SACRAMENTO, Calif. (CN) – California lawmakers debated but ultimately delayed acting on a bill to enact universal state-run health care Monday, following revelations the health care overhaul could carry a $400 billion annual price tag along with potential tax increases.
The proposal being pushed by progressive Democrats and the California Nurses Association would make California the first state with a single-payer health care system but at a striking cost: According to the Senate Appropriations Committee analysis, the plan would require the state to come up with $200 billion annually to offset the loss of employer-based expenditures and enrollee premiums and deductibles.
“It’s critical that California chart its own path,” said state Sen. Ricardo Lara, D-Bell Gardens. “We will also find greater efficiency that comes from a publicly run plan and increase the health care of all Californians.”
Backers of the single-payer plan testified removing private insurance companies from the system will reduce bloated administrative costs and cut down on fraudulent billing practices while providing enhanced benefits to all Californians.
The new costs of overhauling California’s health care system could be funded through payroll taxes of up to 15 percent, according to the committee’s fiscal analysis. While the single-payer system would save state employers billions in health care contributions, it would still leave the state with a $50 billion to $100 billion budget shortfall.
Lara’s proposal, Senate Bill 562, was placed in the suspense file by the appropriations committee. It must be cleared by the committee by the end of the week and passed by the Senate before a June 2 deadline. Lara promised the committee he would return with the bill once he has more financial particulars.
Lara, who chairs the fiscal committee, says he is funding a research program by the University of Massachusetts-Amherst regarding the plan’s ultimate cost and that he will present it to lawmakers once the spending outlook is finished. He also said pieces of the final bill could require voter approval.
The California Department of Finance testified that it won’t take a position on the bill until Lara presents the crucial financial report.
Under SB 562, the state would need to make “unprecedented changes” and dedicate more than twice the amount of the latest $183 billion budget recently proposed by Gov. Jerry Brown on health care alone.
Brown cast doubt on the single-payer push last month, saying he’s skeptical that the state could withstand the financial aftermath of essentially eliminating its lucrative private health care industry, which makes up nearly 15 percent of the state’s gross domestic product.
“I don’t even get it,” Brown told reporters in April. “How do you do that?”
Critics and the fiscal report warn the undertaking would be marred by “uncertainty.” The switch would involve massive government oversight including the creation of new agencies, the elimination of the entire health care insurance industry and a reliance on the state to negotiate prices for health care and prescription drug services on behalf of nearly 39 million residents, including undocumented immigrants.
State Sen. Jim Nielsen, R-Tehama, said he was skeptical of the bill’s purported benefits for employers who would no longer pay directly for their employees’ health care. He contended the bill would also require a massive information-technology overhaul and reiterated the state’s past failures in implementing IT projects.
“How can you possibly say that this is going to be fiscally prudent for the state of California and not a burden to the state?” Nielsen asked Lara. “The state’s never gotten anything right in health care, by the way.”
The California Chamber of Commerce is also opposing the bill and has officially labeled it a job killer. It argues employers will be burdened by the new taxes necessary to supplant the current private health care system.
“Past attempts at single-payer have required significant payroll taxes and even this committee’s analysis of this bill estimates there would be an additional 15 percent payroll tax necessary,” said Chamber of Commerce lobbyist Karen Sarkissian.
State Sen. Scott Wiener said it’s time for the government to step in and improve access to health care for people that have been “treated like garbage” by the state’s current system.
“When you’re talking about something of this significance, you’re going to put it out there and everyone is going to take shots at it from a thousand different directions. Of course it’s huge and hard and a work in progress,” Wiener, the bill’s co-author, said.
Single-payer health care has been kicked around for decades by lawmakers and voters. Voters rejected a universal health care initiative in 1994 and five separate bills have been proposed since 2003, including a 2007 effort vetoed by Arnold Schwarzenegger.
Last weekend, backers of the bill repeatedly interrupted speeches at the California Democratic Party Convention.
“Health care is a human right, “sign-wielding demonstrators decked in matching red shirts chanted throughout the annual convention.