Study Indicates Savings From Universal Health System; Legislation Could Be Reintroduced

Some lawmakers on Wednesday announced their support for legislation that would create a state-run health insurance system to cover all state residents, after a Lewin Group report released Wednesday stated that such a program could save the state $343 billion over the next 10 years, the Sacramento Bee reports. Sen. Sheila Kuehl (D-Los Angeles) said she intends to introduce a bill next month that builds on previously proposed legislation, which she said would reduce health spending in the state by $8 billion next year (Rojas, Sacramento Bee, 1/20).

Kuehl in August 2003 introduced a bill that would establish a state-run universal health system, but after it passed a Senate vote last year, the legislation stalled in the Assembly (California Healthline, 7/24/04). According to the AP/Contra Costa Times, Kuehl's first bill "was overshadowed" by SB 2, which would have required certain businesses to provide health insurance for workers. Voters in November 2004 voted to repeal SB 2 (Lawrence, AP/Contra Costa Times, 1/20).

According to the Los Angeles Times, many health care leaders "believe that Kuehl's sweeping plan has no realistic chance of being enacted, especially given [SB 2's] defeat."

According to the Times, Kuehl's proposal calls for the state to establish a system that would replace all private and state-run health insurance programs and guarantee insurance for all residents. The system would not have participants contribute deductibles or copayments but rather would be funded through "a patchwork of taxes," the Times reports. The taxes would include:

• An employer payroll tax equal to 8.2% of salaries;
  
• An employee payroll tax of 3.8% of salary;
  
• A 3.5% tax on unearned income;
  
• A 12% tax on the net business income of self-employed residents; and
  
• An additional 1% tax on all income of more than $200,000 a year.
  

The not-for-profit Health Care for All-California Education Fund, which was founded by supporters of a single-payer system, paid the Lewin Group $90,000 to conduct the study.

According to the Lewin study, the proposal would mean that employers offering health insurance to their workers would experience a 16% reduction in costs, while firms that do not offer insurance would have cost increases averaging $2,290 per worker. Families would pay an average of $2,448 annually in insurance costs under the proposal, or roughly $340 less than what they currently pay in private insurance premiums. Under the model, families with annual incomes of less than $150,000 would see the most savings, while families with incomes of $200,000 to $250,000 would pay an average of $7,040 more annually, the study found (Rau, Los Angeles Times, 1/20).

Kuehl said she is waiting for data from the state Franchise Tax Board before estimating how much such a system would cost the average taxpayer (Sacramento Bee, 1/20).

According to Kuehl, the program's savings would come from bulk purchasing of drugs and eliminating much of the administrative costs of private insurers (Los Angeles Times, 1/20).

Kuehl said her system, which would be run by an elected commissioner would ensure that patients could choose their physicians; opponents of SB 2 had said that law would have forced some residents to switch doctors (Sacramento Bee, 1/20).

"The findings of the report confirm that California can create a fiscally sound state insurance plan that covers Californians with a solid, comprehensive health plan, reduces costs and controls health cost inflation," Kuehl said.

Kuehl noted that most Democratic senators have not yet endorsed her proposal (Los Angeles Times, 1/20).

She added, "Naturally, health insurance companies will not like this (legislation) because, essentially, we're removing the business from them" (Sacramento Bee, 1/20). She said, "They are going to totally freak out (and) bring a lot of money to bear and a lot of lies about the plan ... in order to scare people" (AP/Contra Costa Times, 1/20).

Senate Pro Tempore Don Perata (D-Oakland) on Wednesday said that he supports Kuehl's program, which he called "more comprehensive and supportable" than SB 2, adding, "We're going to do all that we can to move this legislation."

A spokesperson for Assembly Speaker Fabian Nunez (D-Los Angeles) said although the lawmaker has not yet endorsed the legislation, he supports the goal of universal health care coverage and is receptive to proposals such as Kuehl's plan (Sacramento Bee, 1/20).

Sen. Deborah Ortiz (D-Sacramento), chair of the Senate Health Committee, said the legislation would be "a fair and reasonable proposal, and if in fact we can move a bill that makes sound policy, let's worry about the politics later."

Assembly Majority Leader Dario Frommer (D-Glendale) said, "I don't see the Legislature having the heart right now to do a lot of additional taxes for anything. If they did, I think there is more interest in solving the budget problem first" (Los Angeles Times, 1/20).

Assembly member Keith Richman (R-Granada Hills), who is planning to co-write legislation that would require individuals to have health insurance, said, "It's important that we increase administrative efficiencies. But improving administrative efficiencies is very different than establishing a government-run health system" (Sacramento Bee, 1/20).

Trudi Hughes, a lobbyist for the California Chamber of Commerce, said, "We don't agree that a government system is going to be more efficient than private business," adding, "I don't think anyone wants health care run like the Department of Motor Vehicles."

Jan Emerson, a spokesperson for the California Healthcare Association, said, "If you create a government bureaucracy and everybody has to get their health care through the government, you add to overall costs" (Sacramento Bee, 1/20).

Jack Lewin, CEO of the California Medical Association, said, "It's an expensive option and one that we don't think has any political viability at this time," adding that many health care providers are hesitant to support an expansion of government-run insurance (Los Angeles Times, 1/20).

Bobby Pena, a spokesperson for the California Association of Health Plans, said that administrative costs are not "tearing down the health care system" (Sacramento Bee, 1/20). Pena added, "We think a large portion of this seems to be suggesting, 'Wave a magic wand, give it to the government, and all the administration costs will go away.' And we don't think that's accurate" (Los Angeles Times, 1/20).