SB 562 is the California single payer healthcare bill, which passed the State Senate this week. Chances of passing the Assembly look good. The bill provides many goodies; what is the price tag? Remember that the Devil quotes scripture, as Shakespeare said in Merchant of Venice. Trump quoted a questionable figure when he claimed that the Paris accord would cost 3 million US jobs. That number came from NERA (national economic research associates) who objected to EPA regulations and stricter mercury control in 2012. A biased source, open to doubt, using standard economic methods. Their worst case analysis predicted the loss of 2.7 million jobs. Right wing devils aren't the only ones.
The UMass Department of Economics harbors a group of left wing economists, opposite to NERA. They have provided reassuringly low cost figures for the implementation of SB 562. Like NERA estimates, their estimates must be balanced with other estimates. Economic methods, like typewriters and computers, can be used to further any agenda.
I like single payer ideas. I dislike commercial medicine and the insurance companies. I blame them for many of the problems that befell the ACA. Blue Cross and the insurance companies of the fifties would have cooperated with the ACA and moved it forward. Today's profit dominated companies are different. Expecting them to cooperate with the ACA is like expecting Koch Industries to quietly phase out extraction and processing of fossil fuels, which brought them wealth and power. I hope that you have read An American Illness, which discusses the massive dimensions of American medical profiteering. Sutter Health is one of Dr. Rosenthal's examples, a hospital conglomerate squeezing Californians.
Atul Gawande, a physician and talented writer published several New Yorker articles in 2009. ConsiderTesting, Testing, The health-care bill has no master plan for curbing costs. Is that a bad thing? Gawande had been a White House fellow; his ideas probably influenced President Obama and his healthcare planning team. That team included MIT economist Jonathan Gruber, a prime mover behind Massachusetts Romneycare who later helped kill the teetering Green Mountain Care in 2014, passed but never fully funded by the Vermont legislature.
Gawande made some good points, particularly his emphasis on the path dependency of US healthcare. However, he proposed a harmful analogy to the incremental progress in implementing agricultural reform and phone service in early 20th century America. Yes, the costs of Obamacare were high and the plan controlled only some of them, but they established a beachhead that could be gradually extended.
In reality, this 2010 beachhead was like that at Omaha Beach on D-Day, where everything went wrong. Plan defenders immediately came under heavy fire and could not move forward. The ACA provided insurance for millions of previously uncovered Americans, eliminated the problem of pre-existing coverage, lifetime care limits and other good things. It relied on private insurance companies, the
universal mandate and special new taxes. Republicans quickly demonized the universal mandate, it conflicted with the "choice trump card" (Americans must always get choices), and insurance companies soon began to drop out of the exchanges. Congress, even Democratic stalwarts like Sens. Klobuchar and Warren, voted to suspend the medical device tax, bending to the wishes of a pampered industry, knowing that this would weaken the ACA financially. Plan credibility suffered when the launch of the ACA exchanges ran into major computer problems in 2013. Republicans dug in from day one and never let up. Even before the 2016 elections, the ACA beachhead had shrunk.
The Canadian health care system, more good than bad, began in a single province, Saskatchewan. This might be a lesson for the US. Many were already sniping at the limitations of the ACA and the fact that it had no public option. Vermont moved forward with its Green Mountain Care (GMC), which passed the legislature and was signed into law in May 2011. This private-public hybrid was a state-funded-and-managed insurance pool to provide near-universal coverage. Private insurance and multiple plans would continue. Complex insurance billing would continue. Vermont is a small state with only 14 hospitals. Plan management would be much simpler than anything proposed for California (400 hospitals) or New York. The original bill required that a funding mechanism be established by 2013. This proved to be impossible, even as righteous critics lambasted its shaky approach to single payer. GMC would continue paying hospitals and other institutional providers on a piecework per-patient basis, perpetuating the expensive American billing system. Hospitals would still need surpluses from day-to-day operations for modernization and expansion.This promotes duplication and raises costs by pushing hospitals to undertake the additional work needed to identify and pursue profit opportunities.
Some of these problems came from federal laws that prevent folding Medicare and the military Tricare program into a state single payer plan, and restrict states’ ability to ban employer-provided coverage that duplicates the public plan, even in the pre-Trump/Price era. Decisions to abandon lump-sum hospital payment and separate grants for capital projects came from the governor and his advisers, who included important private sector experts.
Coup de grace
Two things came together to derail the never consummated plan. Jonathan Gruber received a $400,000 contract for the final financial arrangements and Governor Shumlin, a muted voice for GMC during the campaign, eked out a surprisingly narrow victory in the November 2014 gubernatorial election. Remember that Vermont is a blue state. Republicans had higher turnout than Democrats in a low turnout election. Gruber's plan required an 11.5% new payroll tax and more than 50% increase in the state budget. This, plus arrogant Gruber comments about the need to hide provisions of the ACA from stupid voters, all came out later in November, provoking angry denunciations. A few weeks later, Gruber's contract was canceled and Governor Shumlin announced the abandonment of GMC because of its high cost. The plan was never merged with Federal Medicare and Medicaid programs. It would pay 94% of actuarial value, better coverage than ACA platinum plans. In the final months of 2014 as the plan began to stall, GMC considered reducing the actuarial reimbursement to 80% but decided that it would be a painful reduction in benefits for too many Vermonters. The plan had small co-pays (6%) and didn't cover nursing home care.
California today
The moral arguments for single payer remain strong. The theoretical savings are still there. The legislative analyst's office estimates cost of the bill at $400 billion.The 2017-18 total California budget is $183 billion. The bill is vague, making it difficult to precisely estimate costs. Section 1 says " funds would be used for health coverage that provides health benefits equal to or exceeded by those (federal) programs as well as other program modifications, including elimination of cost sharing and insurance premiums." Federal programs include Medicare and Medicaid, whose reimbursements are very different and almost always less than ordinary insurance. So which will it be? The $20 MediCal return visit or the $62 Medicare one? Nobody knows.
Healthy California would have no co pays. It would cover vision, expanded dental coverage, the neglected regional centers for the developmentally disabled and nursing home care in addition to medical costs, emergency transportation (ambulance service) and other transportation costs for disabled or low income residents. How would they define disabled and low income? Comments of its proponents suggest that more people would move into nursing homes. It proposes to bring a large slice of the Scandinavian welfare state into a state with major poverty and homelessness problems. It would cover many items not covered by the Canadian health system (see below). Sheila Kuehl’s single-payer proposal passed in 2007 would have cost $209.8 billion in the 2011, according to the Legislative Analyst’s Office. That plan included an 8 percent wage tax on employers and 4 percent on employees. This smaller plan didn't cover nursing home or regional center expenses. Governor Schwarzenegger vetoed it.
The plan assumes incorporation of the Federal Medicare and Medicaid programs and would eliminate almost all commercial insurance.
Will Californians accept the large tax increases necessary to fund this ambitious program and will Dr. Price's Department of H and HS agree to waivers permitting the state to take over Medicare and MediCal? I think that the answer is no and no. I expect Governor Brown to veto the plan if passed. The California Nurses association, a very powerful lobby, can probably pass this legislation just as the Medical Device makers persuaded even ardent Democrats to suspend the Medical Device Tax. The plan will be important in the 2018 state elections. All Vermont Democratic candidates for governor pledged to support GMC in 2010; no doubt all Democratic candidates for Governor in 2018 will do the same. Hopefully they will be more thoughtful about this complex issue. Who would they appoint to the powerful nine member governing board, the Healthy California Board (the governor gets to name 4 of the 9) if the legislation passes? Who would be their healthcare advisers?
If the tax increases pass and Price's Department of H and HS cooperates with waivers, corporate powers like Sutter Health will be waiting and ready to file multiple lawsuits. Those suits can be appealed to the Supreme Court. The Healthy California Board will be out on the hot sand of Omaha Beach.
Comparison with Canadian health coverage is complex because many services not covered by Canada Health are covered in variable degrees by provincial governments. Canada Health does not cover outpatient prescription drug costs, dental care, vision care, ambulance service, rehab services or nursing home care. About 2/3 of Canadians have private insurance to help with these costs. Canadian drug costs are significantly lower than ours.
Summary
SB 562 promises to cover more than the Canadian system and much more than Vermont's GMC- think about ambulance costs and other transportation costs- it has no cost containment features. The default payment method is fee for service and residents may have any medically necessary treatment. Setting up the necessary computer system and making it secure would take years and cost billions. The plan would be much larger than the ACA exchanges plus the VA system. Fee for service billing means that coding which is outrageously complex and expensive (ICD 10 has 68,000 diagnosis codes- check it out) will probably remain.
Is there no way to create a workable state single payer plan? I think not until/unless a different Congress and president accept extension of Medicare to younger ages and cooperation with state programs. Many single payer advocates share the moral absolutism of the anti-abortion movement. However, it is much easier and cheaper to harass abortion providers than to rearrange our enormous medical infrastructure and fend off the special interests. I don't want another single payer belly flop.
Copays and measures to discourage emergency room visits for minor problems will be necessary for any successful plan; I fear that inclusion of nursing home care will mean that more patients are covered while nursing homes get less per patient than they do today. That will aggravate understaffing and poor service seen in many nursing homes. Unless MediCal payments are significantly increased, our trauma centers will continue to wither. Ambulance services and other covered transportation costs might be substantial.
I don't accept the UMass cost estimates. Because the existing plan is so vague, any honest estimates must be a wide range of costs- are you going to pay nursing home and ambulance charges as billed or at a discount? How will you define disabled and low income? I haven't considered the lightning rod issue of undocumented people. I haven't mentioned the rudimentary Colorado plan. Single payer coverage is a noble idea that can't afford another belly flop like Vermont.