BILL ANALYSIS
SB 810
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Date of Hearing: August 4, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 810 (Leno) - As Amended: January 13, 2010
Policy Committee: Health Vote:13-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill establishes a state-administered single payer health
care system, the California Healthcare System (CHS), to provide
coverage to all Californians. Specifically, this bill:
1)Prohibits any current law health care service plan or health
insurance policy from being sold in California for services
provided by CHS.
2)Establishes CHS in state government, to be administered by the
California Healthcare Agency, an independent agency under the
control of a newly appointed Healthcare Commissioner. Requires
CHS to establish governance including establishing and
administering eligibility standards, a scope of health
benefits, budget formulas, medical innovations, health
planning, and quality measurement.
3)Operationalizes eligibility including aggregating or
maintaining various current law programs, including Medi-Cal,
Medicare, the Healthy Families Program, and numerous local,
indigent health care programs.
4)Addresses numerous budgeting and fiscal issues related to
coverage and financial viability. Key provisions become
effective in 2011 and 2013. Requires the Commissioner of CHS
to seek all necessary waivers, exemptions, agreements, or
legislation to ensure all federal payments continue to be paid
to California.
FISCAL EFFECT
1)Major Costs . Statewide healthcare costs in the current year
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are between $200 billion (public and private funds) and $250
billion (public and private funds). These figures are based on
state and national estimates, including employer, employee,
individual, family, and government spending in Medicare,
Medi-Cal, and the Healthy Families Program. Because a single
payer system is a state-run system, the state GF would be
obligated in both short- and long-term scenarios to bolster a
system with GF augmentations or loans. Any cost overruns or
unpredicted expenses would generate major GF pressures.
2)Lack of Financing . This bill contains no specific financing
mechanisms. A prior version of the bill had a linked revenue
proposal that failed passage in the Senate Revenue & Taxation
Committee in 2007. This bill establishes requirements and
provides authority for a range of financial activities, but no
specific source of revenue is associated with this bill.
3)Revenue Sources . In order to pay the costs of a single payer
system, financing would likely include a series of taxes,
redirection of a variety of current health program funding,
and securing state waivers to aggregate federal and local
health care funds.
4)Federal Funding Challenges . Although it is conceivable that
California may receive federal permission to continue receipt
of major federal funding associated with Medi-Cal, Medicare,
and the Healthy Families Program (after 2017, per federal
health reform waiver), it is unclear how California would
maintain the funding but not the structure and administrative
overhead of these programs. A significant challenge would be
the continued need to document eligibility for more than 10
million residents. Such eligibility workload would reduce
efficiencies and potentially require the maintenance of major
health care programming distinct from many features of the
single payer system established by this bill.
5)Major Shortfall Scenario . A 2007 Legislative Analyst's Office
(LAO) analysis of single payer costs and revenues, as
expressed in linked proposals, identified annual shortfalls in
the range of $40 billion GF due to a mismatch between costs
and underlying revenues. A challenge for a state-administered
approach proposed in this bill and a challenge facing the
American health care economy in general is that health care
cost increases often outpace general inflation. In addition,
employer-based coverage, where a majority of resident access
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health coverage continues to erode as employers drop coverage
and workers lose their jobs. This erosion results in reduced
financial support that would need to be collected from other
sources.
6)Savings and Cost Avoidance . Several studies show major
reductions in particular types of health spending are likely
under a single payer system. Savings include a major reduction
in administrative overhead, which is a significant portion of
expenditures in the current system. According to research,
administrative overhead in our current health care system is
in the range of 25% to 30% of total health costs. Therefore,
if a single payer system reduced administrative overhead,
savings in the range of $20 billion to $30 billion may accrue.
Such savings would likely take up to a decade to be
identified.
COMMENTS
1)Rationale . This bill is co-sponsored by the California Nurses
Association (CNA) and the California School Employees
Association (CSEA) to establish a state-administered single
payer system to provide coverage to all Californians, without
regard to income or employment status.
A new state agency headed by a commissioner would have broad
authority to administer this system, and would contract with
hospitals, physicians, and other providers to deliver
benefits. The author and a broad coalition of provider,
consumer, and labor groups indicate recently enacted and
pending reforms fail to fix our fragmented health care system.
They emphasize that the administrative complexity of the
current health care system diverts significant expenditures
from patient care.
2)California's Uninsured . California has a large proportion of
uninsured residents. In 2009, about 8 million residents lacked
health insurance for some or all of the year. The number of
the uninsured has increased significantly over the past few
years due to drops in employer-based coverage. A majority of
Californians have employment-based coverage, while the
remainder has coverage via Medicare, Medi-Cal, Healthy
Families, or the individual insurance market.
3)Federal Health Care Reform . Enactment of this bill may create
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numerous obstacles related to federal health reform, contained
in the Patient Protection and Affordable Care Act
(PL-111-148). Numerous bills in the current session address
short-term federal requirements for state action. For example,
SB 900 (Alquist) and AB 1602 (J. Perez) in the current session
establish a state-run health insurance exchange. A key
function of the exchange will be to administer federally
funded premium subsidies for low-income individuals. According
to estimates, by 2016, between three million and eight million
individuals and employees of small firms will be purchasing
coverage through the Exchange. About three million of these
individuals will be eligible for coverage subsidies either
because of income (family income of less than 400% of federal
poverty level) or because they work for small firms benefiting
from a related tax credit.
Federal health reform provides an option for states to opt-out
of health insurance exchanges in 2017 and pursue a waiver for
innovation instead. The single payer proposal in this bill may
qualify as a waiver for innovation under federal health
reform, but such waivers will not be available until 2017.
This makes it unclear how California would simultaneously meet
the requirements of this bill, federal reform requirements,
and soon-to-be enacted state requirements related to health
reform.
4)Support . A broad coalition of citizen, labor, and health care
groups support this measure to establish a single payer system
in California. About 200 organizations expressed support when
this bill was heard in the Assembly Health Committee. The
most often cited support for this option includes the
universal aspect, the reduction in overhead, and quality
improvements supporters assert follow from a single payer
system. Numerous supporters indicate a single payer system
will reduce spending diverted from patient care, reduce key
cost drivers such as prescription drugs, and end the rationing
of care that supporters contend is imposed by insurers in the
current system.
5)Opposition . Health plans and health insurers oppose this bill.
They indicate that while several aspects of a single payer
system seem attractive, evidence from other nations show that
such systems do not lower costs, improve quality, or improve
access to care. Many business groups oppose this bill due to
the negative fiscal impact of tax provisions on businesses of
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all sizes. They indicate significant costs would be imposed on
employers without a corresponding improvement in care for
workers. Insurer and business opponents agree that cost
overruns in other countries' single payer systems have
eventually led to a reduction of quality of care.
6)Related Legislation . SB 810 (Kuehl) in 2008, SB 810 (Kuehl) in
2006, and SB 921 (Kuehl) in 2004 each established single payer
systems and oversight. SB 810 was vetoed in 2006 and 2008. The
governor indicated he could not support government-run health
care. SB 921 was never set for hearing in this committee.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081