California's single-payer fantasy remains elusive
California is facing a record budget deficit next year of $68 billion.
As a result, Gov. Gavin Newsom and the Democratic supermajority in the state legislature will have to scale back their progressive ambitions. Can the state really afford the looming rise in the minimum wage for healthcare workers to $25 an hour?
What about the expansion of Medi-Cal to undocumented immigrants, which is set to take effect at the beginning of 2024?
The record deficit should put an end to California's years-long flirtation with single-payer health care. Thanks to legislation signed by Gov. Newsom in October, the state will be spending the first several months of 2024 coming up with a plan to take over the health insurance system. But fiscal reality dictates that single-payer will remain nothing more than a dream for California progressives.
The October law, which entered the legislature as SB 770, was introduced by state Sen. Scott Wiener, D-San Francisco, in March. It directs the state to seek a waiver from the federal government to use federal Medicare and Medicaid dollars to fund a comprehensive new state-run insurance plan. California's Secretary of Health and Human Services Dr. Mark Gahly has until June 1, 2024, to offer recommendations on crafting that waiver.
If the waiver is granted, every Californian would eventually be cast into the state-run plan; private insurance would be illegal.
It's not at all clear whether the federal government would — or even could — approve California's request for a waiver.
The feds have never considered one that would funnel Medicare and Medicaid funding into a new state-run healthcare system.
Some experts on the state's Healthy California for All Commission believe doing so would require a change in federal law — a near impossibility, given the political makeup of Congress.
Even if the Biden administration were to approve the waiver, a subsequent presidential administration could revoke it. That would eliminate federal funding for the staterun system — and essentially destroy it overnight.
Regulatory and political barriers aren't even the worst of SB 770's problems. The legislation would require impossibly high taxes — even for Californians, who are already accustomed to one of the highest tax burdens in the country.
Single-payer in California would cost $500 billion per year. Assuming the state got permission to repurpose Medicare and Medicaid dollars, the federal government would cover $200 billion of that tab. The other $300 billion — roughly equivalent to California's entire budget for this year — would ultimately have to be covered by the state's taxpayers.
So implementing single payer would require doubling taxes — even with federal help. The average household's taxes would increase by $12,250 each year, sending the top marginal income tax rate to 18.05%.
For that price, Californians would face difficulty accessing care. Just consider the current state of Medi-Cal, the Golden State's Medicaid program, which covers roughly 14 million low-income people.
In the first quarter of this year, Medi-Cal beneficiaries filed more than 115,000 complaints about the program — over 27,000 of which were related to provider availability and timely access to care. An analysis from the UCLA Center for Health Policy Research found that, after adjusting for socioeconomic and health status, Californians on Medi-Cal were more likely to report having no usual source of care, being told a doctor wouldn't accept their health insurance, and having not seen a doctor in the past year.
Appointments are scarce because Medi-Cal underpays providers. For some services, Medi-Cal pays as little as 60% of what Medicare does — and Medicare already pays roughly 30% less than commercial insurers do. The low reimbursement rates make it difficult for some doctors to cover the cost of treating Medi-Cal patients, so they've stopped accepting Medi-Cal altogether.
Single payer would bring Medi-Cal's problems to the rest of the population.
Several other states are following California's single-payer lead. Lawmakers in Michigan's House introduced single-payer legislation this year. Washington and Oregon have chartered commissions to come up with plans for state-sponsored universal health care.
These efforts are pipe dreams. Confiscatory taxes and long waits for subpar care are endemic to single payer.
Patients in California, and across the country, must resist these efforts to force everyone into state-run health plans.
Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on X, formerly Twitter, @sallypipes.