California dreaming – headlines don’t explain single payer health care

How about all your health care for free or more accurately at a cost to you of a 2.3% sales tax … and I do mean free; no deductibles, no co-pays, no out-of-pocket costs. Sounds like a pretty good deal doesn’t it? Well California thinks it can do it through a single-payer plan (70% funded by federal government payments).

This is nothing short of a joke.  First, even if the initial costs were reduced, what happens thereafter? How will the rate of increase be controlled?

Beyond that if the California supporters of single-payer believe they will receive health care as they do now, they are sadly mistaken. This concept is based on one thing; regulation of health care and all its components. 

We only have to look to other similar systems to learn the steps, limitations and even rationing to keep such approaches to health care going and even then controlling costs is a struggle. This may all be fine with Californians, but politicians and supporters have an obligation to explain the full story. It is not health care as usual. 

Excerpts from U Mass -Amherst study.

Thus, net health care spending for middle-income families will fall by between 2.6 – 9.1 percent of income. Small firms that have been providing private health care coverage for their workers will experience a 22 percent decline in their health-care costs as a share of payroll. The small firms that have not provided coverage will still make zero payments for health care under Healthy California through their gross receipts tax exemption. Medium-sized firms will see their health care costs fall by between 6.8 and 13.4 percent as a share of payroll relative to the existing system. Firms with up to 500 employees will experience a 5.7 percent fall, and the largest firms, with over 500 employees, will experience a 0.6 percent fall as a share of payroll relative to the existing system.

All for the cost of a 2.3% gross receipts tax and a 2.3% sales tax.

We estimate that, through implementation of Healthy California, overall costs of providing full health care coverage to all Californians could fall by about 18 percent relative to spending levels under the existing system. 

There will be two broad areas of cost saving under Healthy California.

The first is a set of structural changes in the areas of: 1) administration; 2) pharmaceutical pricing; and 3) fee structures for service providers. We estimate that cost savings in the range of 13 percent of total costs are achievable through structural changes in these areas.

The second is through significantly reducing the high level of inefficiency that currently prevails in service provision. The major 2010 study of the U.S. Institute of Medicine found that, as a lower-bound estimate, cost savings in the range of 19 percent of total expenditures are achievable through addressing four major problems with service delivery: 1) unnecessary services; 2) inefficiently delivered services; 3) missed prevention opportunities; and 4) fraud. We assume that achievable cost savings in these areas through Healthy California will be around 5 percent—i.e. roughly one-quarter of the Institute of Medicine’s lower-bound 19 percent figure.

Healthy California proposal would eliminate all forms of cost- sharing, including all deductibles, co-payments and other out-of-pocket expenses.

Yet it is clear from the evidence he reviews that the extent of physician-induced demand will diminish within a health care system that establishes effective controls in the areas of provider fees, pharmaceutical pricing, hospital price-setting, and effective regulation over the level of service provision. That is, the incentive to engage in physician-induced demand will fall when the financial rewards provided by such behavior are limited by regulations. We consider these types of regulatory controls in what follows, within the overall context of the Healthy California proposal.


1 reply »

  1. Taxafornia is at it again, when are the taxpayers going to get a clue? Pie in the sky from Governor MoonBeam once more.
    Besides a 2.3 percent increase in the sales tax, they are going for the Whole Enchilada of tax increases a gross receipts tax.

    From The Tax Foundation

    The flaws of gross receipts taxes are well documented. Gross receipts taxes lead to higher consumer prices, lower wages, and fewer job opportunities, as the tax pyramids throughout the production cycle. Unlike a retail sales tax that is assessed only on the final consumer purchase of a product, a gross receipts tax is assessed at every stage of production. (Many retail sales taxes do not fully exempt business inputs, and do have a small, but notable, amount of pyramiding.)

    Why are states considering a gross receipts tax, given the noted flaws? Gross receipts taxes have two main benefits: They produce large and stable amounts of revenue. Gross receipts tax bases are wider than the entire economy, generating revenue quickly. The same product is taxed multiple times as it moves to the market. And, since gross receipts taxes are assessed on sales, not income, they are not as volatile. They are less impacted by the ebbs and flows of the business cycle as business income varies year-to-year. Under a corporate income tax, firms do not pay the tax if their profits are zero or negative. The same is not true of a gross receipts tax.

    My sister lives in California (wait until I tell her about this) and she tells me taxes and fees the state charges are sky high, for the services you receive from the state. I just hope these new taxes are explained to the average citizen before they are voted in, but as in most cases with Taxifornia they tell you all the free benefits you will receive and not the true cost of the programs.

    1) unnecessary services; 2) inefficiently delivered services; 3) missed prevention opportunities; and 4) fraud.

    Who gets to decide what fits into 1. 2. 3. and 4. – To save 5%, I am sure it will cost more to achieve these so called savings and the taxes will have to be raised to achieve the desired results. Welcome to OZ, Dorothy.


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