BILL ANALYSIS �
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Ed Hernandez, O.D., Chair
BILL NO: SB 810
S
AUTHOR: Leno
B
AMENDED: As Introduced
HEARING DATE: May 4, 2011
REFERRAL: Rules
8
CONSULTANT:
1
Hansel
0
SUBJECT
Single-payer health care coverage
SUMMARY
Creates the California Healthcare System (CHS), a
single-payer health care system, administered by the
California Healthcare Agency (CHA), to provide health
insurance coverage to all California residents. Provides
that the CHS and CHA would become operative when the
California Secretary of Health and Human Services
determines that sufficient revenues are available to
implement the bill's provisions, or the Secretary obtains a
specified federal waiver, whichever is later.
CHANGES TO EXISTING LAW
Existing law:
Requires, under the federal Patient Protection and
Affordable Care Act (PPACA), (Public Law 111-148), as
amended by the Health Care Education and Reconciliation
Act of 2010 (Public Law 111-152), each state, by January
1, 2014, to establish an American Health Benefit Exchange
(Exchange) that makes qualified health plans available to
qualified individuals and qualified employers. If a
state does not establish an Exchange, the federal
Continued---
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
2
government administers the Exchange.
Provides refundable premium tax credits and reduced
cost-sharing amounts for certain persons with lower
incomes who enroll in qualified health plans in the
Exchange. Premium tax credits are available to persons
with incomes of 100 to 400 percent of the federal poverty
level (FPL), and cost-sharing reductions are available to
persons with incomes of 100 to 250 percent of the FPL.
Legal immigrants with household incomes less than 100
percent of the FPL who are ineligible for Medicaid
because of their immigration status are also eligible for
the premium tax credit and the cost-sharing reductions.
Requires U.S. citizens and legal residents to have
qualifying health coverage beginning January 1, 2014, and
requires those without coverage to pay a tax penalty of
the greater of $695 per year up to a maximum of three
times that amount ($2,085) per family, or 2.5 percent of
household income.
Beginning January 1, 2014, provides that employers with
more than 50 employees that do not offer coverage and
have at least one full time employee who receives a
premium tax credit must pay a fee of $2,000 per full-time
employee, excluding the first 30 employees. Provides that
employers with more than 50 employees that offer coverage
but have at least one full-time employee receiving a
premium tax credit, must pay the lesser of $3,000 for
each employee receiving a premium credit or $2,000 for
each full-time employee.
Beginning January 1, 2017, allows a state to request a
waiver of one or more of the above provisions of the
PPACA and requires the Secretary for Health and Human
Services to grant a request for a waiver if the Secretary
determines that the State plan will:
--Provide coverage that is at least as comprehensive as
the coverage offered through the Exchange;
--Make coverage at least as affordable as it would have
been through the Exchange;
--Provide coverage to at least as many residents as
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
3
otherwise would have been covered;
--Not increase the federal deficit.
Requires the Secretary to provide funding to states that
qualify for waivers of the premium tax credit and reduced
cost-sharing provisions, in an amount that is the same as
that which would have been made available through the
Exchange without the waiver.
Establishes, under existing federal and state laws,
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.
Establishes, under existing state law, the California
Health Benefits Exchange, as an independent public
entity, to implement the provisions of PPACA pertaining
to health benefits exchanges, and specifies its powers
and duties.
Provides, under existing state law, for the regulation of
private health care service plans by the Department of
Managed Health Care (DMHC), and health insurance policies
by the California Department of Insurance (CDI).
This bill:
Establishes the CHS to provide health insurance coverage
to every California resident, as defined.
Establishes a new state agency, the California Healthcare
Agency (CHA), which would oversee the CHS. Provides for
the appointment of a commissioner to the CHA by the
Governor, on or before July 1 of the fiscal year
following the operative date of the bill's provisions,
who would be subject to confirmation by the Senate.
Prohibits the sale of any private health care service
plan or health insurance policy in the state, and makes
the CHS the primary payer for health care services in
California.
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
4
Requires the CHS and CHA to become operational no later
than two years after the Secretary of the California
Health and Human Services Agency determines that
sufficient revenues are available to fund the costs of
implementing CHS and CHA, or the date the Secretary
receives a waiver under the PPACA to implement the CHS,
whichever is later.
System governance
Provides that the commissioner is the chief officer of
the CHA. Provides that the commissioner has specified
duties, including to establish the CHS budget; set goals,
standards and priorities for the system; set rates, fees
and prices; establish a CHS enrollment system; establish
systems for electronic referral, medical records, claims,
and reimbursement; establish a prescription drug and
durable medical equipment formulary; establish health
planning regions; determine the appropriate levels for a
reserve fund for the system; appoint specified officers
and directors within the system; implement specified cost
control measures; oversee measures to ensure quality of
care; and, seek to secure a repeal or waiver of any
federal law provisions that would preempt any part of the
bill.
Establishes the following entities under the CHA:
--A Healthcare Policy Board, with specified members,
which would establish goals and priorities for the
system, the scope of services to be provided to patients,
and guidelines for evaluating the performance of the
system, its officers, health planning regions, and
providers.
--A Public Advisory Committee, comprised of physicians,
nurses, hospitals, allied health professionals, and
clinics, consumers, labor, business, and other
stakeholders to advise the Healthcare Policy Board on all
matters related to the system.
--An Office of Patient Advocacy, headed by a patient
advocate appointed by the commissioner, to represent the
interests of patients, and secure the health care
services and benefits to which they are entitled. The
patient advocate would additionally be required to
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
5
establish and maintain a grievance process and to develop
educational and informational guides for consumers to
inform them of their rights and benefits within the
system.
--An Office of Health Planning to plan for the short- and
long-term health care needs of Californians, pursuant to
the health care and finance standards set by the
commissioner, by evaluating regional budget requests and
estimating the health care workforce, health disparities,
and infrastructure needs.
--An Office of Health Care Quality, headed by a chief
medical officer, who would support the development of
high quality, coordinated health care services. The bill
would assign various duties to the chief medical officer,
including establishing evidence-based standards of care
and recommending to the commissioner a benefits package
based on clinical efficacy.
--Partnerships for Health which would improve health
through community health initiatives, support the
development of innovative means to improve care quality,
promote efficient, coordinated care delivery, and conduct
public education, as specified.
--Up to 10 Health Planning Regions, for the purposes of
local and community-based planning for the delivery
services.
Also establishes, within the Office of the Attorney
General, the Office of the Inspector General for the CHS
who would be granted broad powers to conduct various
investigative activities, including the audit and review
of the financial and business records of individuals and
entities that provide services or products to the system
or are reimbursed by the system, and the investigation of
patterns of fraud and abuse related to the utilization of
medical products and services.
Eligibility
Makes all California residents eligible for the CHS.
Residency would be based on physical presence in the
state with the intent to reside. States legislative
intent for the system to provide health care coverage to
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
6
state residents who are temporarily out of the state.
Provides that visitors to the state who receive care
under the CHS will be billed for all services rendered.
Deems individuals who are eligible for health benefits
from California employers but working in another
jurisdiction, to be eligible for benefits under the CHS,
as specified. Provides that individuals who arrive at a
health facility unable to document eligibility, because
of physical and/or mental conditions, shall be deemed
eligible for services.
Benefits
Provides that any eligible individual may receive
services under the system from any willing professional
health care provider. Covered benefits would be defined
under the bill to include all medical care determined to
be medically appropriate by the patient's health care
provider, including but not limited to:
--Comprehensive medical benefits, including inpatient and
outpatient health facility services; professional health
care provider services by licensed health care
professionals; diagnostic and laboratory services,
durable medical equipment, rehabilitative care, emergency
transportation and necessary transportation for health
care services for disabled indigent persons; and
preventive care;
--Health education;
--Hospice care;
--Home health care;
--Prescription drugs listed on the formulary;
--Mental and behavioral health care;
--Dental care;
--Podiatric care, chiropractic care, and acupuncture;
--Vision care;
--Adult day care;
--Case management and coordination to ensure services
necessary to enable a person to remain in the least
restrictive setting;
--Substance abuse treatment;
--Skilled nursing facility care up to 100 days per year,
following hospitalization;
--Family planning services and supplies;
--Early and periodic screening, diagnosis, and treatment
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
7
services for individuals under 21 years of age; and,
--Specified faith healing services.
Allows the commissioner to expand benefits when expansion
meets the intent of the statute and can be sufficiently
funded.
Excludes specified services from coverage, including
health care services that are determined to have no
medical indication, services rendered primarily for
cosmetic purposes, private rooms in inpatient health
facilities, and the services of a provider or facility
that is not licensed by the state.
Prohibits co-payments and deductibles for preventive care
in cases where they are prohibited by federal law, but
allows co-payments and deductibles for other services,
commencing in the third year of CHS operation, as
specified. Requires the commissioner to establish a
process to waive co-payments or deductibles for those who
lack the financial means to pay them.
Allows eligible beneficiaries to choose a primary care
provider, and authorizes women to choose an
obstetrician-gynecologist in addition to a primary care
provider.
Requires individuals enrolling in integrated health care
systems to retain membership for at least one year after
an initial three-month evaluation period, as specified.
Requires patients to have a referral from a primary care
provider to see a specialist, except for a dentist,
optometrist, or ophthalmologist, as specified. Also
allows a specialist to serve as the primary care provider
if the provider agrees to coordinate the patient's care.
Budgeting and financing provisions
Establishes the Healthcare Fund (Fund) within the State
Treasury, administered by a director appointed by the
commissioner, to receive funds to support CHS costs.
Requires the Fund director to establish a system account
and a reserve account, as specified.
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
8
Requires the Fund director to immediately notify the
commissioner when trends indicate that expenditures for
the system may exceed revenues, and to immediately notify
the Legislature and the public regarding the possible
need for cost control measures.
Specifies the types of cost control measures the
commissioner can implement, including changes in health
facility administration that improve efficiency,
postponement of introduction of new benefits or benefit
improvements, imposition of co-payments and deductibles
under specified circumstances, imposition of an
eligibility waiting period if the commissioner determines
that people are immigrating to the state for the purpose
of obtaining health care through the system, and others
as specified.
Specifies cost control measures that may be followed, if
the commissioner or regional planning director determines
that regional revenue and expenditure trends indicate a
need for regional cost containment.
Provides that, in any year in which the Budget Act has
not been enacted by June 30th, moneys in the reserve
account of the Fund shall be used to implement the bill's
provisions until funds became available through the
Budget Act. Requires the State Controller to make
General Fund loans to the Fund if the reserve funds are
exhausted.
Requires the commissioner to establish a budget for all
expenditures that includes a limit on total annual state
expenditures and establishes regional allocations to
cover a three-year period.
Requires the commissioner to limit the growth of spending
under CHS to the average growth in state domestic
product, population growth, advances in technology, and
other factors. Additionally requires the commissioner to
adjust the system budget so that aggregate health care
spending in the state does not exceed CHS spending by
more than five percent.
Requires the commissioner to establish a budget for the
purchase of prescription drugs, and to use the purchasing
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
9
power of the state to obtain the lowest possible prices
for prescription drugs.
Requires the commissioner to establish a budget to
support research and innovation and a budget to support
the training, development and continuing education of
health care providers and the health care workforce
needed to meet the health care needs of the population.
Requires the commissioner to project the system's
revenues and expenditures pursuant to specified factors,
and to establish specified budgets for various components
of the health care system that include adjustments for
cost-of-living differences between regions, health risk
of enrollees, workforce development needs, and projected
savings due to improved access and efficiency of care
delivery, and other variables.
Requires the commissioner to seek necessary approval so
that all current federal payments for health care are
paid directly to CHS, which would then assume
responsibility for the benefits and services paid by the
federal government with those funds.
Requires the commissioner to establish formulas for
equitable contributions to CHS from counties and other
local government agencies.
Provides that the system is secondarily responsible for
providing care, to the extent that the federal, state, or
county programs are not transferred to the system.
Requires the CHS to cover the Medi-Cal share of cost
amounts for aged, blind and disabled beneficiaries, and
Medicare Part B premiums, to the extent that the
commissioner obtains authorization to incorporate
Medi-Cal and Medicare revenues into the Fund.
Provides that until a single payer system for all health
care in the state is established, health care costs may
continue to be collected from "collateral sources"
including insurance policies, health plans, employers,
employee benefit contracts, government benefit programs,
judgments for damages, and any liable third party.
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
10
Establishes a transition advisory group, comprised of the
officers of the system, specified stakeholders and health
care policy experts, and representatives from existing
state departments and agencies to advise the commissioner
on all aspects of implementation of the CHA.
Health care providers
Allows all licensed and accredited health care providers
in the state to participate in the CHS.
Requires the commissioner to establish a Payments Board
that would be responsible for negotiating reimbursements
and establishing a uniform payments system for
fee-for-service providers, essential community providers,
group medical practices, and upper level managers, as
specified.
Allows providers to choose to be compensated by the
system or by persons to whom they provide services, in
which case they may establish charges for their services.
Prohibits providers who accept any payment from CHS from
billing a patient for any covered service.
Requires provider compensation to be actuarially sound
and include a just and fair return for health care
providers. Requires payment schedules to include bonus
payments associated with specified performance standards
and goals, including service to medically underserved
areas.
Requires integrated health delivery systems, essential
community providers, and group medical practices to
negotiate operating budgets with regional planning
directors that allow them to be reimbursed on the basis
of a capitated system or a non-capitated operating budget
that covers all costs of providing health care services.
Provides that margins generated under a health care
system's operating budget may be retained and used to
meet the health care needs of the population, conditioned
upon specified restrictions.
Provides that all claims for health care services
rendered pursuant to the system shall be submitted to the
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
11
Fund via an electronic claims and payment system.
Health facilities and equipment
Directs the commissioner to perform a system-wide
assessment of existing capital health care assets,
prioritize short- and long-term capital needs, and
develop a multi-year capital management plan, according
to specified criteria, to govern all capital investments
and acquisitions.
Requires the commissioner to develop and maintain capital
inventories on a regional basis and to establish a
process whereby those intending on making capital
investments or acquisitions would be required to prepare
a business plan, as specified.
Requires the establishment of a competitive bidding
process, as described, for the development of capital
management plans that meet the needs of the system;
provides that the system may fund, partially fund, or
participate in seeking funding for those capital
projects.
Requires the regional planning directors to develop
regional capital development plans and to make financial
information available to the public when the system's
contribution to a capital project is greater than $25
million.
Health care premiums
Establishes the California Healthcare Premium Commission,
comprised of specified representatives, including health
finance experts, business and labor representatives, and
state tax department representatives, to determine the
aggregate costs of providing health care coverage, and to
develop an equitable and affordable premium structure, as
described, that would generate adequate revenue to
support the system and ensure actuarially sound funding
for the system.
Requires the Premium Commission to be funded through an
appropriation in the Budget Act of 2012, and authorizes
it to obtain grants from, and contracts with, individuals
and entities, and receive charitable contributions or any
other lawful source of income in order to perform its
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
12
functions.
Requires the Premium Commission, on or before January 1,
2014, to submit a recommendation for a premium structure
to the Governor and the Legislature.
FISCAL IMPACT
This bill has not been analyzed by a fiscal committee.
According to the Senate and Assembly Appropriations
Committees analyses of a substantially similar bill in the
2009-10 session, state costs under the prior bill would
likely total in excess of $200 billion annually. These
costs would be offset to an unknown extent by redirection
of revenues from existing health coverage programs that
would be subsumed into the single payer system created by
the bill, some of which would be subject to federal
waivers, and unspecified new taxes.
The coverage system proposed by the bill would take effect
no later than two years after the Secretary of the Health
and Human Services Agency determines that adequate funding
is available to implement it, or upon receipt of a federal
waiver under the PPACA, whichever is later.
BACKGROUND AND DISCUSSION
The author states that SB 810 enacts a modern universal
health care system in California, based on a
Medicare-for-All model of health care financing that
combines public financing with competitive private health
care delivery, and covers every resident of the state with
affordable comprehensive health benefits while saving the
state billions of dollars in the first year it is enacted.
The author states that the current health finance and
delivery system is fragmented, administratively complex and
clinically wasteful, leading to billions of dollars being
diverted annually away from direct medical care and driving
unaffordable premium increases. According to the author,
SB 810 would establish a more efficient finance and
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
13
delivery system that would achieve the dual goals of
achieving universal coverage while stabilizing health care
spending.
The author notes that health care costs continue to
significantly outpace overall economic growth and are
significant contributors to the nation's overall economic
recession, rising budget deficits, job loss, and medical
bankruptcy. However, existing law provides no mechanisms
for containing health care spending that do not come at the
expense of significant reductions in quality and access for
consumers. Absent a single-payer model of health care
financing, the author states that growth in health care
spending is rapidly surpassing our ability to afford
current levels of benefits or to add new benefits related
to technological improvements.
The author states that with the passage of federal health
reform, the establishment of a single-payer model of health
care is particularly critical because the taxes that fund
public programs, and the wages that fund mandatory private
insurance, will both grow much more slowly than rising
health insurance premiums.
The author states that a single-payer model of health care
financing has been demonstrated to contain health care
spending while providing universal coverage, through
reduced administrative overhead and more effective use of
consumer purchasing power. The author states that steeply
rising health care costs are extremely burdensome on
companies doing business in the United States, putting them
at a substantial competitive disadvantage in the
international marketplace. While health insurance premiums
are rising unpredictably, often by as much as 20 percent in
one year, employers, large and small, unions, and even
powerful purchasers such as the California Public Employee
Retirement System, are no longer able to stabilize health
care costs or benefits through negotiations. The author
believes that a single-payer model of health care
financing, which removes private insurance as a middleman
between the patient and health care providers, is essential
to containing these rising costs.
Analyses of prior single-payer proposals
California-specific analyses were completed of SB 921
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
14
(Kuehl) of the 2003-04 Session, and SB 840 (Kuehl) of the
2007-08 Session, both of which were previous single-payer
proposals containing provisions nearly identical to those
in this bill, as well as of SB 1014 (Kuehl), a companion to
SB 840, which would have imposed taxes on employer payroll,
employee wages, and other self-employed or non-wage income,
in order to generate revenues to help fund the proposed
single-payer system. These analyses were written prior to
the passage of federal health care reform.
In 2005, the Lewin Group, an independent health care policy
and research firm, published an analysis of SB 921, finding
that total health spending for California residents under
the current system was about $184.2 billion in 2006, and
that the proposed single-payer program would achieve
universal coverage while reducing total spending in the
state by a net of $7.9 billion in 2006, the first year of
operation. The analysis stated that these savings would be
realized by reducing administrative costs within the
current system, and savings from bulk purchasing of
prescription drugs and durable medical equipment. The
Lewin Group analysis anticipated a substantial increase in
utilization as a result of universal coverage and access,
but found that those costs would be exceeded by roughly $20
billion in administrative savings and $5.2 billion in bulk
purchasing savings.
The Lewin Group analysis stated that the proposed
single-payer system would constrain growth in future
spending to match growth in the state gross domestic
product, expected to be about 5.14 percent annually through
2015. By 2015, the analysis found that health care
spending under the single-payer program would be about
$68.9 billion less than projected spending under the
current health care system. The analysis stated that total
savings over the 2006 through 2015 period would be $343.6
billion, with savings to state and local governments over
this ten-year period of about $43.8 billion.
The Legislative Analyst's Office (LAO) published an
analysis of SB 840 in June 2008. The LAO reviewed and
updated the Lewin analysis with respect to single-payer
costs and revenues, and estimated annual costs of $210
billion in 2011, growing to $252 billion in 2015.
Additionally, the LAO forecast of costs and revenues over
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
15
the 2011 through 2015 period showed an estimated annual
shortfall, with costs outpacing revenues by $42 billion in
2011 and $46 billion in 2015. One-half of the shortfall
was accounted for by the fact that growth in medical costs
exceeded the growth in tax revenues and redirected funding
from public programs between 2006, the year Lewin assumed
implementation would begin, and 2011, the start of
implementation assumed by the LAO. Another 40 percent of
the shortfall was attributed to LAOs use of
California-specific and actual wage data, which resulted in
lower tax revenues than the Lewin report had assumed. The
Lewin report relied on national survey data rather than
actual California data. The remaining 10 percent of the
shortfall highlighted by the LAO was due to the assumed
costs of funding a reserve and due to lower assumed savings
in health care administrative costs and the costs of
prescription drugs. In particular, LAO assumed that the
state would need to continue to conduct a separate
eligibility determination process for Medi-Cal eligible
enrollees, and would need to separately track
Medicare-eligible enrollees also. Based on these
assumptions, LAO reduced the level of administrative
savings estimated by Lewin by 10 percent, or $1.5 billion
in 2011-12.
In the other direction, LAO assumed that higher revenues
would be available from counties to fund the system than
the level assumed by Lewin, and assumed that the costs of
increased utilization of health care services would be
lower than those assumed by Lewin.
LAO estimated that payroll taxes for employer and employees
would need to be 15.5 percent, combined, for the
single-payer costs and revenues to balance at the start of
the forecast period, as opposed to the 11.5 percent
combined taxation rate that was proposed in SB 1014.
LAO also identified but didn't quantify other General Fund
impacts resulting from a single-payer health care system.
Those include reductions in revenues from taxes on health
insurance companies, revenue effects resulting from
economic dislocations and labor market adjustments, the
state's administrative costs to set up the new system, and
additional state employee health benefit or wage costs.
According to LAO, those costs would be offset to some
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
16
degree by increased revenues from reduced use of health
care-related tax deductions and exclusions currently
available to individuals and businesses.
PPACA and state waivers
The PPACA gives states the flexibility to apply for waivers
of certain provisions of the PPACA in order to pursue
alternative strategies for providing their residents with
affordable, comprehensive health coverage. Under the law,
these waivers are available beginning in 2017. Under these
waivers, states may implement policies that differ from
those in the PPACA so long as they:
Provide coverage that is at least as comprehensive as the
coverage offered through the Exchanges;
Make coverage at least as affordable as it would have
been through the Exchanges;
Provide coverage to at least as many residents as
otherwise would have been covered under the PPACA; and
Do not increase the federal deficit.
Particular provisions of PPACA that states are able to
waive include establishment of an Exchange, certain
provisions related to qualified health plans, and the
provision of premium tax credits and cost sharing
subsidies.
The year 2017 was established in the PPACA for the waivers
to allow for three years of experience under the PPACA,
which will enable the federal government to determine how
much a state is eligible to receive in federal funding
under the waiver.
In March 2011 the Departments of Treasury and Health and
Human Services issued regulations outlining the procedural
requirements states must follow in seeking and implementing
state flexibility waivers.
Prior legislation
SB 810 (Leno) of the 2009-10 Session was substantially
similar to this bill. This bill died on the Assembly
floor.
SB 840 (Kuehl) of the 2007-08 Session would have
implemented a system substantially similar to that proposed
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
17
by this bill. This bill was vetoed by the Governor.
SB 1014 (Kuehl) of the 2007-08 Session, would have imposed
specified health care coverage taxes on employer payroll,
employee wages, self-employment income, and other non-wage
income, as specified, and direct revenues generated from
these taxes to fund the single-payer system that would have
been created by SB 840. This bill was held in the Senate
Revenue and Taxation Committee.
SB 921 (Kuehl) of the 2003-04 Session was substantially
similar to SB 810. SB 921 died in the Assembly.
SB 900 (Alquist), Chapter 659, Statutes of 2010,
establishes the California Health Benefits Exchange as an
independent public entity, to implement the provision of
PPACA pertaining to health benefits exchanges. Makes its
provisions contingent upon the enactment of AB 1602
(Perez), which specifies the powers and duties of the
Exchange.
AB 1602 (Perez), Chapter 655, Statutes of 2010, specifies
the powers and duties of the board governing the California
Health Benefit Exchange relative to the administration of
the Exchange, determining eligibility and enrollment in the
Exchange, and arranging for
coverage with qualified carriers. Makes its provisions
contingent upon the enactment of SB 900 (Alquist), which
creates the Exchange and establishes its governance.
Arguments in support
The California Nurses Association/National Nurses United
(CNA/NNU), the co-sponsors of SB 810, and other supporters
of the bill say SB 810 will greatly improve on the
weaknesses of the current health care system and of the
recently enacted federal health care reforms, for several
reasons. Specifically, CNA/NNU and other supporters of SB
810 argue that the bill will free up billions in waste
duplication, and administrative costs, and produce billions
of dollars of savings annually by allowing for bulk
purchasing of prescription drugs and medical equipment, and
it will provide better access to preventive and primary
care, thereby reducing the costs of treatable illnesses.
CNA/NNU states that the changes made by federal health care
reform have made some improvements in the health care
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
18
system, but they are not enough. In particular, federal
health care reform omitted important features, such as a
public option and insurance rate regulation to control
health care costs. Without these two critically important
provisions, health care inflation will continue to climb.
CNA/NNU further argues that because federal health care
reform includes an individual mandate, it is imperative for
California to take action to make sure health care benefits
are affordable, comprehensive, and available to everyone.
Health Access California (HAC) states that SB 810 combines
universal coverage with the most effective cost control
mechanisms known to exist, including global budgets for
health services and the elimination of waste and
administrative overhead created by the insurance based
model of coverage. HAC argues that insurance is not a
sensible means of financing health care because it assumes
that health care is expensive and infrequently used;
instead health care is routine, frequently needed, and
often most needed by those least able to pay. Spreading
these costs across society through public financing makes
sense because health care is like education, water, or
transportation--a basic service needed by all.
The Western Center on Law Poverty states that SB 810 would
achieve many health care improvements for low-income
consumers, including that all resident would have
comprehensive coverage, low-income persons would no longer
receive care through separate health programs, that the
system would utilized a simplified eligibility processes,
that medical debt and related bankruptcy would be
eliminated, and that all Californians would have access to
preventive medical and dental care.
The National Alliance on Mental Illness (NAMI) states that
SB 810 would dramatically increase patient choice and
provider competition by guaranteeing every Californian
total choice over his or her doctors and hospitals instead
of the narrow provider networks that restrict choice today.
NAMI argues that SB 810 would also significantly lower
health premiums for businesses and families, and further
argues that single-payer is the only model that will
achieve true universal coverage.
Support if amended
Taking a support if amended position, the County Health
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
19
Executives Association of California requests amendments to
relieve counties of their Section 17000 responsibility to
be health care providers of last resort, and to ensure that
the portion of health realignment funds dedicated to core
public health functions such as communicable disease
control is maintained at the local level.
Arguments in opposition
America's Health Insurance Plans (AHIP) states that while
seemingly attractive in principle, single-payer health care
systems are riddled with significant unintended
consequences that impact consumers. AHIP questions whether
there is public support for a government-run health care
system and argues that SB 810 directly contradicts the
efforts of Congress in enacting the federal health care
reforms, which rely on market-based reforms to protect
consumers and improve access to health care. AHIP states
that single-payer health care systems are expensive and
that significant new taxes will be needed to fill the
financial gap left by the elimination of health care
premiums, as found by the LAO in its 2008 report. AHIP
further argues that while proponents of single-payer argue
that individuals have greater access to health care
services, the evidence suggests that consumers in countries
with single-payer systems experience increased wait times
for physician and specialist visits, elective surgeries,
and lifesaving procedures, which can have a direct effect
on the quality of care. AHIP cites a 2008 Commonwealth
Fund report on patients with chronic conditions, which
found that wait times were longest in Canada, New Zealand,
and the United Kingdom, where at least one-third of adults
reported wait times of two months or longer to see a
specialist.
The California Association of Health Plans (CAHP) argues
that it is counterproductive to consider a single payer
health care system when the state is in the midst of
implementing the current federal health care reforms. CAHP
also disagrees with proponents' assumption that
administrative costs will reduced significantly under the
bill and that the numerous governmental entities created
under SB 810 that would assume responsibility for
organizing and delivering care, including claims payment,
utilization review, disease management, development of drug
formularies, and customer service functions, would incur
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
20
the same types of costs.
The California Association of Health Underwriters states
that under SB 810, consumers will lose the ability to use
health insurance agents to intervene on their behalf when
they are denied benefits. The National Association of
Insurance and Financial Advisors of California states that
the coverage under SB 810 would be determined by what
government feels it can afford, not by what consumers may
want or need.
The California Chamber of Commerce states that the single
payer system proposed in SB 810 would be funded through
premiums set by an appointed commission and paid by all
employers. To balance the budget for the system, premiums
could be increased, and benefits and provider payments
reduced, and copayments and deductibles imposed. Further
added tax burdens on individuals and employers will only
lead to declining revenues and job losses without
addressing escalating medical costs.
The California Taxpayers Association (Cal Tax) writes that
the higher payroll taxes for employers and employees that
would be needed to adequately fund a single payer system
would discourage business growth, hurt investments, and
chase jobs away from the state.
Oppose unless amended
The California Medical Association (CMA) states that while
it supports many of the goals of SB 810, it has several
specific concerns including that the bill would give a
powerful commission authority to determine premium costs,
provider rates, and program costs and financing mechanisms;
that the commissioner and chief medical officer will have
power to determine which health care services are covered
and which have no medical indication, without public input,
and that these decisions should be made by an independent,
scientific body; that physicians would lose the ability to
freely negotiate adequate reimbursement rates; that the
bill does not provide a system for providers to file
grievances; and that the bill gives an Inspector General
authority to investigate allegations of misconduct by
providers, usurping the role of licensing boards.
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
21
COMMENTS
1. Implementation of bill dependent on enactment of a
funding measure and federal waiver. SB 810 establishes the
framework for the CHS and the CHA, in which it would be
housed. The bill also establishes a commission which would
take effect January 1, 2012, which would determine the
amount of financing needed to operate the system and
recommend a financing structure, including new payroll or
other taxes. Sponsors contemplate that this financing
structure would then be submitted to voters for approval.
If approved, the coverage system would take effect within
two years after the Secretary of the Health and Human
Services Agency determines that sufficient revenues exist
to operate the system and after the Secretary obtains a
federal waiver pursuant to the PPACA to operate the system
in lieu of the Exchange and related PPACA provisions.
2. Effect of bill on long- term health care costs unclear.
Health care costs are increasing as a percent of gross
domestic product in most developed countries, including
those with single-payer type health systems, although they
are increasing more rapidly in the US than other countries.
This indicates that it is a challenge for any health care
system to control costs to a level that is commensurate
with overall economic growth. Most countries struggle to
control the underlying factors that drive health care costs
and many have had to consider additional types of cost
containment, such as limiting provider reimbursement,
increasing beneficiary cost sharing, or reducing benefits,
to limit cost growth. It is unclear whether the system
proposed in SB 810 would be able to control underlying
health care cost growth, and if it could not, whether there
would be support to provide the additional revenues over
time that would be needed to maintain the level of coverage
and benefits.
3. Federal waiver process. The PPACA gives states the
flexibility to apply for waivers of certain provisions of
the PPACA in order to pursue alternative strategies for
providing their residents with affordable, comprehensive
health coverage. Under the law, these waivers are
available beginning in 2017. Under these waivers, states
may implement policies that differ from those in the PPACA
so long as they provide coverage that is at least as
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
22
comprehensive as the coverage offered through the
exchanges; make coverage at least as affordable as it would
have been through the exchanges; provide coverage to at
least as many residents as otherwise would have been
covered under the Affordable Care Act; and do not increase
the federal deficit. While a single-payer system could
potentially meet these criteria, it is currently unknown
how the federal government will apply these criteria to
single-payer systems that may be proposed by states. Under
a waiver, funding from premium tax credits and cost sharing
subsidies that would otherwise be provided under the
Exchange would be available to states.
4. Clarifying amendment. A suggested clarifying amendment
would be to provide that the CHS and CHA take effect on the
earlier of the date the Secretary determines that adequate
funding exists, and the state receives a waiver under
PPACA.
On page 86, lines 26 - 34, amend as follows:
140700. Notwithstanding any other provision of law,
the operative
date of this division, other than Article 2
(commencing with Section
140230) of Chapter 3, shall be the earlier of the date
the Secretary of
California Health and Human Services notifies the
Secretary of the Senate
And the Chief Clerk of the Assembly that he or she has
determined that
the Healthcare Fund will have sufficient revenues to
fund the costs
of implementing this division or and the date the
Secretary of California
Health and Human Services receives the necessary
waiver referenced
in Section 140701 , whichever is later .
POSITIONS
Support: California Nurses Association/National Nurses
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
23
United (sponsor)
California School Employees Association, AFL-CIO
(co-sponsor)
ACLU of Southern California
Actor's Equity Association
AFSCME Retirees Chapter 36
Alameda County Board of Supervisors
American Association of University Women - Davis
American Federation of State, County, and
Municipal Employees
Bagg Lady Handbags
Berkeley City Council
Berkeley-East Bay Gray Panthers
Board of Supervisor of the County of Santa Clara
California Alliance for Retired Americans
California Church IMPACT
California Commission on the Status of Women
California Communities United Institute
California Federation of Teachers
California Health Professional Student Alliance
California Labor Federation
California Newsreel
California Pan-Ethnic Health Network
California Teachers Association
Californians for Disability Rights
City of San Pablo City Council
City of Santa Monica
Communications Workers of America, District 9
Congress of California Seniors
Consumer Federation of California
County Health Executives Association of
California (if amended)
Democratic Alliance for Action
Democratic Club at The Villages
Democratic Club of Santa Maria Valley
Democratic Party of Contra Costa County
East Bay Peace Action
El Cerrito Democratic Club
Friends Committee on Legislation of California
Grandfolia
Gray Panthers Sacramento
Greater Santa Cruz Federation of Teachers
Having Our Say
Health Access California
Health Care for All - Contra Costa
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
24
Health Care for All - Los Angeles
Health Care for All - Nevada County Chapter
Health Care for All - Sacramento Valley
Health Care for All - San Francisco Mid-Peninsula
Chapter
Health Care for All - Santa Barbara County
Chapter
Health Care for All - Yolo Chapter
Health Officers Association of California
Interfaith Council of Contra Costa County
International Longshoremen's & Warehousemen's
Union, Local 6
JERICHO: A Voice for Justice
Kehilla Community Synagogue
Kramer Translation
Labor United for Universal Healthcare
Laurel Park Neighborhood Council
League of Women Voters - Los Altos-Mountain View
Area
League of Women Voters - Pasadena Area
League of Women Voters of Davis
League of Women Voters of Los Angeles
League of Women Voters of San Francisco
League of Women Voters of San Joaquin County
League of Women Voters of San Jose/Santa Clara
League of Women Voters of Santa Barbara
League of Women Voters of the Livermore-Amador
Valley
League of Women Voters of the Livermore-Amador
Valley
League of Women Voters West Contra Costa County
Los Angeles Unified School District
Lumina Media Production
National Alliance on Mental Illness, California
National Association of Social Workers -
California Chapter
Northern California Committees for Correspondence
for Democracy and Socialism
Old Lesbians Organizing for Change
Older Women's League of California
Orange County Nation Group
Pacific Palisades Democratic Club
Parents For Independence, Inc.
Peace and Justice Network of San Joaquin County
Peninsula Democratic Coalition
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
25
Physicians for a National Health Program
Progressive Democrats of America - San Francisco
Random Technologies Corp.
Retired Public Employees Association
Richmond Commission on Aging
Richmond Vision
San Gabriel Valley Democratic Women's Club
San Jos� /Evergreen Faculty Association
San Mateo County Democracy for America
Santa Barbara Chapter of the ACLU of Southern
California
Santa Clara County Democratic Club
Santa Clarita Valley Fair Elections Committee
Service Employees International Union Local 1021
Single Payer San Joaquin
The Federation of Retired Union Members of Santa
Clara County
The Unitarian Society of Santa Barbara
Town of Fairfax
Unitarian Universalist Church of Santa Clarita
Unitarian Universalist Legislative Ministry
Action Network-CA
UNITE HERE Local 2
United Nurses Associations of California/Union of
Health Care
Professionals
Warehouse Union Local 16, ILWU
West Contra Costa Unified School District
Westchester Democratic Club
Western Center on Law and Poverty
Westside Progressives
Wheelhouse
Willoughby Farms
Women's International League for Peace and
Freedom, Peninsula Beach
Woodland League of Women Voters
54 individuals
Oppose: America's Health Insurance Plans
Anthem Blue Cross
California Association of Health Plans
California Association of Health Underwriters
California Association of Joint Powers
Authorities
California Chamber of Commerce
STAFF ANALYSIS OF SENATE BILL 810 (Leno) Page
26
California Farm Bureau Federation
California Medical Association (unless amended)
California Taxpayers Association
CSAC Excess Insurance Authority
Health Net
Howard Jarvis Taxpayers Association
National Association of Insurance and Financial
Advisors of California
USCB, Inc.
-- END --