California's Democratic-controlled state Senate advanced a bill that would establish a $400 billion, tax-supported public health plan that would cover all residents, including undocumented immigrants.
The bill would eliminate private insurance. There would be no co-pays or deductibles.
Observers say the measure is unlikely to be enacted because it would require a big tax increase, and all tax increases require a two-thirds super-majority in both chambers of California's Legislature.
The bill now moves to the Democratic-controlled Assembly for consideration.
The California Legislature passed single-payer bills twice before, but former Republican Gov. Arnold Schwarzenegger vetoed both bills, in 2006 and 2008.
The California bill reflects Democrats' anger over congressional Republican efforts to repeal and replace the Affordable Care Act and cut and restructure Medicaid. Beyond that, it's consistent with longstanding liberal support for a Medicare-for-all type system.
Last month, New York's Democratic-controlled state Assembly also passed a single-payer bill. It's also considered unlikely to pass in the Republican-controlled Senate.
Single-payer initiatives even in liberal states like California and New York face long odds. Polls have found that while voters like the idea of single-payer in the abstract, they recoil when faced with the prospect of paying sharply higher taxes—even though those taxes would be partially offset by elimination of private insurance premiums.
Gerry Kominski, director of the UCLA Center for Health Policy Research, said the California Senate bill lacks details and is more of a statement of principles than a fleshed-out legislative proposal.
"It's an important first step in trying to make universal access a reality," he said. "I believe that healthcare is a right, and we're never to get there if we say it's just too difficult and it costs too much."
The Senate Appropriations Committee estimated that the new system would cost $400 billion a year, which would easily exceed how much the state currently spends on all programs.
But the Senate analysis found that if the federal government allowed its Medicare and Medicaid payments to be used for the new system, the state would only need to raise $200 billion in taxes to pay for it.
The Senate panel suggested the money could be raised through a new 15% payroll tax. That would come on top of the current Social Security payroll tax.
Under the proposed system, employers and employees no longer would have to pay premiums, deductibles, or coinsurance for private insurance.
State Sen. Ricardo Lara, a co-sponsor of the bill, told the Los Angeles Times that private insurance payments and Medicare and Medi-Cal tax funding total $367 billion a year.
California would need a waiver from the federal government to establish the new system, because it would significantly change Medicaid and Medicare. It's not clear how this would work, though the Affordable Care Act, under Sect. 1332, allows states to apply for waivers to establish alternative healthcare financing systems.
Craig Garthwaite, co-director of Northwestern University's Health Enterprise Management Program, doubted that the Trump administration would grant approval. "I find it hard to believe that the current HHS is going to (provide) a laboratory for single payer."
Garthwaite said he'd like to see how well a state single-payer system performed. He questions the assumption of single-payer advocates that getting rid of insurers would save lots of money. And prescription drug costs would remain high.
"It turns out health insurance is expensive because healthcare is expensive," he said.
The biggest opportunity for savings would be from the government setting rates paid to providers. But that has its limits. "If they pay at the Medi-Cal level, (some) hospitals will go out of business," he cautioned.
Jeff Goldsmith, owner of consultancy Health Futures, said single-payer is an article of faith for people on the political left rather than a rational economic proposal. "Even if you confiscated every dime of (insurers') profits and confiscated their CEO pay back to what a bus driver earns, you don't justify the disruptions," he said.
Goldsmith noted that the single-payer bill would return California to a fee-for-service model, which is ironic given how pervasive capitated managed-care plans such as Kaiser Permanente are in the state.
Even Kominski, who supports the single-payer concept, questioned the Senate bill. Making all care free at point of service, with no deductibles or coinsurance, would drive up utilization by as much as 7%, he warned.
"In a system that has $400 billion in spending, that's real money," he said.
William Hsiao, an economics professor at Harvard University who has helped eight foreign countries design universal healthcare plans, said California should pay attention to what happened in Vermont. That state passed a single-payer concept bill, then abandoned the effort in 2014 when state elected officials decided the tax cost was too high.
Hsiao said it's problematic for a single-payer system to set too high an actuarial value for coverage. Taiwan, which implemented its plan in 1993, covers 85% to 88% of costs. He and his colleagues suggested that Vermont set a similar coverage level, but the state Legislature decided to cover 96% of costs. To pay for that, it was estimated payroll taxes would have to be set at 11.5%, and the state income tax would to be raised to 9%. That ultimately proved politically untenable.
"This is a trade-off when you're designing something," he said. "You don't want the perfect to be the enemy of the good."
Hsiao predicted that no U.S. state would implement a single-payer system in the next decade. "My guess is that America will move toward single payer when enough of the American people become disgusted with high healthcare costs."