California’s Senate Passes Single Payer Health Care Act
A new California single payer health care law, if also passed by the Assembly, would save money for California households and businesses explains Bob Pollin of PERI, who conducted an extensive study of the law’s impact
Sharmini Peries: It’s The Real News Network. I’m Sharmini Peries, coming to you from Baltimore. In the state of California, the Senate has voted to support a single-payer healthcare system somewhat like Medicare for All. The bill will now head to the Assembly and can still be amended until mid-September. In its current form, it is estimated to cost $400 billion a year, and critics say that California cannot afford it. Nevertheless, it passed the Senate with a 23 to 14 majority, with the new administration in Washington having voted to scuttle the Affordable Care Act and promising to replace it with a new system, but it is not yet clear what that replacement will look like, but California is moving ahead.
The legislature is moving quickly to prevent a healthcare disaster with hundreds and thousands of households being priced out of the system and losing their healthcare insurance. One thing that may have swayed the California Senate to support the bill is a new report published by the Political Economy Research Institute at UMass Amherst, written by Robert Pollin, James Heintz, Peter Arno, and Jeannette Wicks-Lim, the study titled, “Economic Analysis of the Healthy California Single-Payer Health Care Proposal.”
It is an extensive analysis of the pros and the cons of the single-payer system. Here to discuss this with us is one of the authors of the report, Robert Pollin. Professor Robert Pollin is Distinguished Professor of Economics and Co-Director of the Political Economy Research Institute at University of Massachusetts Amherst. His latest book is Greening the Global Economy. I thank you so much for joining us today, Bob.
Robert Pollin: Thank you very much for having me on.
Sharmini Peries: Bob, this is a huge achievement for the healthcare of Californians. Give us a sense of what happened and how it happened.
Robert Pollin: Well, basically, we were commissioned by the California Nurses Association, which is the California branch of National Nurses United, to do this study for a bill that they had brought. Basically, they got a sponsor in the California State Senate, Senator Ricardo Lara, but it was the Nurses Association that initiated the project. And they asked me to develop an analysis of it, and I have a tremendous amount of respect for the nurses union. I think they’re one of the most progressive forces, and effective progressive forces, in the country.
So when they asked me to do it, I wasn’t about to say no, and we had a great team of coauthors that you mentioned, James Heintz, Peter Arno, and Jeannette Wicks-Lim, all PERI coworkers here, so we put together this study. We really built from the existing research literature and came up with an analysis that includes our estimate of how much it would cost to cover everybody in the state with a decent healthcare plan, everybody, and then how much it would cost to cover everybody under the existing system, and that’s in the range of $400 billion.
Then we said, “How much … What savings could you get through a single-payer system?” And we said, “That would get you about 18% savings,” so that gets the total cost down to $330 billion. Then the study goes through how you pay for that $330 billion and what the impacts are on households, families, and businesses.
Sharmini Peries: All right, so Bob, the California newspapers are writing that single-payer healthcare will cost us $400 billion a year, and the public purse will have to carry the burden, but your report estimates 10% increase mitigated by an 18% efficiency decrease, so the overall cost will actually go down. Explain how the single-payer system works and how it will create efficiency.
Robert Pollin: So yeah, the estimate that the overall system would cost $400 billion is not wildly off, except for one basic fact, the way it was presented in the press. We’re not going from 0 to $400 billion. That’s really critical. Right now, the state is paying $370 billion for all healthcare payments, by all sources of funds, so what we estimate is, as I mentioned, that … First of all, what is the first goal of a single-payer system? That everybody has decent healthcare, so it’s Medicare for All, which is a nicer way of putting it. Single-payer sounds very bureaucratic. But it’s really, the idea is to provide decent healthcare for everybody.
Equivalent, I mean, we have, for example, public schools. Anybody can go to a public school, and the idea is that all the schools are supposed to be pretty good and give kids a decent education, no matter who they are, no matter who their parents are, no matter whether their parents have good jobs, bad jobs, or no jobs. Everybody should be able to go into a public school and get a decent education, and the idea behind Medicare for All, or single-payer healthcare, is the same: Everybody should have access to decent healthcare. It’s that simple.
Now, estimating what it would cost, we say, “Okay, you were at a system that cost $370 billion, but in that system, about 8% in California do not have any healthcare coverage now, and another 30% have inadequate healthcare, they’re underinsured, meaning that they have a healthcare plan, but to actually get healthcare, they have to pay a lot in a deductible or a copay.” So we’re saying, “Everybody gets decent care. Everybody gets full access. Under the existing system, that would cost … Would go, costs would go up from 370 billion to 400 billion, about a 10%, little less than 10% increase.”
But then we said, “Single-payer will generate savings, because we are getting rid of multiple payers, all the insurance companies. We are fixing prices for pharmaceuticals at the rates that are paid by the Veterans Administration. We are fixing payments to providers, doctors, clinics, physicians, at the Medicare rate, which is lower than the private insurance rate, and we’re also building in features that will reduce excessive treatments, inadequate treatments, and so forth, and promote preventative care, and add all that up,” and we say, “You can get 18% savings,” so we say, “To cover everybody under the existing system is 400 billion. 18% savings gets you to 330 billion.”
Sharmini Peries: Sounds like a win-win situation. One of the things that you cover, Bob, is, rather than households paying insurance companies directly, you’re proposing levying a tax to cover healthcare costs and have the state pay the companies. Explain how that work, and is this similar to what we have in Canada, for example? No one actually sees bills, and having to pay insurance companies, and negotiating with them. It’s just, we pay a tax to the government and the government takes care of it.
Robert Pollin: [inaudible 00:08:25] for healthcare would be abolished in California. There would be no private insurance companies in the area of healthcare. Everybody is automatically covered, and now how do we pay for it? So we did propose two new taxes, so instead of people paying and businesses paying insurance companies, we proposes a tax on gross receipts, so all the money coming into all businesses, at 2.3%. That would also exempt, we propose to exempt the first $2 million of receipts from all businesses; so basically, small businesses would be completely exempt from this tax. Medium-sized businesses would be paying well below 2.3%. The only businesses that would end up paying the full 2.3% would be big businesses.
So with that tax, we generate most of the additional revenue we need, and we also propose a sales tax, also at 2.3%, that would cover the rest, and that also we built in exemptions for necessities, food, housing, utilities, and also a tax credit for low-income families. So low-income families, basically, would not pay anything at all. Small businesses would not pay anything at all. Even with that, we show that middle-income families and middle-sized businesses do much better under this system, allowing for the taxes they have to pay, relative to what they’re paying now by having to either be insured themselves or the businesses having to cover them.
Sharmini Peries: Now, is this a question that the senators, of course, asked you, in terms of, “How do we finance this system, and is the tax proposal you’re making here a part of the bill?”
Robert Pollin: The tax proposal is not yet part of the bill, though my understanding, and you’d have to ask the senators, they were not willing to vote in even the bill in principle until they had a handle on how you pay for it. And so what our study does is show a way, a realistic way, to pay for it. It is highly progressive, that basically exempts small businesses, low-income households, creates large net benefits for middle-income households, middle-sized businesses, and for the large businesses and wealthy households … For the large businesses, there still is no net payment increase. They still will see a net payment decline relative to what they’re paying now for their employees’ health insurance. For high-income households, they will see a tax increase, but, relative to their income, they end up paying less than 1%, on average, of their total income in this sales tax.
Sharmini Peries: Bob, in your paper, you recommend waiving the tax to low-income households. How is that being received in the state? Because when you propose that, normally, subsidizing anything for low-income households, people often criticize it, saying, “They shouldn’t get a free ride,” but this is a wonderful proposal for those who are at the bottom and struggling to make a living; so how is that being received?
Robert Pollin: I think, generally, it was good. I mean, basically, what we wanted was, right now, low-income households, very low-income households are covered through Medicaid, which is called Medi-Cal in California, so at the very least, we didn’t want people to be worse off under this single-payer system than they are under Medicaid, Medi-Cal. So that’s really what we were aiming for, and in order to do that, of course, as I said, we exempt necessities, basically, food, shelter, utilities, and those cost, those things cost proportionately more for low-income households because those are first, those are the necessities that they have to pay for, so those are untaxed.
And, on top of that, we propose a tax credit that would make those low-income households whole, relative to the sales taxes they would be paying for non-necessities, so they, yes, they would come out with basically paying nothing and still having access to decent healthcare. Again, comparable to what we have, at least in principle, with public schools. You live in a neighborhood, you should be able to send your kid to the school, and it should be a decent school. Same thing with healthcare.
Sharmini Peries: Now, how does your emphasis, Bob, on the corporations, those who are doing well in California who might have to carry the bigger burden of these costs, impacting on the corporate sector, and would there be this risk, as some anticipate, of corporations fleeing from California?
Robert Pollin: I can’t see why they would flee, because what we show in the study is that even the large corporations, we looked at businesses of, representative businesses of different sizes, so we looked at businesses of 500 employees and over, and that average business of that size has gross receipts in the range of $500 million. Now, even for those businesses, what we show is that the net impact of moving to the single-payer will lower their healthcare costs, not by a lot, but by about one half of 1% relative to what they’re paying now in healthcare costs.
So those businesses, large businesses, are better off. Now, naturally, the ones who aren’t better off are the private insurance companies, and yes, those are going to be out of business, and they, I’m sure, are not going to be very happy about that. And what we do need to consider, which we have not considered yet systematically, is reemployment for the employees of the private insurance companies.
Sharmini Peries: All right, Bob, I just want everyone to go and read this report. I, myself, learned so much just from reading the report, as to how it works. We can’t cover all the issues here, but I will put a link to the study up so you can read it. Those of us who are especially working in covering and doing advocacy in this area, there is a lot there for us; and Bob, finally, before we depart, can you tell us what their next steps are, in terms of the passage of this bill?
Robert Pollin: It has to go through the State Assembly. It’s passed the State Senate, has to go through the State Assembly, and the two houses, the Assembly and the Senate, will have to reconcile any differences in the details of their two bills, and then it goes to the Governor, Jerry Brown, and Jerry Brown can either sign it or veto it, and if we have a really solid proposal at his desk, I’m hoping he’s going to sign it.
Sharmini Peries: All right, Bob. I thank you so much for joining us, and I’ll welcome you to come back and give us an update whenever you have one on this topic. This is something that concerns all of us. Thank you.
Robert Pollin: Okay, thanks a lot. Bye.
Sharmini Peries: And thank you for joining us here on The Real News Network.