The Pros and Cons of a Single Payer System
(Universal Health Care) as Proposed for California

By: Mary Riemersma
Executive Director

The Therapist
(May/June 2003)

This article will address the legislation that, if signed into law, will create Universal Health Care or a Single Payer System in California. The article will reflect the proponents' arguments in favor of such a system, as well as the oppositions' arguments that such a system is not in the best interests of Californians.

The Bill as Currently Proposed
Senate Bill 921 has been authored by Senators Kuehl, Cedillo, Florez, and Perata, along with Assembly Member co-authors Goldberg, Hancock, Levine, Pavley, and Steinberg. While it is likely to go through many iterations, as introduced, it provides, among other things, for the following: It will be known as the "Health Care for All Californians Act."

The California Health Care Agency would be designated as the agency to oversee the system.

A commissioner would be responsible for the operation of the agency including, but not limited to, implementing statutory eligibility standards; adopting a benefits' package for consumers; acting directly or through one or more contractors as the single payer for all claims; establishing budgets; determining the sufficiency of rates, fees and prices; providing for efficient administration; implementing standardized claims and reporting methods; establishing an enrollment system for all Californians; reporting to the legislature; bidding for low cost prescriptions and medical equipment; negotiating rates, fees and prices; and procuring funding, property, and insurance.

A Health Policy Board would be developed. This Board has room for only one allied health practitioner.

An Office of Consumer Advocacy, with appropriate staff, would be created. An Office of Medical Practice Standards and a Medical Practice Standards Advisory Board with appropriate staff, will be created. This Board also has room for only one allied health practitioner.

Regional health agencies would be established throughout the state.

All moneys collected, received, and transferred pursuant to this system are to be transmitted to the State Treasury to be deposited to the credit of the Health Care Fund for the purpose of financing the system.

There would be a personal income surtax for health care on unearned income at a rate not
yet established.

There would be a cigarette and tobacco surtax, as well as an alcohol surtax, in amounts not yet established.

The commissioner would be charged with seeking necessary waivers, exemptions, agreements, or legislation so that all current federal payments to the state for health care are paid directly to the California Health Care System, which will assume responsibility for all benefits and services previously paid by the federal government.

Similarly, the commission would be charged with seeking necessary waivers, exemptions, agreements or legislation so that all county or other local government agency payments for health care including employee health benefits and health benefits for retired employees are paid directly to the system.

To the extent that funding for these programs are not transferred to the Health Care Fund, the system's responsibility for providing care will be secondary to any other program.

On the second year following passage of the bill, should it become law, all persons employed in California would be required to pay a health care tax based upon a percentage of income. The percentage has not yet been revealed. This tax, however, would not negate an employer's obligation under a collective bargaining agreement to pay an employee's health care benefits. If there is a contractual agreement to pay the entire cost of an employee's health care premium, the employer is to pay the employee's portion of the health care tax. Also in the second year following passage, all employers of resident employees would be required to pay a health care tax of a percentage not yet identified. An employer would be exempt from this requirement if the employer has established an employee benefit plan subject to federal law that preempts state law (an ERISA self funded plan). Employees whose plan is preempted will be required to first seek benefits under that contract before receiving benefits from the system. No benefits will be denied by the system, however, as long as the employee has taken reasonable steps to secure benefits covered under the preempting plan. Generally speaking, however, the if there is any other entity that might pay, all efforts are to be made to first seek reimbursement from such entity.

In the event of unanticipated expenditures by the system, in excess of an established threshold, the Legislature can increase system funding by increasing taxes or locating other revenue sources.

All California residents will be eligible for the California Health Care System. Residency is based upon physical presence in the state with the intent to reside.

There will be eligibility standards for residents temporarily out of state and for non-residents temporarily employed in California. Visitors to the state are to be billed for all services received under the system.

Any individual shall be presumed eligible if he or she arrives at a health facility or clinic and is unconscious, comatose, or is otherwise unable to establish eligibility. Any involuntarily committed individual shall be deemed eligible.

Any eligible individual may choose to receive services from any willing professional provider participating in the system. The covered services do include mental health care, without any limitation, at this time.

Excluded services, among others, include: Health Care services that have no medical indication, as determined by the chief medical officer and the Medical Practice Standards Advisory Board, and services of non-licensed professionals.

Initially there are to be no co-pays or deductibles, however, in the third year, the commissioner can establish limited deductibles.

While not yet fully set forth in the bill, financing is proposed to include the following:

  • Payroll tax-6.1% employer; 3.6% employee
  • Tobacco tax-$1 per pack
  • Alcohol tax-15 cents/can beer; 32 cents/bottle wine; 48 cents/bottle
  • champagne; $5/bottle distilled spirits
  • Sales tax-1/4 cent
  • Surtax on non-payroll income-2.8%
  • Current federal, state and county health moneys

Advantages of a Single Payer System
Universal Coverage-The system must provide health care for most all California residents regardless of age, employment, income, or health status, even though there are some limited exceptions. Thus, residents will be covered from cradle to grave with no exclusions or limitations on pre-existing conditions.

No Loss of Coverage-Coverage will not be forfeited due to job loss or change. Premiums will not be increased or coverage cannot be terminated due to illness or condition.

Comprehensive Benefits-Coverage, as proposed, includes a full range of preventive, inpatient, out-patient, mental health, rehabilitative, long-term care services, and prescription drugs.

Single Payer-A publicly funded system replaces most other payers.

Freedom of Choice of Health Care Providers-Any willing licensed professional provider who is participating in the system.

Financially Sound-It is believed that it will be affordable because money will be saved by streamlining administrative costs. There is also the belief that the state's purchasing power will win discounts on pharmaceuticals, medical supplies, state-wide coordination of capital expenditures, and dollars will be saved due to an emphasis on primary and preventative care.

Levels Playing Field-A health payroll tax will be an operating expense for all businesses. It is believed that this leveling will stabilize health system inflation.

No New Spending-It is believed that the health tax will involve no new spending. Instead, it involves a shift of funds from the private sector (insurance premiums) to the public sector (health tax).

Socially Responsible-The health tax is socially responsible because tax proceeds are used to assure that all Californians receive an essential social service.

Like Medicare-It is believed that the health tax is like Medicare, but it is better because it provides lifelong health care security.

Expanded Healthcare Market-The market is expanded to include the 7 million uninsured people and 10 million without prescription drug coverage.

Eliminates Uncompensated Care-Providers, hospitals, clinics, etc., are paid for the care they deliver.

Equity in Reimbursement-There will be the same reimbursement for the same service, rather than differing reimbursement rates depending upon what plan is paying.

Savings for Employers-It is argued that employers who currently provide insurance will save money.

Eliminates Workers Compensation Insurance- It is argued that it will eliminate the need for employers to provide workers compensation insurance.

Stabilization of Work Force-Some believe it will stabilize the workforce because employees won't take or leave jobs simply to obtain health coverage or to get better coverage.

Cost Savings Projected-Based upon a study by the Lewin Group, a cost savings of $3 billion
is anticipated.

Disadvantages of a California Single Payer System
Not all Encompassing-Because it would be California only, it will present problems for those leaving and coming into the state. Besides, there are always exceptions to every law, and there would likely be at least one, if not more, significant exceptions in this program, e.g., self-insured welfare benefit plans, which includes a significant number of large employers in California.

Similar to Medicare-While the proponents argue that being like Medicare is good because the administrative costs are low, the fact is not too many elderly are satisfied with the limits placed on them by Medicare, and often, if they have the resources to do so, they get and pay for supplemental coverage.

Ever-Growing Budget Deficit-While the budget deficit in California is soaring, California is borrowing board and bureau funds, cutting programs, terminating workers, engaging in a hiring freeze, and cutting state-employee wages, it does not make sense to put a new, unknown and potentially very costly program to administer, especially in its infancy, in the hands of the state of California. Those who are waiting for money from the Victims of Crime Program understand what happens when the program is out of money-practitioners don't get paid and available services are diminished.

Let's Look to Canada-Today, after 30 years of government intervention, the Canadian system suffers from long waiting times for critical procedures, lack of access to current technology, increasing costs to taxpayers and patients, and a brain drain of doctors, who head to the United States for better working conditions and more money. In the U.S. context, Canada's Medicare is similar to Medicaid, the system through which state governments provide health insurance for low-income Americans. Another way to think about it is as a series of extremely poorly run, monopoly HMOs. Many Americans are dissatisfied with their HMOs. A recent study in the British Medical Journal compared the performance of Kaiser Permanente to Britain's National Health Service. Kaiser outperformed the NHS on all variables. If Americans complain about Kaiser, how would they tolerate a fully managed government system?

It is estimated that the Canadian system costs each Canadian 21 cents for every dollar they earn, which translates into $7,350 per year for a person earning $35,000. But, since Canadians don't pay for it when they use it, the result is overuse and inefficient use of primary care facilities. There are rampant cost containment problems in a system where consumers pay nothing at the point of consumption and producers are free to decide what to sell.

Doctors' annual incomes are capped and so are hospital budgets. The result is a severe under investment in high tech equipment, which in turn, results in rationing of care. Canadians face an average wait of three months for an MRI and over one month for a CT scan.

Many Canadians find they must wait months and sometimes years for critical care. While Canadians confront few barriers and no bills when they want to see a primary care doctor, however, should that doctor diagnose a serious disease, Canadians are fast exposed to their system's limitations.

Rationing by Waiting-Rationing by waiting is the inescapable product of a government-controlled system. If the costs of hospitals and practitioners are controlled, there will be continuing complaints about longer hospital waiting lists and the absence of the latest technology.

There is also the fact that some people may no longer need the service due to long waiting times-they may even die waiting!

The System May Pay Even When Other Coverage is Available-Because it is the payer of last resort, it will have responsibility for those who are covered by other plans, whenever the other plans deny coverage for whatever reason.

CAMFT has taken no position on this bill other than to watch it closely. Since we know we have an ample number of members who are proponents and opponents, we will be following the bill to make sure that it is not amended in a way to be adverse to marriage and family therapists. Regardless, the bill is likely doomed given California's extreme budget deficit, but it is likely to be a measure for consideration over
the next few years.

This article appeared in the May/June 2003 issue of The Therapist, the publication of the California Association of Marriage and Family Therapists, headquartered in San Diego, California. This article is intended to provide guidelines for addressing difficult legal dilemmas. It is not intended to address every situation that could potentially arise, nor is it intended to be a substitute for independent legal advice or consultation. When using such information as a guide, be aware that laws, regulations and technical standards change over time, and thus one should verify and update any references or information contained herein.
Copyright/Request for Permission to Reprint