REPORT: California’s Single-Payer Healthcare Plan Cost More Than State Budget

May 26, 2017

REPORT: California’s Single-Payer Healthcare Plan Cost More Than State Budget

The state of California is trying to adopt a single-payer health care system, but the enormous cost burden may well ground the project. The high price tag of “free health care” has shelved other single payer health care proposals around the country, such as in Colorado and Vermont, and California’s plan is poised to follow the same path.

Health plan alone would cost more than double the annual state budget

The California Senate Appropriations Committee just released their financial analysis on Monday, concluding that the single-payer system would cost the state $400 billion annually. To put that into perspective, the current state budget for all government spending is only $183 billion.

The single-payer health care system would cost more than twice California’s entire state spending. Even liberal California Governor Jerry Brown was skeptical. “Where do you get the extra money?” he asked.

SB562 to provide “free health care” to all Californians

On April 26, the California State Senate Health Committee approved the measure on a 5-2 vote. The bill, SB562, would establish a publicly run health care plan to provide coverage for all Californians including illegal immigrants.

The program would cover all medical care, including inpatient, outpatient, emergency care, dental, vision, mental health, and nursing home care. The overly generous plan also eliminates any co-pays and all deductibles.

Referrals would not be required for a member to see any eligible provider and Californians would be covered when they travel.

The California health care plan would be classified as a Cadillac plan, and would be subject to a 40% tax starting in January 2020 unless the Trump administration manages to repeal the Affordable Care Act. Funding will come from “broad-based revenue” even though the cost had not been determined at the time of the April vote.

Senator Ricardo Lara (D-Bells Gardens) who co-authored the bill said in April that a detailed financial study would be completed in May.

“Senator Atkins and I are not just going to do this on a whim,” said Lara. “We want to make sure this is sustainable.” But the results of the analysis should make them think again.

The California bill is a clear example of why the single payer health care system is an impractical and unhelpful idea. Not only is it completely unaffordable but the quality of care would likely suffer as doctors see an increase in the number of patients they treat, leaving less time for each patient.

Cutting co-pays and referrals will lead to decreased quality of care

The new proposal eliminates co-pays and deductibles and covers all medical care so Californians would be able to see the doctor for any ailment at any time. That sounds great in theory.

Unfortunately, if there is no out-of-pocket expense to see a doctor or specialist, people will schedule appointments for any and all small problems, consuming a doctor’s time and resources just to be told to go home and take an Aspirin.

The bill also eliminates the requirements for referrals — again leading to cost increases. The purpose of a referral is that the primary care physician, in consultation with the patient, should decide if a visit to a higher priced specialist is necessary.

Without the doctor’s input, there is a tendency for the patient to make uninformed and costly decisions that inevitably waste resources. And like it or not, when we all as taxpayers are footing the bill, our neighbor’s health care choices suddenly become of personal interest.

Canada’s already tried it — let’s not follow them

In Canada, where the single payer system already exists, there are long waiting periods to see a doctor and even longer waiting periods for medical procedures. That’s because there are no co-pays and no deductibles and as a result, Canadians want to see a doctor for any possible ailment, even a runny nose, which drowns the system.

And there’s a shocking consequence to taxpayer-funded and government-administrated health care — pretty soon, the costs start going up and administrators start looking for ways to reduce costs. In Canada, the logical result is that people who are more likely to have health care expenses are less welcome.

As explained by Elizabeth Picciuto in the Daily Beast in regards to her chances of immigrating to Canada with a disabled son, “Canada, it turns out, has something of a habit of unwelcoming immigrant families with children with disabilities.”

It’s ironic that the system which produces this kind of inhuman attitude is supported by those who call themselves “the party that cares.”

Single payer health care is a disastrous idea

Democrats in Congress want the entire country to move to a single payer system, claiming it’s the only solution to the current problematic insurance system. But that would be a disaster — the cost of the system would skyrocket and the lack of any competition would result in higher prices, poorer quality and less availability.

It’s basic economics — single payer systems that eliminate competition also eliminate the incentive to improve quality or reduce prices, leaving the customer with no recourse. But where competition exists, prices always fall, quality always improves and the availability also increases, which is a win-win for insureds.

The Foundation for Economic Education’s COO Richard Lorenc put it this way, explaining why the price of some commodities or services have gone down over time and others have skyrocketed:

It’s not that complicated, folks. If you want good services, good products, innovative ideas, and low prices, you need competitive markets. The more you control, the higher the prices and the worse the results.

There’s also a philosophical problem with single payer systems. They put the needs of the bottom 10% to 15% of the population (in terms of income earned) ahead of the needs of the other 85%. Better solutions value the needs of the majority as well.

On a national level, the GOP is attempting to change that by proposing to change the current health care law. The GOP’s plan puts the needs of the majority first and then considers the needs of the others.

The California bill has been shown to be a costly and damaging program. That bill won’t pass and the federal government shouldn’t consider the single-payer option either.

There are better ways to help the uninsured than to foul up the entire system for everyone.


Michael Busler

Dr. Busler is an economic analyst for the Conservative Institute and a finance professor at Stockton University. He received his PhD in economics from Drexel University.