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  • Alyse DiNapoli

California's Search for Universal Healthcare Raises Questions about the Best Approach

Updated: Oct 20, 2018

California wants to take healthcare into their own hands, and while there is little contention that better prices and access to care are paramount, there is plenty of debate over what that path will entail.

Proposals for healthcare reform are not lacking in Sacramento. With the backing of unions like the California Nurse’s Association, some politicians like Gavin Newsom have pushed for the single-payer system. Others such as Assembly Speaker Anthony Rendon didn’t sign off on SB562 -aka the Single Payer bill- but legislators still want to find the golden ticket to universal health care through other ideas like a competing public insurance option (which would be in addition to ones offered on the Covered CA exchange and may involve expanding the MediCal program). State Senator Ed Hernandez is advocating for an increase in subsidies that are provided on the exchange by supplementing federal subsidies with state money. 

Access to affordable, quality coverage is an issue that extends beyond California, and the media never shies away from the national healthcare debate. However, the opaque costs and policies make it really hard to know what is the “correct” system. An article from The Economist in August 2017 described how most Western European countries fall under at least one of the following frameworks (Canada also included): the government handles both the payer and provision of care, meaning medical staff also work for the public sector (Britain, Italy, Spain and Sweden); the government provides universal health insurance but provision of care falls under the private sector (many in this system, such as the Canadians and French, have private supplemental plans as well); or lastly, both the insurance and medical care are left to private sector, but regulation exists to ensure adequate coverage and access. Under this approach, countries like the Netherlands and Switzerland still mandate coverage but the subsidies for coverage are higher than in the US. 

Other than the rationale that socialized medicine eradicates competition necessary to drive innovation, one reason against single-payer is simply the cost, as it would raise taxes and increase spending. According to a 2008 NPR Health article, French workers are taxed roughly 21 percent of their income into the national health care system, and employers pick up the rest. Although the current 2018 tax rate could not be confirmed, a more recent Commonwealth article confirms that both payroll taxes and income taxes finance approximately 85% of the system.  That is higher than the US federal income tax rate for most Americans, but in 2013, average out of pocket spending for the average US resident was $1,074 vs $277 in France, and that doesn’t even include the premiums. According to the Commonwealth study, “as for other private health spending, including on private insurance premiums, U.S. spending towered over that of the other countries at $3,442 per capita—more than five times what was spent in Canada ($654), the second-highest spending country."

Even if the cost is accounted for, handing over sole responsibility to the government could reach a toxic level of bureaucracy, resulting in more inefficiency than you currently see today. This isn’t even referring to the actual provision of care- like the long wait times you hear about in British hospitals-but to the burden of administrative red tape, such as payer-mandated prior authorizations and appeals that can take  anywhere from a day to over month to get approved. Even then, approval is not guaranteed. Some say that it is unrealistic to think that massive government takeover of a largely private industry is going to reduce red tape.

Supporters, however, say that consolidating resources would give the government more power to negotiate lower prices with insurance companies and pharmacy benefit managers, subsequently standardizing prices. It's true that a lack of price standardization costs us a chunk of change. In 2011, administrative costs accounted for 25 percent-$200 billion- of hospital spending in the United States (including salaries for staff responsible for billing and coding), higher than any of the 8 other countries surveyed: Canada (16%), England (12%), Scotland, Wales, France, Germany, and the Netherlands (20%).

Reducing healthcare costs and improving health outcomes is not an unpopular platform, but the path to achieving it in Washington often boils down to the economic school of thought a politician belongs to. Meanwhile in California, it is not so much a matter of if universal coverage makes sense, but to what extent taxes will be raised and government involvement will expand. Unfortunately, it seems there is no simple answer, but even economists haven’t seemed to figure out the solution-or if they have, not enough people are on board.

Sources (in order of appearance)

"Single-payer bill all but dead this year as California lawmakers craft new health package." Sacramento Bee. March 13, 2018.

"The Fix for American Healthcare Can be Found in Europe." The Economist. Aug 10, 2017.

"Health Care Lessons from France." National Public Radio (NPR). July 11, 2008.

"US Healthcare From a Global Perspective: Spending, Use of Services, Prices, and Health in 13 Countries". Commonwealth Fund. October 8, 2015.

"A Comparison of Hospital Administrative Costs in Eight Nations: U.S. Costs Exceed All Others by Far". Commonwealth Fund. September 8, 2014.

"Drug Price Control: How Some Governments Do It". Commonwealth Fund. May 10, 2016.