California’s Single-Payer Proposal Could Be A Blueprint For The Nation. With A Few Caveats…

A promising bill with at least one potentially devastating oversight.

by: Matt Strauss on June 3, 2017

While much of America is closely following the Republican party’s efforts to replace the Affordable Care Act, California boldly forges ahead with a plan of its own.

Here’s how it works, in a nutshell

All California residents, regardless of employment status, age, income or health conditions, would be insured under a comprehensive state-run health plan that covers:

And, Californians could access all of these services for free. That’s right. Under the proposal there are no out-of-pocket expenses like deductibles, copayments or insurance premiums. (Prescription drugs would also be covered, but they may be subject to, limited, cost sharing amounts.)

How will California pay for it?

The proposed single-payer health plan is estimated to cost California $331 billion dollars. And there are two main components that would be used to fund the proposal:

Keeping costs in check

But California isn’t just throwing money at the problem. They are taking two, very smart, steps to ensure that their single-payer plan remains financially solvent:

Potential Pitfall

After reading the economic analysis of the proposed policy several times, I am convinced that this program may actually work. However there is one lingering doubt, namely the lack of utilization control mechanisms present within the proposal.

“Newly insured people under the ACA had inpatient hospitalization rates 57 percent higher, 49 percent higher rates of chemotherapy treatment for cancer, and 43 percent higher rates of congestive heart failure when compared with commercially insured members” — Pittsburgh Post-Gazette

The Affordable Care Act, and health insurers alike, grossly underestimated the pent-up demand for healthcare services by the previously uninsured and underinsured.

And California’s plan is at an even higher risk of such a setback. Since there are no deductibles or copayments to deter residents from accessing virtually unlimited amounts of healthcare services, utilization costs may quickly get out of hand and overrun budget estimates.

This is a symptom of America’s fee-for-service healthcare system. Whereas medical providers are paid for each procedure, test and consultation that is completed, regardless of the result of the treatments. In essence, we are paying for the quantity of care instead of the quality of care.

And therefore, the potential savings from the lower, Medicare matched, reimbursement levels, could be quickly eroded by provider induced demand. This is something that California lawmakers should consider before enacting this bill into law.