would simply follow the Medicare guidelines of approvals and so forth, so that we wouldn’t create a new bureaucracy in California. We’re going to follow Medicare and those processes and rates to implement our system.”
So California can do this all by itself?
Nope. The single-payer bill relies on the assumption that the state will be able to redirect current federal health spending—Medicare, Obamacare, Mediciad, etc.—into the Healthy California program. That would require waivers from the Trump administration, and given national Republicans’ demonization of any government health care initiatives, it’s hard to see Health and Human Services Secretary Tom Price allowing California to end private insurance. There are also a few complications from federal laws governing how employer-provided insurance operates that might make it unfeasible for any administration to grant those waivers without congressional action.
Who supports the bill?
The California Nurses Association (which is a part of left-leaning National Nurses United) has been pushing single-payer for quite a while. But the idea has found new support over the past year following Sen. Bernie Sanders’ (I-Vt.) campaign for Medicare-for-all. “The great state of California can send a message that will be heard all over this country and all over the world if you pass single-payer here,” Sanders said while visiting the state last month. At the state Democratic convention in May, pro-single-payer protests organized by the nurses association dominated news coverage. And the CNA organized a demonstration by about 1,000 single-payer advocates at the state Capitol when the Senate considered the bill.
Who opposes it?
Surprise! The insurance industry isn’t a big fan of the bill that would abolish their business. One of the more intriguing opponents is Kaiser Permanente, which operates a massive health network in the state providing both insurance and treatment. Kaiser has said that ending the private insurance market would disrupt the entire way it does business. “A model like ours that combines care and coverage would not be able to operate under the rigid system proposed in the bill,” the company’s lobbyist wrote in a letter opposing the bill. The California Chamber of Commerce is also predictably opposed, calling the plan a “job killer.”
So what’s next?
The Senate passed the bill last week, but because lawmakers were rushing to meet a deadline, they didn’t really finish the necessary work on it. It now heads to the Assembly, which also faces impending deadlines if it wants to enact something this year. The legislation would need to clear the Assembly’s policy committee by July 14 and would then need to be approved by the full Assembly, passed by the state Senate once more, and signed by the governor by early September.
But before the Assembly can even take a vote, a lot more work needs to be done. The bill the Senate voted on lays out the broad overview of how the health care plan would work and what it would cover. But it leaves the funding question mostly untouched. The Assembly will have to figure out how the necessary revenue will be generated. In California, new taxes require a two-thirds majority in both houses. That’s a significant obstacle; the Senate version—which didn’t contain a funding mechanism—fell four votes short of the two-thirds majority that would be needed to raise taxes.
The final vote could weigh even more heavily on lawmakers. Single-payer and Medicare-for-all poll well in the abstract, but people tend to be less supportive of those plans when they are asked about the necessary taxes. Advocates for single-payer point out that people are already paying for much of this already, just not through taxes. But that’s a nuanced public policy point; a concerted public relations campaign would likely be necessary to persuade voters. A poll from the Public Policy Institute of California recently found that while 65 percent of adults in the state and 56 percent of likely voters support a single-payer plan, that drops to 42 and 43 percent respectively if the plan would raise taxes.
Even if the bill passes both legislative chambers, California Gov. Jerry Brown (D) would still need to sign it (though the Legislature can override a gubernatorial veto with a two-thirds vote). Back when Brown ran for president in 1992, he advocated a single-payer national plan. But these days, he’s more skeptical. “I don’t even get it,” he told reporters while discussing single-payer back in March. “How do you do that?”
And Brown is far from the final roadblock. Implementation of single-payer would require cooperation from the federal government, which controls much of the money that state lawmakers hope to use to pay for the program. The Trump administration isn’t likely to let that happen without a fight.
Supporters of the bill insist the single-payer process could kick off this year. “Make no mistake,” says CNA communications director Chuck Idelson. “We’re doing a full court press. It’s our intent and commitment to get that bill to the governors’ desk this year and get this bill enacted.” Still, the current debate might end up looking a bit more like a trial run for a renewed single-payer push a few years down the road. Backers of the plan no doubt hope that by the time they’d have to start asking the feds for waivers, the White House might have a friendlier occupant.
