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Single-Payer Healthcare Plan May Cost California $400 Billion

A single-payer healthcare system for California would have a $400 billion price tag, but offsets from existing insurance costs could lower that figure significantly.

California single payer could cost $400 billion

Source: Thinkstock

By Jesse Migneault

- California’s proposed single-payer healthcare system would come with a $400 billion price tag, says a report from the state Senate on bill SB 562.

The goal of the universal healthcare bill is two-fold: to tackle the issue of runaway premiums for individuals and businesses and to build on the ACA by expanding coverage to those Californians still left without any coverage or inadequate coverage.

“All residents of this state have the right to health care,” the bill states. 

The total annual costs of about $400 billion per year would include all covered health care services and administrative costs at full enrollment.  An existing $200 billion in federal, state and local funding would pay for a portion of that.  

That would leave $200 billion in additional revenue needed to pay for the program. 

The state may raise the revenue through a new no-wage cap payroll tax, but the levy would equate to an additional 15 percent of individual income.  Such a proposal would likely be difficult for residents to accept, especially since the higher tax would not be measurably offset by higher wages.  

However, state residents and businesses would not be subject to existing healthcare expenditures, which may compensate for a higher tax rate..   Budget estimates place current employer-sponsored health insurance outlays at between $100 and $150 billion per year. 

Transferring this spending to a single-payer system would, in effect, reduce new spending under the bill to between $50 and $100 billion per year.

If the universal care bill becomes law, it will include several key provisions, including : that all enrollees receive 33 essential health benefits (including diagnostic imaging tests, inpatient and outpatient services, emergency care, and pediatric care).  It would also provide for the establishment of the Healthy California Program, a complete prohibition of private payers from the system, eligibility for every state resident, as well as no premiums, copayments, or deductibles for members.

About 45 percent of California’s population is currently in an employer-sponsored health insurance model, followed by 26 percent in Medi-Cal, 10 percent in Medicare, and nine percent in the individual marketplace.  Approximately 8 percent of residents are uninsured.

The numbers of uninsured (under 65) includes 1.8 million undocumented adults who are ineligible for Medi-Cal or subsidized coverage.

There have been three similar single-payer bills introduced in the California legislature in recent years, although none have been enacted.

Despite the financial implications, the report recognized the assemblage of issues that make such a large structural change challenging.

“This bill would require unprecedented changes to a mature health care system,” the Senate report noted. “Therefore, there is tremendous uncertainty in how such a system would be developed, how the transition to the new system would occur, and how participants in the new system would behave.”


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