BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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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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