Doomed single-payer bill reappears in California

March 1, 2010

Just as national health reform fervor began to wane in Washington in recent weeks, California's state senate approved a bill to create a $200 billion, single-payer, government-run state health system. Ugh.

Democratic State Senator Christine Kehoe told the local news the timing was deliberate, meant to show how California can take the lead. Other reports, however, note the timing as coincidental. Single-payer advocates are persistent, if anything, and such proposals tend to recirculate from time to time, regardless of public support or political climate.

Governor Arnold Schwarzenegger-along with the leading gubernatorial candidates-is against the proposal. He's already vetoed two previous single-payer plans that reached his desk. In 2007, he even attempted to drive his own plan for universal coverage but couldn't drum up enough support.

With the state drowning in a $20 billion budget deficit and witnessing unemployment well above 12%, this is not exactly the ideal time to ask the state to spend more money it doesn't have.

According to the bill, an investment of $1 million would be earmarked to set up a commission just to evaluate how to pay for the single-payer system. No doubt funding would be expected from higher taxes and mandatory contributions from employers-two sources that are already tapped out. The commission, after eating up the $1 million with its very existence, would then go to voters to approve its funding plan, which, like Schwarzenegger's signature on the bill, is extremely unlikely.

According to the proposal, a new California Health Agency would negotiate with providers, set fees and pay claims. Clearly, in that scenario, providers would be given a "take it or leave it" proposition, which is hardly negotiation. Private insurers that offer benefits similar to those of the agency would be prevented from doing business in California, so residents would also face "take it or leave it" premium prices because there would be no choice of insurers.

Imagine California residents not having choices. Imagine the end of Kaiser Permanente of California as we know it.

As it is, the state cut $2 billion from its healthcare budget last July. According to Health Access, a statewide coalition, the cuts have caused the safety net to unravel, particularly in the rural north. Providers are losing revenue, and resources are drying up. Five community clinics have closed since then, and 10 others are in danger of closing.

Supporters of the single-payer bill are standing on the efficiency platform, and plenty of providers truly would like to save on administrative costs under a single payer. However, the bigger burden lies in utilization and the general cost curve. There's a limit to how much can be gained by pure administrative efficiency and price setting. At some point, the initial high would level off, and the state would be right back on an unsustainable course.

Sounds like the criticism of the bills in Washington, doesn't it? The pressing issues of balancing the budget and resuscitating the economy in California parallel those of the nation, too.

If California lawmakers' intention is to set a precedent, then they've succeeded. The precedent they've set is one that indicates health reform is needed, but the single-payer solution is not a fit.

Julie Miller is editor-in-chief of MANAGED HEALTHCARE EXECUTIVE. She can be reached at julie.miller@advanstar.com