The Democrats’ dream of single-payer health care is alive and well in California — it’s just been temporarily deferred.
In late June, California Assembly Speaker Anthony Rendon shelved SB 562, the Healthy California Act, until next year. If passed, the bill would abolish private insurance and force everyone — including undocumented immigrants, people with employer-based coverage and those with publicly funded coverage — into a state-run health plan. It would also supposedly save tens of billions of dollars.
“Because this is the first year of a two-year session, [postponing the vote] does not mean SB 562 is dead,” Rendon said. “The Senate can use [the coming months] to fill the holes in SB 562 and pass and send to the Assembly workable legislation that addresses financing, delivery of care, and cost control.”
The California Nurses Association — the chief advocate for SB 562 — claims that they’ve solved Rendon’s cost concerns. They’re pointing to an 83-page study they commissioned from University of Massachusetts, Amherst, economist Robert Pollin.
The study is not sound.
Pollin argues that “enacting a single-payer system would yield considerable savings overall by lowering administrative costs [and] controlling prices of pharmaceuticals and fees for physicians and hospitals.”
The study claims that these reforms would cut Californians’ total health spending by 18 percent. This figure is based on unrealistic assumptions.
For example, Pollin argues that a single-payer system will drastically reduce paperwork because the government can run things more efficiently than the private sector.
Actual doctors are unlikely to agree. A 2013 survey found that primary care doctors in Washington were twice as likely to encounter problems with Medicaid’s paperwork compared to commercial insurance paperwork.
Medicare and Medicaid aren’t as efficient as single-payer advocates claim. Medicare spends between 5 percent and 48 percent more per enrollee on administrative costs than private insurers, depending on the insurer and the year.
Plus, the entitlements are plagued by fraud. Last year, the programs squandered about $100 billion on improper payments.
SB 562 would make health coverage “free” for patients by getting rid of co-pays and deductibles. It would also remove all the cost-control measures — like provider networks and referral requirements — typically employed by private insurers.
Pollin assumes that the state can cut costs instead by capping reimbursements to doctors, hospitals, and drug companies. He figures that the state could set payment rates at Medicare levels, which are roughly 22 percent less than what private insurers pay. He also factors in a 30 percent reduction in the state’s drug expenditures because he assumes California could demand the same prices obtained by the Veterans Health Administration.
But price controls like these are just rationing by another name.
Facing sharp cuts in pay, many California doctors would simply leave the state or retire. That would aggravate the state’s already troubling doctor shortage. Currently, six of California’s nine regions lack the recommended ratio of primary care doctors to patients. Two have less than the ratio required by state law for managed care plans.
Fewer doctors and hospitals means longer wait times for patients.
Just look at Canada’s single-payer health care system. After patients receive referrals from general practitioners, they wait 20 weeks, on average, to receive treatment from specialists.
Pollin’s analysis also falls short when it comes to the Veterans Health Administration. The VA controls drug spending mainly by denying veterans access to medicines. Its formulary, or list of approved medicines, only covers 46 percent of the brand-name medicines and 61 percent of the generic drugs that are available on the CalPERS formulary.
SB 562 would drastically raise costs for almost everyone. The state Senate Appropriations Committee estimated that the system would cost $400 billion, not $331 billion as Pollin calculates. The Committee suggested that a new 15 percent payroll tax would be required to fund the system.
The battle over single-payer health care is far from finished in California. The Assembly will have the chance to pass SB 562 again early next year. Doing so would cripple the economy and deprive tens of millions of Californians of high-quality care.
Sally C. Pipes is president, CEO and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is “The Way Out of Obamacare.” Follow her on Twitter @sallypipes.