Will Single Payer Be The Demise of Gov. Gavin Newsom?

Unless the California coastline sinks into the Pacific before November 6, 2018, Gavin Newsom will be the state’s next governor. Just look at the numbers.

Newsom, formerly San Francisco’s mayor and now California’s Lt. Governor, holds a commanding 24-point lead in the polls, has outraised his republican opponent John Cox by a nearly 5-to-1 margin and is for all practical purposes running in a “one-party state.”

So, congratulations in advance, Mr. Governor. To get here, you ran a campaign on bold promises and I know you’d like to honor all of them. However, allow me to impart a word of warning before inauguration day: The governor’s mansion in Sacramento is only 90 miles north of the mayor’s office in San Francisco, but it’s a world away, legislatively.

That advice should come in handy as you look to make good on this vow you made to the California Nurses Association in September 2017: “We will have universal healthcare in the state of California.”

The Road To Sacramento And Single-Payer Healthcare

It is said that all politics is local and that aphorism applied duly to Newsom’s mayoral tenure (2003-2011).

Just a year after taking office, Newsom began issuing marriage licenses to same-sex couples—a daring move at the time, which would have been political suicide for practically any mayor outside of the Bay Area. But not in San Francisco. Newsom’s approval rating actually shot up to 81% shortly after. He would go on to make national headlines in 2006 for launching the “Healthy San Francisco” program aimed at providing universal healthcare citywide. Very few mayors in America could have pulled that off. Then again, San Francisco is the nation’s richest metropolitan area and a magnet for tourists. Its voters and businesses could afford to cover the added costs.

Of course, things work quite differently at the state level than in the city by the bay. A recent run-in with Big Soda demonstrated just how huge that gap can be.

A Lesson From California’s Soda Tax Debacle

Some of California’s most progressive cities—Berkeley, Oakland and San Francisco—have already implemented some of the nation’s most stringent anti-soda policies. Their leaders, Newsom among them, know that taxing sugary sodas effectively reduces consumption and improves community health. Many other municipalities were scheduled to vote on the issue this fall, which put the soft-drink companies on high alert.

A few quick facts: A single can of “full calorie” soda contains 39 grams of sugar (more than 9 teaspoons) and no nutritional value. Consuming two cans of it each day for a year is the same as ingesting 70 pounds of sugar or the equivalent of 25 pounds in weight gain. Therefore, no one’s pretending that Coke and Pepsi are good for you (not even Coke and Pepsi). But these soda brands have argued that taxing their products is a direct attack on the rights of individuals to make their own decisions. And since 2009, Coke, Pepsi and their trade organization, American Beverage Association, have spent $14+ million annually on lobbying and mass advertising to defeat local tax bills that threatened their sales. But as more and more California cities began embracing these measures, Big Soda changed tactics and pulled off a major coup.

Rather than fighting local tax proposals one-by-one, soda makers threatened all local governments with a ballot initiative to increase the votes necessary to pass all new future taxes from a simple majority to two-thirds. The mayors and county supervisors blinked and—in return for Big Soda withdrawing its threat—they convinced the state legislature to pass the Tax Fairness, Transparency and Accountability Act, which all but bans local taxes on soft drinks for the next 12 years.

California may be a blue state, but inside the state legislature, the color that matters most is green, as in greenback. The next governor will learn quickly how often economic realities defeat even the best ideas in Sacramento.

Learning Healthcare Policy The Hard Way

I’ve only met the former mayor twice and both encounters were brief. But I’ve followed his career and believe he is an individual of integrity who wants to advance meaningful legislation that helps people. That said, in a state that’s currently struggling to fund its schools and rebuild its infrastructure, Newsom will likely soon realize that turning California into a single-payer state is too expensive a promise to carry out.

After all, Vermont, the bluest state in the Union, wasn’t even able to make it happen. Under the leadership of Gov. Peter Shumlin in 2014, the single-payer plan on the table was supposed to open the door for other states to follow. That was until “the governor admitted what critics had said all along: He couldn’t pay for it.”

And if Vermont couldn’t figure out how to make single-payer work, then how will Newsom’s efforts in California turn out differently? As Angela Hart of the Sacramento Bee wrote in March: “The idea is not new. Republican Gov. Earl Warren suggested a taxpayer-financed universal healthcare system in 1945. Voters considered and defeated a version of universal care in 2004. Gov. Arnold Schwarzenegger vetoed a single-payer bill in 2006.”

Doomed From The Start: Newsom’s Universal Coverage Aspirations

This year, the rate of healthcare inflation will increase 2.2% (compared to a 1.9% increase in overall inflation), according to CMS. As a result, overall healthcare costs will rise 5.5% compared to a GDP that will increase only 3% to 4%. In other words, a healthcare system that’s already too expensive is about to get more so.

A government run, Medicare-for-all single-payer plan would be an economic nightmare. According to the nonpartisan Legislative Analyst’s Office in California, such a system would cost more than double the state’s current budget and put taxpayers on the hook for $200 billion a year. The only way to generate the necessary funds would be for the legislators to (a) pass major tax increases on everyone, not just the wealthy or (b) strangle the state’s schools and public-safety programs.

They will do neither. Mandatory health coverage might work in a city as wealthy and progressive as San Francisco. But the plan faces too many financial obstacles to become statewide policy in California anytime soon.

The Economics Of Single-Payer Paint A Bleak Portrait

The reason healthcare costs are rising at a 5.5% clip across the nation, and at such unsustainable rates, is the inefficiency of the delivery system (how care is paid for and provided to patients). It is fragmented, reimbursed based on volume not value, technologically inadequate and inhibited by illogical regulations and restrictions.

Medicare-for-all, rather than solving these shortcomings, would only aggravate them.

Today, the federal Medicare program keeps costs down by restricting reimbursements to doctors and hospitals, not through efficiency. So, imagine that reimbursements are like a balloon. If you squeeze them in one area, they’ll bulge elsewhere. In the United States, when Medicare squeezes costs, they get shifted to commercial insurers, who then pass them along to businesses and, ultimately, American workers.

So, what would happen if everyone in California received Medicare, not just seniors? First, providers could no longer price-shift. Instead, they would begin to perform more services (from medical exams to surgeries) to make up for the impact on their income. This happens every time price controls are applied to healthcare.

As costs rise under a single-payer plan, the government will have no choice but to impose further price restrictions to limit its exposure. That will cause providers to perform even more tests and procedures, many of them unnecessary and some even harmful to patients.

We know this because history tells us it’s so. When the federal government tried to contain costs by limiting total healthcare reimbursements to a rate no higher than overall inflation—a process known as Medicare’s Sustainable Growth Rate (SGR)—Congress felt the political heat, and rather than reducing reimbursements, passed stopgap measures each year since 2003 to fund the excess costs. By the time the program ended in 2015, prices had risen 21.2% faster than overall inflation.

As physicians are forced to cram in more and more medical care to maintain revenues, they will have no choice but to shorten visits and create long wait times, particularly for lower-paying routine care. In response, wealthier individuals and families will purchase private-coverage so they can move to the front of the line, pushing those covered by the government program to the back of the line. That’s the current reality for Medicaid enrollees in California. Ultimately, as happened in Britain in response to poor access through their government-run system, voters will take their frustrations out on elected officials. Legislators in Sacramento understand what that means, which is why I don’t believe they will pass the legislation despite the next governor’s words.

The only way one can imagine a different scenario for California is to assume a government-run system will be more efficient than the present one. And if you think that’s a possibility, I encourage you to go to the Department of Motor Vehicles around noon and judge for yourself.

Dr. Robert Pearl is the bestselling author of “Mistreated: Why We Think We’re Getting Good Health Care–And Why We’re Usually Wrong” and a Stanford University professor. Follow him @RobertPearlMD