File photo by Jason Ruiz.
The State Senate voted Thursday to advance a universal healthcare bill championed by two Southern California legislative members that could create a single payer healthcare system in the state after a week of conflicting cost estimates encircled the bill.
Senate Bill 562, also known as the Healthy California Act, eked out a victory Thursday with a 23-14 vote in its third reading on the senate floor. The bill required 21 votes to advance.
“I thank my Senate colleagues who voted to give SB 562 a chance to succeed," said State Senator Toni Atkins of San Diego, a co-author of Senate Bill 562. "Let’s be clear – there is a lot of hard work to be done on this bill. There will be numerous hearings, plenty of input from interested parties and lots of time for the public to weigh in. I believe we can create a sound proposal for a healthcare system that costs less money and covers all Californians.”
State Senator Ricardo Lara, who co-authored Senate Bill 562, the bill number a nod to the area code of the largest area he represents, has pushed for its passage since announcing it in Sacramento in February.
A national study released Wednesday focusing on spending and potential costs savings of a single-payer health system in California revealed that, if adopted, the Healthy California Act (HCA) could result in substantial savings—about $37 billion annually—for the state.
The study was sponsored by the California Nurses Association, a vocal advocate of the bill since its rollout earlier this year.
The study was conducted by a group of researchers at the University of Massachusetts-Amherst headed by Distinguished Professor of Economics Dr. Robert Pollin, who was on hand at a press conference Wednesday to discuss the report.
The group concluded that the state stood to save about 18 percent relative to spending levels under the current system. That figure translates to a savings of over $37 billion if SB 562 were to be adopted by the state legislature. The study suggested that under the current model, it would cost the state just over $404 billion to insure every Californian.
Lara speaks during a news conference on the study on Wednesday. Photo: YouTube screenshot.
“Healthcare costs Californians billions and one-third of people with healthcare still don’t have enough coverage,” Lara said in a statement. “The good news is that California can get a lot more for our money and reduce the costs of healthcare for middle class families and businesses.”
In March, Lara announced he would run for the state’s insurance commissioner seat, a role that could grant him regulatory control over California’s insurance markets.
The study makes a number of assumptions in reaching its findings, including that dental rates would mirror fee schedules of the medical field, that the state would be successful in obtaining waivers to use current funding for a future single-payer system and that the cost of covering its roughly 2.7 million uninsured residents would amount to roughly double the amount of money it currently spends on them, among other assumptions.
“Assuming that universal coverage is achieved under Healthy California and that cost savings are also achieved to the extent we have estimated, the net impact will be to create a single-payer health care system in California that guarantees universal coverage for all California residents, while the overall costs of the full-coverage system will be about 10 percent less than the existing system,” the authors of the study wrote. “The overall annual costs of this single-payer system for California would be $331 billion as of 2017.”
To fund the program, the authors proposed two separate tax hikes. One would come in the form of a 2.3 percent gross receipts tax on businesses with an exemption for those taking in less than $2 million annually. The second would be a sales tax increase of 2.3 percent, one that the authors say would be offset by a 2 percent income tax credit for families insured through MediCal.
A third option would be a 3 percent payroll tax for both employees and employers, with the funding from either option going toward bridging the $106 billion gap needed to fully fund the program.
The reported savings would come by virtue of negotiating drug prices and other medical services en masse—the state is home to nearly 40 million people—instead of individuals or private entities negotiating on the behalf of smaller groups of people.
The study also suggests that the savings from eliminating unnecessary services (8.4 percent reduction) and increased efficiencies (5.2 percent savings) could be achieved through the uniformity brought about by a single-payer system.
These findings were released just over a week after a separate legislative analysis of the bill found that it would cost the state over $400 billion to implement.
Under SB 562, enrollees would not be responsible for deductibles, co-payments or pay premiums, but would be subjected to new taxes to finance the plan. The state legislature would need a two-thirds majority to approve any kind of new tax.
The previous analysis cautioned that a “mature healthcare system” would require a tremendous transition to a single-payer model and that it could not account for future behaviors.
Authors of the most recent study agreed with that notion, and could not account for how fixed prices and greater availability to medical access would impact the system.
They noted that it could in face lead to over-treatment of some patients who may have previously forgone medical exams or treatments due to cost barriers, but added that other savings could be achieved by treating ailments in earlier stages before they become more expensive to remedy.
Overall, the authors projected that middle class families would pay less out of pocket while those among the top earners would see a modest increase in the percentage of family income spent on healthcare, and businesses of all sizes would pay less to provide coverage to their workers, with the benefits being weighted toward small business owners.
To the spirit of the bill, the authors concluded that it would also provide full coverage to the roughly one-third of Californians who are currently uninsured or underinsured.
The state Senate voted this evening on the bill, passing it 23 to 14. It will next head to the state Assembly for approval. However, because it currently doesn’t have a financing plan, the bill would require a second vote and require two-thirds approval in both houses if the Assembly decides to attach a tax increase to fund it.