The following piece is a response to a recent article in The Intercept by David Dayen.
Is a single-payer health care system workable in California? My short answer is “yes.” I reached that conclusion by writing a research study, along with co-authors James Heintz, Peter Arno, and Jeannette Wicks-Lim, of the Healthy California single-payer bill (HB562) that was introduced into the California state Senate last spring. Our study was commissioned by the California Nurses Association, a lead supporter of the bill.
The basic finding of our study is that the Healthy California bill could deliver decent health care to all 39 million California residents while also lowering overall costs of health care by about 8 percent relative to the existing system. Under the existing system, California will spend about $370 billion in health care in 2017 (about 14 percent of the state’s overall GDP) but about 15 million Californians — 40 percent of the population — are still either uninsured or are underinsured — i.e., they have insurance but the costs of deductibles and co-payments are prohibitively high.
On May 31, I presented the main results of our study in Sacramento, both in a press conference and to private meetings with state senators, fiscal analysts, and various interested groups. On June 1, one day after my Sacramento presentations, the California Senate voted 23 to 14 to endorse Healthy California. I would love to convince myself that the senators voted for Healthy California due to our study’s dazzling logic. But the fact is that the Senate was responding to years of dedicated and effective organizing by the California Nurses Association and other groups, resulting in about 70 percent of all California’s now supporting single payer. Equally critical is that the current dysfunctional state of our health care system is almost certainly going to get even worse under the stewardship of Donald Trump and the Republican Congress.
The Healthy California bill was scheduled to move into debate in the California Assembly within a few weeks of its Senate passage. However, in a surprise move on June 23, Assembly Speaker Anthony Rendon removed the bill from consideration for this year, even though he had previously expressed support for the single-payer approach. Rendon called the Senate version of the bill “woefully inadequate” in providing the necessary details to make the bill workable.
One may surmise that Rendon might have been influenced by the private health insurance industry, which has donated to his political campaigns. But let’s take Rendon at his word. If he is indeed a single-payer proponent, as he states, and he finds the version of the Healthy California bill that passed in the Senate to be inadequate on specifics, then why wouldn’t he, as speaker of the Assembly, be prepared to lead the legislative process that would have added the necessary detail to make the bill viable?
Not surprisingly, Rendon has offered no clear answer to this question. What has been surprising is that a number of progressive journalists have either come to Rendon’s defense outright or have provided cover by claiming that the Healthy California bill is indeed unworkable, virtuous intentions notwithstanding.
David Dayen, writing in The Intercept on June 30, was especially fervent, asserting that the backers of the bill, including the California Nurses Association, “are perfectly aware that SB562 is a shell bill that cannot become law without a ballot measure approved by voters. Rather than committing to raising the millions of dollars that would be needed to overcome special interests and pass that initiative, they would, apparently, rather deceive their supporters, hiding the realities of California’s woeful political structure in favor of a morality play designed to advance careers and aggrandize power.” Dayen did back off, but only slightly, in response to criticism in The Intercept from CNA Policy Director Michael Lightly.
Kevin Drum, writing in Mother Jones on June 28, claimed to know that the new tax revenues needed to finance Healthy California were about $100 billion more than what our study has estimated, while providing no evidence to support his conclusion. He also asserts that, under Trump, there was zero chance that the level of funding that the federal government would be obligated by law to provide for Healthy California — i.e., the amount they now provide for Medicare, Med-Cal, and smaller federal programs — would ever arrive.
Paul Waldman, writing in The Week on July 5, asserts that establishing single payer in one state is “nearly impossible,” without providing any explanation as to why that is so. In addition to citing the current stalled effort in California, Waldman mentions that “Vermont tried to do it and then abandoned the effort” and that “Colorado voters rejected it at the polls last year.” But he ignores the fact that a perfectly viable single-payer framework for Vermont had been developed in 2011 by the Harvard University health economist William Hsiao, perhaps the leading authority in the world on the issue. The fact that the initiative died in Vermont for political reasons, including the inevitable massive opposition of the private health insurance industry, hardly means that Hsiao’s plan, or the state-level single-payer approach more generally, is unworkable.
We can take as a given that insurance and pharmaceutical companies will mount relentless oppositional campaigns against any and all single-payer proposals in the United States, regardless of whether they are at the state or federal levels. If that is the basis for pronouncing single payer “nearly impossible” to implement, then we should simply resign ourselves to continue living with our current health care system that even Warren Buffett, a single-payer supporter, calls “the tapeworm of American competitiveness.”
On the other hand, if we are serious about creating a health care system that can provide everyone with decent care while lowering overall costs — including costs for families at almost all levels and businesses of almost all sizes — then we need to continue advancing the arguments in support of single payer at both the state and federal levels.
What are some of the critical questions at hand with the current Healthy California fight?
- What makes Healthy California financially viable?
California will spend about $370 billion on health care in 2017. Assuming the state’s existing system stayed intact, the cost of extending coverage to all California residents, including the nearly 15 million people who are currently uninsured or underinsured, would increase health care spending by about 10 percent, to roughly $400 billion.
But enacting single payer will also yield considerable savings relative to the existing system by lowering administrative costs, controlling the prices of pharmaceuticals and fees for physicians and hospitals, reducing unnecessary treatments, and expanding preventive care. Based on the research literature, my co-authors and I found that Healthy California could conservatively produce about 18 percent savings overall, bringing health care spending down to about $330 billion, even with all California residents now receiving decent health care.
- Where does California find $330 billion?
Right now, federal, state and municipal financing covers about 70 percent of all health care expenditures in California. Existing federal law requires the federal government to continue providing this current level of spending even if a state organizes its own health care system differently than the prevailing federal system, as long as the state-run system provides its residents with at least the same quality of care as the prevailing system. Under this law, existing public funding will cover about $225 billion of the total $330 billion in total spending needed to operate Healthy California.
These are the federal government funds that Kevin Drum claims will never arrive into California’s coffers as long as Trump is president. It is true that the Trump administration, or any other federal administration, may attempt to violate the law. But if one supports single payer, why would one assume right off the block that existing laws will obviously be abrogated and that California will have no recourse when this happens?
Assuming instead that federal laws will be enforced, this then means that California will still need to raise an additional $105 billion to bring total funding to $330 billion. To do that, we propose two new taxes: (1) a gross receipts tax on all California businesses of 2.3 percent, but with the first $2 million in business receipts exempted from the tax. This means that small businesses will pay no gross receipts taxes; (2) a 2.3 percent sales tax increase. This would exempt spending on housing, utilities and food. It would also provide a 2 percent income tax credit for low-income families who are now on MediCal (the California-based version of Medicaid).
- Everybody hates paying taxes. Why would anybody support these new taxes?
Both the gross receipts tax and the sales tax are quite progressive in their overall impact after we factor in exemptions and the low-income tax credit. In addition, because Healthy California will reduce the state’s overall health care costs, families and businesses will end up saving money, because their new tax obligations will be less than what they now pay for private health insurance.
Thus, on average, net health care spending for middle-income families would fall significantly, by between about 3 and 9 percent of their income. For medium-sized businesses, costs will fall by an average of between 7 and 13 percent relative to payroll. Even large firms will see costs fall by an average of between about 1 and 5 percent of payroll.
- California law requires 40 percent of all state funding support primary/secondary education. Now what?
This is the law that David Dayen claims is a nearly insurmountable obstacle to passing Healthy California. This is also why Dayen claims that single-payer organizers are “deceiving their supporters” until they admit that, before they can try to pass single payer itself, they must first raise millions of dollars to have a chance of repealing this law through a ballot initiative.
What has convinced Dayen that he knows more about organizing for single payer than the organizers themselves? From the actual organizers’ standpoint, what is the downside, much less deceitfulness, of advancing Healthy California as far as possible within the existing legislative process, building momentum on behalf of the measure at each step? If, at some point, it does become necessary to amend the state’s budget rules, either through legislation or a ballot initiative, then this administrative barrier to single payer can be attacked as one large challenge among many in the long march toward creating a decent health care system. Indeed, if California’s voters, state legislators, and governor all commit to endorsing single payer, then it follows logically that they are also advocating an adjustment in the state’s technical budget rules that will enable an amended version of Healthy California to become law.
Commentators of all persuasions, but especially progressive ones, are doing nobody a favor by offering up overwrought pronouncements on why Healthy California must inevitably fail — especially when these pronouncements are grounded neither in evidence nor the growing political support for creating a decent health care system in California and the U.S. overall.