As you may have read in Paul Roberts’s recent compliance column, A Deep Dive into California “Single Payer,” the most recent effort to pass some sort of single-payer health care legislation in California failed. It marks the sixth time efforts have fallen short in a push to overhaul the state’s health care system.
As proposed, Assembly Bill 1400 (AB 1400) would have virtually eliminated health care in California as it is known today. It would have created a new single-payer, government-run system known as “CalCare,” affecting all health care services for every resident in the state. In the end, the measure did not even get a vote in the State Assembly on January 31, after author Assembly Member Ash Kalra (D – San Jose) found he likely did not have enough votes for passage.
One of the challenges associated with AB 1400 – beyond opposition to it by the California Chamber of Commerce, insurers, and associations representing doctors and hospitals – was its cost. Estimates exceeded $400 billion annually, nearly 50% more than the $285+ billion state budget for 2022-2023. POLITICOPRO reported in mid-March that the California Legislative Analyst’s Office estimates the costs to the state could range between $494 billion and $552 billion annually.
Funding would come from new taxes on businesses, employees, and individuals as well as funding from the federal government, if the feds agreed to it. It would include federal funds currently reserved for multiple existing programs in California, such as Medicare, Medi-Cal (Medicaid in California), the Children’s Health Insurance Program (CHIP), TRICARE (health care for uniformed service members, retirees, and their families), Long Term Care plans, and subsidies for individual health insurance plans purchased through the Covered California public exchange.
The funding mechanism, Assembly Constitutional Amendment 11 (ACA 11), would have imposed new excise taxes, payroll taxes, and a new personal income tax on Californians. Those taxes would have included:
- * Gross Receipts Tax: Annual excise tax of 2.3% of gross income above $2 million for all qualified businesses in California (gross income, not profit)
- * Payroll Taxes – Employer Share: Employers with 50 or more employees pay 1.25% of payroll tax on wages and other compensation of employees
- * Payroll Taxes – Employee Share: Employees earning more than $49,900 in wages or compensation pay 1% payroll tax
- * Income Tax: 1.45%+, on a sliding scale for higher income earners, as an added personal income tax
Impact on Brokers, Insurers, and Employers
The role of brokers, insurance companies, and employers would have changed dramatically under AB 1400. In fact, they would have had no role in offering or delivering health insurance to workers and dependents, at least under the most-recently proposed legislation.
Covered services under AB 1400 and CalCare would generally have included:
- * All traditional medical services
- * Dietary and nutritional therapies
- * Dental care
- * Chiropractic care
- * Vision services
- * Acupuncture
- * Prescription drugs
- * Necessary transportation for health care or long-term care
- * Rehabilitative services
- * Mental health treatment
- * Skilling nursing substance use treatment
- * Additional services authorized by the CalCare Board of Directors (nine unelected, government-appointed individuals)
Physician and Care Network Roles
If the State Assembly, Senate, and Governor Newsom all signed off on AB 1400, physicians in California would have to work exclusively through CalCare, the new state bureaucracy created by the law. For example, Kaiser Permanente health care facilities and staff would work for the state under a new model and name, as would hospitals across the state.
Public support for such an idea is mixed. While the concept of universal health care is popular, when more information is shared about potential delays in care, or what a single-payer program might cost (in terms of added taxes), public support drops. According to the National Association of Health Underwriters (NAHU), among the two-thirds of insured Americans covered by a private plan (such as coverage through an employer), the majority are satisfied with their insurance and feel confident it would protect them in a medical emergency.
A Look Back at Prior Efforts in California
As mentioned previously, this was the sixth attempt to overhaul health care in California. There were previous efforts dating back to the 1990s. Californians first rejected a ballot measure to create a state-supported single-payer system in 1994.
Senate Bill 562, proposed in 2017, came with a $400 billion price tag – more than double the state’s 2017-2018 budget of $183 billion. Funding would have come from reallocating funds the state was already spending on health care as well as new income taxes and a 2.3% sales tax. While the measure did pass the State Senate in June 2017, it failed to earn Assembly approval in 2018.
Similar legislation passed in Sacramento twice during Governor Arnold Schwarzenegger’s term in office; however, he vetoed both bills in 2006 and 2008. Like with AB 1400, funding previous proposals anticipated moving funds from Medi-Cal, Medicare, and other health programs as well as new income tax and employer payroll taxes. Still, a 2017 analysis forecast a shortage of $40 billion+ in the first year of implementation.
Efforts to move toward single payer (or something similar) are not limited to California. However, other states have faced challenges, too. Colorado, Maryland, Massachusetts, New York, and Vermont have all discussed or enacted legislation. Vermont abandoned its single-payer system in 2014 due to rising costs and lagging tax revenue, just three years after establishing it. Colorado voters rejected Amended 69 in 2016, by a margin of 79% to 21%. Proposals in the Bay State date back to the 1980s, with efforts at both the local and state level. The 2006 health care law in Massachusetts was said to be the basis for the Affordable Care Act (ACA); however, both the state law and the ACA stop short of the overhaul envisioned in the most-recent California proposal.
California Governor Gavin Newsom is not necessarily a proponent of Single Payer. He has proposed an alternative plan to provide more Californians with access to care. It would expand Medi-Cal to more low-income adults regardless of their citizenship status. This would result in closing the six percent “uninsured gap” in the state and move California closer to 100% universal coverage. (Currently, 94% of California residents have access to health care through existing programs and options.) The Newsom alternative would cost taxpayers $2.2 billion annually, a fraction of the anticipated $400 billion cost for AB 1400 and CalCare.
When campaigning in 2018, Governor Newsom pledged support for a single-payer system; however, after being elected (and avoiding a recall in 2021), he has backed away from the idea. Advocates for single payer, including the California Nurses’ Association, consider his actions an unacceptable flip-flop. Since the governor is facing re-election this fall, time will tell if his lack of support for single payer is a deal-breaker for California Democrats.
Federal Opposition, Future Action
The Biden Administration does not favor Single Payer. It advocates building upon the successes of the ACA. If a proposal like AB 1400 is dependent on shifting federal monies to a state program, even if it was acceptable during one administration, there is no guarantee it might not be reversed by a future administration.
In addition, with regard to extending the ACA, with the current divide in the U.S. Senate, the likelihood of expansion further seems unlikely. That pushes any national action into 2023 or later, if at all.
At the state level, while single-payer is no longer on the table right now, it could come back as an issue in the future. AB 1400 author Assembly Member Kalra has said as much, “This is only a pause for the single-payer movement. We will not give up.”
We will continue to monitor proposals in California and elsewhere, and we will share them via this blog.