BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 810|
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THIRD READING
Bill No: SB 810
Author: Leno (D), et al
Amended: 1/13/10
Vote: 21
SENATE HEALTH COMMITTEE : 7-4, 4/15/09
AYES: Alquist, Cedillo, DeSaulnier, Leno, Negrete McLeod,
Pavley, Wolk
NOES: Strickland, Aanestad, Cox, Maldonado
SENATE APPROPRIATIONS COMMITTEE : 6-3, 1/21/10
AYES: Kehoe, Corbett, Leno, Liu, Price, Yee
NOES: Cox, Denham, Walters
NO VOTE RECORDED: Alquist, Wyland
SUBJECT : Single-payer health care coverage
SOURCE : California Nurses Association
California School Employees Association
California Health Professional Students
Association
California Teachers Association
Health Care for All - California
League of Women Voters
DIGEST : This bill establishes the California Healthcare
System, an entity that would attempt to provide affordable
and comprehensive health care coverage for all.
ANALYSIS :
CONTINUED
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Existing law:
1. Establishes several publicly financed health insurance
programs, including Medicare, Medi-Cal, and the Healthy
Families program, that provide health coverage to
eligible individuals and families, including children,
the aged, blind, and disabled, and pregnant women.
2. Provides for the regulation of private health care
service plans by the Department of Managed Health Care
and health insurance policies by the Department of
Insurance.
This bill establishes the California Healthcare System
(CHS), a single-payer health care system that will provide
coverage for which all 37 million Californians would be
eligible. Essentially, this bill combines under one
administration existing state-administered health care
programs with the privately funded insurance industry, and
the state's uninsured. The CHS will, on a single-payer
basis, negotiate with providers or set fees for health care
services and will pay claims for those services.
This bill prohibits the existence of a health care service
plan contract or health insurance policy, except for the
CHS, that will be sold in the state that provided for the
same services as the system. This will reduce the
California health plan and insurance industry to either
third-party administrators for the system or entities that
would provide coverage for benefits not covered by the
system. It will be administered by the California
Healthcare Agency under the control of a Healthcare
Commissioner appointed by the Governor and confirmed by the
Senate.
This bill requires the Commissioner to seek all necessary
federal policy and financing waivers, exemptions,
agreements, and legislation to implement the CHS. This
bill provides that if the system does not receive federal
or local permission to transfer revenues to the Healthcare
Fund for existing federal, state or local governmental
programs, the system's responsibility to provide health
care services would be secondary.
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Implementation
This bill creates various offices and boards to aid in the
administration of the CHS, including a Premium Commission
that will determine the cost of CHS, develop an equitable
and affordable premium structure, and consider the existing
financial simulations and analyses of universal health care
proposals, such as that completed by the Lewin Group in
January 2005 of SB 921 (Kuehl), 2003-04 Session. The other
offices within the California Healthcare Agency will be the
Healthcare Policy Board, the Office of Patient Advocacy,
the Office of Health Planning, the Office of Health Care
Quality, the Healthcare Fund, the Public Advisory
Committee, the Payments Board, and the Partnerships for
Health.
This bill requires that the premium structure be
means-based and generate adequate revenue to implement CHS,
ensure that all income earners and employers contribute an
affordable amount of premiums, maintain the current ratio
for aggregate health care contributions from employers,
individuals, government, and other sources, provide a fair
distribution of monetary savings achieved from the single
payer system, coordinate with existing and ongoing state
and federal funding sources, comply with federal
requirements, and include an exemption for employers and
employees who are subject to a collective bargaining
agreement and participate in a Taft-Hartley Trust Fund.
This bill specifies that only the provisions relating to
the Premium Commission will become operative on January 1,
2011, and that the remaining provisions will become
operative on the date that the Secretary of the Health and
Human Services Agency states that sufficient funding exists
to implement the CHS.
This bill prohibits any state entity from incurring
transition or planning costs prior to this determination,
except the Premium Commission. This bill requires the
Premium Commission to submit a recommendation for a premium
structure to the Governor and the Legislature on or before
January 1, 2013. The costs to the Premium Commission will
be borne by state departments and agencies that are members
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of the Commission, including the Board of Equalization, the
Health and Human Services Agency, the Employment
Development Department, the Legislative Analyst's Office,
the Department of Finance, and the Franchise Tax Board and
will be funded by either the General Fund or private funds.
Although the cost is unknown, it will be a substantial
undertaking requiring many hours of expert staff time to
determine the cost of a system and to determine a rate and
premium structure, as well as consult with stakeholder
organizations, policy institutes, and experts in health
care financing and universal health care models. Costs
could be in the high hundreds of thousands to millions of
dollars in fiscal year 2011-12, and ongoing, depending on
the ongoing role of the Commission. This bill requires the
Premium Commission to be funded in the Budget Act of 2011.
This bill establishes the Healthcare Fund, which will
consist of two accounts - one to pay annual state
expenditures for health care and another to maintain a
system reserve. This bill provides that the premiums
collected each year will be roughly sufficient to cover
that year's projected costs. This bill requires the
Commissioner of CHS, during transition to the system and
annually thereafter, to determine an appropriate level for
a reserve fund for the system.
This bill assumes that all current local, state, and
federal trust fund monies used to provide health care
coverage to enrollees in state health care programs will be
transferred to the system. In many cases, it will be
necessary to seek federal waivers to ensure the continued
receipt of federal funds. For example, $27.9 billion of
Medi-Cal's $40.6 billion projected program budget are
federal funds. The state must meet minimum federal
requirements to be eligible for federal matching funds,
known as the Federal Medical Assistance Percentage (FMAP).
California's current base FMAP rate is 50 percent federal
funds and 50 percent General Fund. The state is receiving
an enhanced FMAP rate of 61.59 percent federal funds and
38.41 percent General Fund pursuant to the American
Reinvestment and Recovery Act for benefit claims from
October 1, 2008, through December 31, 2010.
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Comment
SB 921 (Kuehl), 2003-04 Session, and SB 840 (Kuehl),
2007-08 Session, would have implemented health care policy
substantially similar to this bill. SB 921 was held in the
Assembly Health Committee and SB 840 was vetoed.
Background
According to the Senate Appropriations Committee analysis:
"The Lewin Group and the state's non-partisan Legislative
Analyst's Office (LAO), in response to SB 921 in 2004 and
to SB 840 and SB 1014 in 2008, respectively, produced
detailed fiscal analyses on the concept of a single-payer
health care entity in California.
"The LAO report analyzed SB 840 and its funding mechanism
SB 1014 (Kuehl, 2008), which would have imposed a
combined 12 percent tax on employers and employees, as
well as other unspecified taxes (the LAO estimated a rate
of 11.5 percent) for the purposes of providing a funding
source for SB 840, as a comprehensive "single-payer
proposal" and assumed an implementation date of January
1, 2011. The LAO estimated annual costs of $210 billion
in the first year of implementation, which would grow
over subsequent years to $250 billion in 2015-2016. The
analysis predicted a net shortfall of $42 billion in the
FY 2011-2012, the first full year of implementation, and
$46 billion in 2015-2016, due to a faster rate of growth
for health benefits costs relative to SB 1014 revenues.
The LAO estimated that it would take a combined tax of 16
percent on employers and employees and 15.5 percent on
the other taxes to mitigate the predicted shortfall in
revenues. The LAO estimate did not include the 1 percent
tax in SB 1014.
"The LAO assumes that the state would realize savings due
to reduced physician and hospital administration costs
and that the system would be able to operate at
relatively low administration costs. The analysis also
assumes that federal, state, retired state employee
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health contributions, and local government contributions
would shift to the single-payer system.
"The Lewin Group's analysis of SB 921 estimated costs
would be $167 billion in 2006 and would increase to $280
billion in 2015. The group assumed similar tax revenues
to those later proposed in SB 1014 in 2007.
"Both the Lewin and LAO reports cited potential
administrative savings under a single-payer system, but
their estimates differed: the Lewin report estimated
administrative costs of 1.9 percent of health benefit
costs, a rate that is similar to that of the Medicare
program, versus a rate of 12.7 percent for private
insurer administration. The LAO report estimates system
administrative costs of 3.9 percent in the first year of
implementation and 2.9 percent after 5 years. This bill
would require that system administrative costs not exceed
10 percent of system costs in the first 5 years of
transition and would limit them to 5 percent of system
costs within 10 years of completing transition to the
system. This bill would also require the commissioner to
establish a budget to support the training, development,
and continuing education of health care providers needed
to meet the needs of the population and the goals and
standards of the system."
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Premium Commission $0 hundreds of
thousands to General/
millions of dollars
beginningPrivate
in FY 2011-12 through FY
2012-13 ongoing costs unknown
CHS implementation Major implementation cost
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pressure of General
at least $200 billion annually and
ongoing
likely starting in latter half of FY
2012-13
SUPPORT : (Verified 1/20/10)
California Health Professional Students Association
(co-source)
California Nurses Association (co-source)
California School Employees Association (co-source)
California Teachers Association (co-source)
Health Care for All - California (co-source)
League of Women Voters (co-source)
AFSCME District Council 36 and 57
AFSCME Local 444, 955, 2019, and 2428
AFSCME Retirees Chapter 36
Alameda-Contra Costa Transit District
Alliance for Democracy, Mendocino Coast
AP Goodyear Construction
American Association of University Women
American Association of University Women, Pasadena Branch
American Civil Liberties Union, Southern California
American Medical Students Association, UCLA Pre-medical
Chapter 5/6/09
American Federation of State, County and Municipal
Employees
American Medical Students Association, National
American Medical Students Association, Davis School of
Medicine Chapter
Bay Area Veterans of the Civil Rights Movement
Bell-Everman, Inc. (Goleta, CA)
California Alliance for Retired Americans
California Chiropractic Association (if amended)
California Commission on the Status of Women
California Communities United Institute
California Federation of Teachers
California Foundation for Independent Living Centers
California Health Professional Student Alliance
California Labor Federation, AFL-CIO
California Maternal, Child and Adolescent Health Directors
California Nurses Association/National Nurses Organizing
Committee
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California Pan-Ethnic Health Network
California Physicians Alliance
California Professional Firefighters
California Retired Teachers Association
California School Employees Association
California Senior Coalition
California Society for Clinical Social Work
California Student Physicians for Healthcare Reform
California Teachers Association
California Women's Agenda
Cities of Albany, Berkeley, El Cerrito, Oakland, Richmond,
San Pablo, and Santa Monica
Coalition of Lavender-Americans on Smoking and Health
Coastside Democrats
Committees of Correspondence
Concerned Citizens of Laguna Woods Village
Congress of California Seniors
Consumer Federation of California
Contra Costa County Advisory Council on Aging
Contra Costa County Board of Supervisors
County Health Executives Association of California
Democratic Alliance for Action
Democratic Party of Contra Costa County
Democrats of Rossmore (Walnut Creek)
Diablo Valley Democratic Club
Doctors Medical Center, West Contra Costa County
East Bay Peace Action
Easter Hill United Methodist Church
El Cerrito Committee on Aging
El Cerrito Democratic Club
Elsdon, Inc., (Danville, CA small business)
Evergreen Democratic Club
Federation of Retired Union Members of Santa Clara County
Glendale City Employees Association
Having Our Say
Health Access of California
Health Care for All, Contra Costa County
Health Officers Association of California
Hubert Humphrey Democratic Club
International Alliance Theatrical Stage Employees Local 33
International Association of Machinists
The Kennedy Club of San Joaquin
Labor Task Force for Universal Health Care
Lamorinda Democratic Club
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Lamorinda Peace and Justice Group
League of Women Voters, Davis; Diablo Valley; El Dorado
County; Oakland; Palos Verdes Peninsula/San Pedro; San
Diego County; San Joaquin County; San Jose/Santa Clara;
Santa Maria Valley; and Southwest Santa Clara Valley
Los Angeles Unified School District
Lumina Media Productions (Richmond, CA)
Lutheran Office of Public Policy
Mane Event Salon, Grass Valley
Manteca Democratic Club
Marin County Board of Supervisors
National Association of Social Workers, California Chapter
National Council of Jewish Women, Long Beach
North Richmond Municipal Advisory Council
Officescapes, Newport Beach, CA
Old Lesbians Organizing for Change
Older Women's League of California
Older Women's League, East Bay
Older Women's League - San Francisco Chapter
Organization of SMUD Employees
Progressive Jewish Alliance
Promotores de Salud of Behavioral Health Services
Rainbow Coalition, West Contra Costa
Richmond Commission on Aging
Richmond Progressive Alliance
San Bernardino Public Employees Association
San Fernando Valley Interfaith Council
San Francisco Tobacco Free Coalition
San Jose Peace and Justice Center
San Luis Obispo County Employees Association
Santa Barbara County Action Network
Santa Clara County Democratic Club
Santa Clarita Valley Clean Money for Better Government
Committee
Santa Cruz County, Board of Supervisors
Santa Monica Community College District
Santa Rosa City Employees Association
Service Employees International Union
Social Justice Alliance
St. Mark Presbyterian Church, Health Ministries Commission
(Newport Beach)
Students of University of CA Program in Medical Education
Union for Reform Judaism, Pacific Southwest Council
Unitarian Universalist Fellowship of Santa Cruz County
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United Nations Association-USA, Santa Barbara and
TriCounties Chapter
United Nurses Assoc. of California/Union of Health Care
Professionals
United Steelworkers, Local 1440, AFL-CIO
Valley Women's Club
West Contra Costa Concilio Latino
West Contra Costa Latina/o Democratic Club
West Contra Costa Unified School District
Western Center on Law & Poverty
Women's International League for Peace and Freedom -
Peninsula Branch
OPPOSITION : (Verified 1/20/10)
America's Health Insurance Plans
Anthem Blue Cross
Association of California Life and Health Insurance
Companies
California Association of Health Plans
California Association of Health Underwriters
California Chamber of Commerce
California Independent Grocers Association
California Taxpayers' Association
Concerned Women for American
Health Net
National Federation of Independent Business
ARGUMENTS IN SUPPORT : Supporters state that as health
insurance costs steadily rise, employers are increasingly
reducing or dropping coverage for employees, that the
increase in high deductible health plans, which require
deductibles and co-payments which are generally
unaffordable, have failed to stem the rise in health care
costs, and that half of all bankruptcies in the United
States are now related to medical costs. Supporters cite
this as evidence that Californians can no longer rely on
the current system of private insurance, as no one is
guaranteed to receive care when they become ill, and many
who are insured often have inadequate coverage. Supporters
state that this bill would provide every Californian with
health care coverage that would provide comprehensive
benefits and a high quality of care. Supporters state that
this bill would simplify the currently complex, multi-payer
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system, eliminate billions of dollars in administrative
waste, generate savings through increased access to primary
and preventive care, as well as bulk purchasing of
prescription drugs and durable medical equipment, allow
patients to choose their own doctors, eliminate coverage
exclusions for preexisting conditions, and ensure continued
coverage regardless of employment status.
ARGUMENTS IN OPPOSITION : Opponents state that costs
associated with this bill would create an expensive
labyrinth of bureaucracy, and that competition among
private companies leads to lower costs and better care.
Opponents assert that a state-run health care system would
eliminate private health plans and insurers, thereby
forcing people to rely upon the state to take care of their
health needs, and limiting medical advances because of
decreased competition. Opponents argue that this bill
would extend taxpayer obligations too far, and damage the
state's competitiveness for jobs. They state it would be
impossible to replace the current system of health care
without major increases in taxes, both to cover currently
insured individuals, as well as the uninsured, which would
discourage business growth, and hurt state investments, and
that out-of-state individuals would move to California to
take advantage of the new health care system adding to the
state's economic burden. Opponents disagree with the
premise that a single payer system will generate
substantial savings from lowered administrative costs and
profits, as administrative costs will not be eliminated
under a single payer system. They assert that competitive
forces in the marketplace are vital in health care, and
that while California's premiums have increased, they are
still lower than other large markets. Opponents also state
that single payer systems in other countries have
demonstrated limited access and longer waiting times for
services.
CTW:mw 1/25/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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