Report: Single-payer insurance will cost California twice its entire state budget
California governor Jerry Brown is seriously considering going to a single-payer health insurance plan for the state if the GOP ever manages to repeal Obamacare. But an analysis by the state Senate Appropriations Committee – dominated by Democrats – reveals that if the governor wants his dream of a single-payer system to come true, he's going to need to spend a lot more to realize it.
How much more? The Appropriations Committee's analysis shows that a single-payer plan would cost the state $400 billion a year. In case the governor isn't keeping track, that amount is twice the size of the entire state budget of $200 billion.
California would have to find an additional $200 billion per year, including in new tax revenues, to create a so-called "single-payer" system, the analysis by the Senate Appropriations Committee found. The estimate assumes the state would retain the existing $200 billion in local, state and federal funding it currently receives to offset the total $400 billion price tag.
The cost analysis is seen as the biggest hurdle to creating a universal system, proposed by Sens. Ricardo Lara, D-Bell Gardens, and Toni Atkins, D-San Diego.
It remains a long-shot bid. Steep projected costs have derailed efforts over the past two decades to establish such a health care system in California. The cost is higher than the $180 billion in proposed general fund and special fund spending for the budget year beginning July 1.
Employers currently spend between $100 billion to $150 billion per year, which could be available to help offset total costs, according to the analysis. Under that scenario, total new spending to implement the system would be between $50 billion and $100 billion per year.
"Health care spending is growing faster than the overall economy ... yet we do not have better health outcomes and we cover fewer people," Lara said at Monday's appropriations hearing. "Given this picture of increasing costs, health care inefficiencies and the uncertainty created by Congress, it is critical that California chart our own path."
The idea behind Senate Bill 562 is to overhaul California's insurance marketplace, reduce overall health care costs and expand coverage to everyone in the state regardless of immigration status or ability to pay. Instead of private insurers, state government would be the "single payer" for everyone's health care through a new payroll taxing structure, similar to the way Medicare operates.
Lara and Atkins say they are driven by the belief that health care is a human right and should be guaranteed to everyone, similar to public services like safe roads and clean drinking water. They seek to rein in rising health care costs by lowering administrative expenses, reducing expensive emergency room visits, and eliminating insurance company profits and executive salaries.
Profits by insurance companies are only 1-2% of total health care spending, and executive salaries are a fraction of that. But when waging a war to bankrupt your state, it's so much easier to blame evil corporations and the rich for the high costs of health care.
The estimate that the state would need to find only an additional $50-100 billion to make single-payer work is laughable. That figure is dependent on several pie-in-the-sky changes to the system, including convincing sick people not to go to the emergency room. So at the same time the government is going to pick up 100% of the costs of an emergency room visit, you're asking people not to take advantage of it? Good luck with that.
Single-payer is not the answer anywhere – especially when it comes to imposing the system nationwide. Last year, the U.S. spent about $3.3 trillion on health care. The government already spends about 40 cents of every health care dollar, which has resulted in Medicare, Medicaid, and other government health care programs on an "unsustainable" spending path.
God help us if Bernie Sanders and liberal Democrats ever achieve power. The resulting massive tax increases to pay for a single-payer system would ruin the economy and drive costs through the roof.
Private insurance may not be an ideal system. But like democracy, it's better than everything else. Instead of finding ways to bankrupt the U.S. by imposing a ruinously expensive health care system on citizens, ways should be found to increase the efficiency and competition in the private market by removing regulations and incentivizing care for the sick based on outcomes.