BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Tom Torlakson, Chairman
840 (Kuehl)
Hearing Date: 5/14/07 Amended: 4/30/07
Consultant: John Miller Policy Vote: Health 6 - 4
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BILL SUMMARY: SB 840 would establish the California Universal
Healthcare System under which all California residents would be
eligible for specified health care benefits. The universal
system would, on a single payer basis, negotiate for or set fees
for health care services provided through the system and pay all
claims for those services. The bill would establish a new
administrative structure and provide for oversight of health
care operations statewide.
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Fiscal Impact (in thousands)
Major Provisions 2007-08 2008-09 2009-10 Fund
State/county net savings
($1,000,000)($2,800,000)GF/county
Transition loan $ 6,000
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STAFF COMMENTS: This bill meets the criteria for referral to
Suspense.
SB 840 fundamentally alters the financing of health care in
California shifting the current employer based/multi-payer
system to a single financing system. As proposed the bill will
provide comprehensive medical benefits to every California
resident, authorizes participation of all licensed medical
providers, incorporates federal and other public programs into
the universal system, prohibits the sale of private health
insurance and regulates health care costs. The program would be
financed with current government health care funding for
incorporated federal/county programs, a payroll tax to replace
employer benefit plans and other taxes to replace insurance
premiums.
The measure would be governed by an appointed commissioner
charged with establishing the universal system's budget and
setting rates, establishing expenditure limits, developing a
capital management plan, seeking all necessary waivers and
exemptions and establishing equitable distribution of services
and financing. This bill contains the structure and policy for a
universal single payer system, the financing provisions are in a
companion measure, SB 1014 (Kuehl).
An actuarial analysis of a prior version of this legislation by
the Lewin Group found that the total health spending for
California residents under the current system to be about $184.2
billion for 2006, and that the single payer program would
achieve universal coverage while reducing total spending in the
state by a net $7.9 billion. This savings is realized by
reducing administrative costs within the current system and
savings from bulk purchasing of prescription drugs and durable
medical equipment. The Lewin analysis anticipates a substantial
increase in utilization as a result of universal coverage and
access but finds that this increased utilization is more than
offset by savings of roughly $20 billion in administrative
savings and $5.2 billion in bulk purchasing savings.
SB 840 (Kuehl)
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SB 840 would constrain growth in future spending to match growth
in the state gross domestic product which is expected to be
about 5.14% annually through 2015. By 2015, health care spending
under the single payer program would be about $68.9 billion less
than currently projected ($343.6 billion). Total savings over
the 2006 through 2015 period would be $343.6 billion. Savings to
state and local governments over this ten year period would be
about $43.8 billion.
The bill requires the universal system to be operational no
later than two years after it is determined there are sufficient
resources to implement the program. The bill provides authority
for a loan from the GF to finance transitional costs. The
Committee estimated this cost to be $6,000,000 in the first year
and by the second year the transition should be self sustaining.