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Report on Funding for Single-Payer Health Care Welcomed

Depending on your perspective, a new report from the California Legislative Analyst’s Office on funding for single payer health coverage (choose one of the following):

A) “Lays to rest once and for all the notion that single payer could ever work in California.”

B) “Shows that single payer can indeed work, if you use realistic numbers.”

C) “Doesn’t make or break the case for single payer but definitely ups the political ante for future debate.”

Earlier this year, three legislators asked LAO to analyze the funding plan for an earlier version of SB 840, the single payer initiative championed by Sen. Sheila Kuehl (D-Santa Monica).

The report predicts that if a single payer plan (SPP) began the first day of 2011, the state would see “a net shortfall of $42 billion in 2011-12 (the first full year of operations) and $46 billion in 2015-16.”

“These shortfalls result largely from a faster rate of growth for health benefits costs relative to the SPP revenues,” the report said. “To close that gap, the plan’s managers would have to sharply curtail the health care services most Californians receive today or else collect far more in taxes, or some combination of the two,” the report concludes.

Critics Say ‘Told You So’

Senate Minority Leader Dick Ackerman (R-Irvine), one of the three legislators who asked for the LAO analysis and the only one publicly to say so, considers the LAO report a vindication of sorts.

“We discussed in caucus the possibility of seeking a budget analysis some time ago,” Ackerman said. “Everyone had a pretty good idea that it was going to be a financial disaster, and we think the report bears that out.”

“This report is very damning for the plan, even taking into consideration all the uncertainties of future projections,” Ackerman said. “Even if you cut the red ink in half, which some say might be reasonable, it’s still not anywhere near feasible.”

Ackerman said the report “lays to rest once and for all the notion that single payer could ever work in California.”

For most practical, current purposes, the single-payer bill was already dead on arrival before the first vote this year. Even if approved by the Senate and Assembly, as it was two years ago, Kuehl’s bill would almost assuredly be vetoed by Gov. Arnold Schwarzenegger (R).


The governor vetoed the plan in 2006.

Ackerman acknowledged that his request for an LAO report was not motivated strictly for this year’s legislative session, which concludes at the end of the summer.

“We see this as an investment for down the road,” Ackerman said. “Most people who have been involved in examining these systems in other states and other countries realize that it just doesn’t work — practically or financially.”

“They’ll continue to introduce it, and we want to be ready,” Ackerman said.

Kuehl Sees Report as Favorable

The huge flow of red ink projected in the LAO report is “exactly why we need a single-payer system,” Kuehl said. “If Arnold had signed 840, we would have already seen a vast diminution in costs. The unfettered rise in insurance premiums from 2006 to 2011 is exactly why the cost projections are so high, and they are precisely why we need single payer,” Kuehl said.

The LAO report is based on a funding framework from 2006, which actually uses data from 2004 and 2005, according to staffers in Kuehl’s office. LAO staffers used those numbers to project insurance costs, wages and tax revenues five years into the future.

“In the current year, SB 840 didn’t have a hard start date or a companion funding bill,” said Kirk Feely, health care analyst for LAO. “In the previous financing bill that went with the earlier version of the bill, there was a specific date and specific numbers so we had to make assumptions based on those,” Feely said.

Kuehl said the disparity between rising insurance costs and stagnant wages accounts for much of the red ink in the LAO report. The equations would have worked — or at least been a lot closer — in 2006, proponents said.

“The ‘Gotcha’ that critics of single payer think they’re engaged in really falls apart when you consider the fundamental message of this report,” Kuehl said. “And that message is that single payer does indeed keep costs in check while providing coverage for everyone. Our current system can’t make either one of those claims,” Kuehl added.

Along with dire financial predictions, the LAO report does give credence to an earlier, more favorable financial analysis of Kuehl’s single-payer plan.

“A substantial portion of our analysis relies on modeling and estimates described in the Lewin report, which concluded that SB 921 (2004) would generate sufficient resources to pay the costs for universal coverage. Nonetheless, our estimates indicate the SPP would incur annual shortfalls over our projection period,” the LAO report said.

Timing of Study Questioned

The requests for an analysis of SB 840’s funding possibilities came shortly after a similar LAO report helped kill a health system overhaul proposed by former Assembly Speaker Fabian Núñez (D-Los Angeles) and Gov. Schwarzenegger.

Although the single payer proposal has been active in Sacramento for most of the decade, a request for analysis didn’t materialize until six months ago, shortly after the Núñez-Schwarzenegger plan was scuttled.

In addition to Ackerman, two other legislators asked for an analysis, but neither has come forward publicly. Speculation runs the gamut from disgruntled Democrats to insurer-backed Republicans.

People on both sides of the political aisle, in the LAO office and in health care industry in general wonder why now.

“People have all kinds of political and policy motives for what they ask us to do,” said Feely of LAO.

Some industry insiders who prefer not to be named speculate that seeking ammunition against the single-payer movement may in fact indicate a new respect for — and worry about — an idea that is slowly accumulating support.

“This doesn’t make or break the case for single payer,” said a Sacramento insider about the LAO report, “but it definitely ups the political ante for future debate. You can be sure it will be trotted out again and again.”

‘Unprecedented Changes’

The LAO report repeatedly tempered its predictions by acknowledging that the whole notion of single-payer health care is unlike anything our country has seen.

The 31-page report included this disclaimer:

“The SPP would significantly alter the structure of California’s entire health care delivery system. Many of the changes that would occur if the SPP were implemented are unprecedented in the United States. Therefore, assessing the SPP’s possible fiscal effects necessitated making a number of significant assumptions regarding revenues and costs. While our interviews with relevant experts and our review of existing literature helped to inform our assumptions, the magnitude and unprecedented nature of the SPP means that many of our assumptions are subject to uncertainty.”

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