BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
810 (Leno)
Hearing Date: 5/4/2009 Amended: 4/23/2009
Consultant: Katie Johnson Policy Vote: Health 7-4
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BILL SUMMARY: SB 810 would establish the California Healthcare
System (CHS), an entity that would provide affordable and
comprehensive health care coverage for all Californians.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
CHS Implementation Major implementation costs in
the billions General
at least $200 billion annually ongoing
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STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
This bill would establish the CHS, which would be administered
by the California Healthcare Agency under the control of a
Healthcare Commissioner appointed by the Governor and confirmed
by the Senate. The CHS would provide specified health care
benefits for which all Californians would be eligible. The CHS
would, on a single-payer basis, negotiate for or set fees for
health care services and would pay claims for those services.
This bill would require the commissioner to seek all necessary
federal waivers, exemptions, agreements, and legislation to
implement the CHS. This bill would prohibit the sale of any
private health care service plan or health insurance policy in
the state. This bill would provide that a resident with an
income at or below 200% of the Federal Poverty Level (FPL) would
be eligible for benefits like those provided by California's
existing Medi-Cal program. This bill would create various
offices and boards to aid in the administration of the CHS.
This bill would specify that only the provisions relating to the
Premium Commission would become operative on January 1, 2010,
and that the remaining provisions would become operative on the
date that the Secretary of California Health and Human Services
states that sufficient funding exists to implement the CHS. This
bill would require that the CHS become fully operative 2 years
from that date.
This bill is nearly identical to SB 840 (Kuehl), which the
Governor vetoed in 2008 saying, "According to the Legislative
Analyst's Office, the bill is estimated to cost $210 billion in
its first full year of implementation and cause annual
shortfalls of $42 billion. To place this in proper
perspective-our state budget deficit this year started at $24.3
billion." Since this bill is nearly identical to SB 840, and as
such, would have a similar fiscal impact on the state, it does
not address the veto message.
This bill is also similar to SB 921 (Kuehl, 2004), a bill that
would have implemented a single-payer health care system. SB 921
was held in the Assembly Health Committee.
Page 2
SB 810 (Leno)
In response to SB 921 in 2005 and to SB 840 in 2008, the Lewin
Group and the Legislative Analyst's Office (LAO), respectively,
analyzed the concept of a single-payer government health care
entity with respect to 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 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 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 tax of 16 percent to mitigate the predicted
shortfall in revenues. 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 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 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 revenues to those later proposed in SB
1014 in 2007. It is important to note that the Lewin Group based
its estimates on 2004 cost data and that health care costs have
increased faster than anticipated.
Unlike previous bills, there is no funding source identified for
the implementation of this bill. Thus, there would be
considerable General Fund pressure in the hundreds of billions
of dollars. Also, were there a funding mechanism, the pressure
on the General Fund would continue to exist, although to a
lesser extent, because the General Fund would be responsible for
providing supplemental moneys in the event of a shortfall.
It is likely that the costs associated with the implementation
of this bill would result in costs similar to those projected in
both the LAO and Lewin Group analyses. However, the LAO and
Lewin Group analyses do not take into consideration several
effects of the transition between California's current health
care system and a single-payer system. For example, there would
likely be significant up-front implementation costs, labor
market disruptions, as well as reduced tax revenue from
insurance companies. It is also possible that the provisions in
this bill would make the state ineligible for federal Medicaid
and Children's Health Insurance Program (CHIP) federal matching
funds if the Centers for Medicare and Medicaid (CMS) do not
approve waivers of federal Medicaid law. Medi-Cal, California's
Medicaid program, and the Healthy Families Program, California's
CHIP, receive federal funds which match state General Funds to
provide health care benefits to low-income individuals.