State of Reform – Single Payer Panel
Thanks to State of Reform for putting this event together and inviting me to speak.
I first got a taste of the politics of single payer (Canadian style) during the early 70’s when Senator Kennedy was its champion and President Nixon favored a multi-payer private system closer to the German model of offering universal coverage. My thoughts on single payer are compiled and included on your flash drive.
We have a Governor elect with a stated preference for single payer and a strong history in San Francisco of developing universal coverage for all SF residents. We have a state legislature with 2/3rds democratic super majorities in both houses.
So can we get a bill passed to enact single payer? I think it would be extraordinarily difficult.
The biggest obstacle is financing! So let’s discuss those financing problems first, and then get to the political difficulties. And finally what needs to be done and what can be done.
All the money ($400 billion) to finance single payer is already in the system. Half is from the government, primarily Medicare and Medicaid roughly $200 billion. Half is from the private sector – insurance premiums, copays, deductibles and uncovered services – another $200 billion.
In order to integrate Medicare, we will need an act of Congress. There is no §1115 waiver that would allow the federal government to transfer these federal funds to a state. In order to integrate Medicaid, we will likely need an act of Congress. A §1115 waiver might allow the federal government to transfer these federal funds to a state in a block grant; the Trump Administration is not about to give a waiver to help California implement single payer. In order to integrate Covered California, we would need either a §1332 waiver or an act of Congress. The Trump Administration is not about to give a §1332 waiver to help California implement single payer. In order to integrate CHIP, the VA and the DOD funds for coverage of the military, and IHS funds for Indian tribes, we would need an act of Congress. There is no §1115 waiver that would allow the federal government to transfer these federal funds to a state. So, we have to have a Congress and a President that would give a state like California the necessary financial latitude to enact single payer.
That believe it or not was the easier part. Let’s move onto the more difficult part(s). Most of the private money is in the form of insurance premiums from employers, employees and individuals. That’s a lot of money – over $125 billion in California. You’d need some hefty payroll taxes and income tax surcharges to simply redirect those private funds into a system of public coverage. For large self-insured employers, you may well need an Act of Congress to amend ERISA (Employee Retirement Income Security Act) to tax large self insured employers to provide coverage for their employees. That is very politically difficult, as both labor and businesses do not want to reopen ERISA.
Employment-based coverage is cross-subsidized by the federal and state tax expenditures in the form of pre-tax purchasing. This subsidizes about 1/3rd of the costs of employment-based coverage. It’s going to be very difficult to recapture those federal and state tax “expenditures” with a state single payer bill.
The rest of the private funds are in the form of patient copays and deductibles for covered services and patient out of pocket for uncovered services like long-term care, dental care and vision care. It’s about $66 billion. That is a lot of money and you would need an individual income surcharge or an individual premium share or a sales tax on goods and services to replace it.
In total, you need to, at a minimum, double state taxes to finance a state single payer bill. That’s $200 + billion in new taxes. The genius of our existing financing system is invisibility; we as employees complain about our share of premiums and our copays and deductibles, but we are for the most part oblivious about what our employer pays and what governments cross-subsidize.
When individuals, as voters, are suddenly exposed to all these hidden costs, and they are brought out into the sharp light of day in the form of taxes, they experience severe “sticker shock”. California, Colorado and Oregon have all had single payer ballot initiatives with financing attached. They all attracted about 1/5th to 1/4th of the vote.
Let’s discuss the politics of getting this done. On the health front, we have one stalwart proponent, the nurses union, while the rest of the health care industry (insurers, drug companies, hospitals and doctors) is adamantly opposed. We have strong business opposition and somewhat tepid union support. We have strong support from progressive Dems and unanimous Republican opposition.
Unless the line up changes, you cannot pass and cannot fund single payer. The most logical allies, who are now opponents, are the business community; they are paying the highest prices, and their costs have been going up the most rapidly. Conceivably, the large and small businesses could make common cause with big labor. Next, the deficit hawk Republicans could conclude that single payer is their best approach to slow the inexorable and indefensible growth in American health spending. Lastly organized medicine could be convinced that the incredible administrative complexities and inherent unfairness of our current system in delivering medical care to their patients must be and can be fixed.
Most consumers are as yet unconvinced that their coverage will be better and their costs will be less when they are taxed and the government administers the program. Those with Medicare, employment-based coverage and the nation’s veterans and military are going to be hard to convince, but their support will be essential. This one on one honest discussion with the constituencies needed to make single payer a political reality has not been done and must be for the reform to be taken seriously.
Looking at SB 562 (Lara), it’s a bit of a mess and it needs a careful re-thinking. Its cost control model is fee for service, reasonable and necessary costs, no out of pocket, full panoply of services and free choice of providers; this is inherently inflationary and ought to be replaced by the best reimbursement and delivery system models with the right incentives to improve outcomes and reduce costs from other nations and from existing systems. The bill relies too much on the wisdom and skills of state regulators to do what a well-designed reimbursement and organized delivery system should be doing. The financing needs to be spelled out so people can discuss the merits or different financing ideas.
California’s uninsureds are now primarily (60%) undocumented workers and their families; many are non-voters. Because they are a young healthy working population, the actual costs of extending coverage to them is quite low. It’s a tough act to make the case for $200 billion in new state taxes and have the other side constantly harping on coverage for undocumented workers.
The most politically appealing benefit expansion, long term care for seniors and the disabled, is not in the bill. Politically it should be, but a reasoned discussion needs to be had as to how it should be financed and its costs controlled because it's a very expensive benefit, not for the most part covered by Medicare.
The impending insolvency of the Medicare Trust Fund in a decade due to the demographic imbalance between baby boomer retirees and workers hangs over all discussions of single payer. It needs to be discussed and addressed in a positive way in the legislation.
Rural Californians too often experience the lack of effective geographic access to specialists. The bill should address how rural health care access can be improved.
Our nation is experiencing an unprecedented decline in longevity due to suicides and opioid addiction; the bill should address how it will reverse the declining longevity that is particularly severe in rural communities. The effectiveness of and access to rapidly expanding medical treatments needs to be addressed in the legislation as well.
So to sum up the challenges for single payer proponents: financing, cost containment, long term care, rural health, Medicare Trust Fund, behavioral health, efficacy of treatments, declining longevity and care and coverage of the undocumented. It behooves us all, whether supporters or opponents of single payer to make the case as to how these common issues should be addressed in a new system and in the evolution of the existing system. Let’s stop throwing stones at each others proposals and start making progress.
November 28, 2018