The Healthy California Act (SB 562): Executive Summary

I. Introduction
II. Eligibility, Benefits, and Costs to Consumers

A. Who Would Be Eligible?
B. What Benefits Would Be Covered? (EHBs)
C. Who Would Provide Care?
D. Will I Get to Choose My Doctor?
E. What Would It Cost Consumers?

III. Government Funding and Cost

A. How Would Healthy California Be Funded?
B. What Would it Cost?

IV. Who Would Run the Healthy California Program?

V. Has This Been Done Before in the U.S.?
VI. Could it Really Pass into Law?
VII. Who Supports SB-562?
VIII. External Discussion and Analysis

 

Ricardo Lara, Co-Sponsor of the HCA.
Image from Wikimedia Commons via Flickr upload bot
and originally posted by Neon Tommy.


 

I. Introduction

As Congress contemplates federal health reform with the American Health Care Act (“AHCA”), California’s state senate has proposed its own version of healthcare reform. The Healthy California Act (“HCA”) (SB-562), as amended on April 17, 2017, would create a single payer health system called the Healthy California program. The bill is sponsored and/or co-authored by sixteen state legislators, the California Nurses Association (“CNA”), and CNA’s parent organization, National Nurses United.

 

The purpose of the HCA is to provide “universal health coverage for every Californian” under a single payer system. A single payer health system is one in which the government operates a tax-funded health insurance plan for a
ll residents. Under the HCA, all California residents would be enrolled in the program. Health insurance companies could no longer sell any health care service plans or offer health benefits covering any service for which HCA provides coverage. Effectively, this means all private health insurance companies would cease to operate in California. Individuals who qualify for Medicare would also receive those benefits through the Healthy California program.

This article provides a brief and non-exhaustive explanation of the bill and its potential impact on California residents. If you are interested in reading the entire bill you can do so here.

You can read the Senate Committee on Health’s analysis of the bill (4/24/17) here.

 

 

 

Toni Atkins, Co-Sponsor of the HCA.
Image from Wikimedia Commons via Flickr upload bot.


II. Eligibility, Benefits and Cost to Consumers

This section provides a brief summary of eligibility requirements, covered benefits (including access to doctors), and costs to consumers.


A. Who Would Be Eligible?

Under this plan, coverage would be available to all California residents, regardless of immigration status. This differs from the Affordable Care Act (“ACA”), which has strict immigration requirements for coverage under any federal health insurance program.

In addition, institutions of higher education could purchase coverage under the program for students who are not California residents.


B. What Benefits Would Be Covered?

The bill states that the system would cover “all medical care determined to be medically necessary by the member’s health care provider.” The HCA would guarantee coverage of the Essential Health Benefits (EHBs) mandated by the ACA, which include:

— Ambulatory (outpatient) patient services
— Emergency services
— Hospitalization
— Pregnancy, maternity, and newborn care
— Mental health and substance abuse disorders, including behavioral health treatment
— Prescription drugs
— Rehabilitative and habilitative services and devices
— Laboratory services
— Preventative and wellness services
— Chronic disease management
— Pediatric services (including dental and vision care)

The HCA would also cover benefits beyond those in the ACA. Some, but not all, of these added benefits would include:

— Diagnostic imaging and other diagnostic and evaluative services
— Medical equipment, appliances, and assistive technology including prosthetics,
eyeglasses, hearing aids and their repair, technical support, and customization needed for individual use
— Necessary transportation for health care services for persons with disabilities or
who may qualify as low income
— Hospice care
— Care in a skilled nursing facility
— Home health care, including health care provided in an assisted living facility
— Adult and child dental and vision care
— Podiatric care
— Chiropractic care
— Acupuncture
— Certain complementary and integrative therapies
— Adult day care
— Ancillary health care or social services previously covered by county-integrated
health and human services programs or by a regional center for persons with developmental disabilities
— Case management and care coordination

 


C. Who Would Provide Care?

Any health care provider who is licensed and in good standing in California is qualified to participate in the program, so long as the care is provided in the state. The Healthy California Board is also tasked with establishing relationships with out-of-state providers for care given to members when temporarily outside California’s borders. Under the bill, health care providers would be allowed to engage in collective bargaining with the Healthy California program to discuss and negotiate rates of payment and payment methodologies.

Healthy California would likely operate similarly to Medicare, which is also a single payer system. Medicare is funded by taxpayer dollars and is administered by the federal government, but the government does not directly employ healthcare personnel. Rather, private practitioners and hospitals contract with the Centers for Medicare and Medicaid Services (“CMS”) to receive reimbursements for healthcare services they provide.

This differs from the Veterans Health Administration (“VHA”) which is also a single payer system for individuals who have served in the U.S. military. Under the VHA, the government administers the agency by directly employing healthcare personnel (as well as contracting with private entities) to provide health care.

Under the language of the bill, it appears that Healthy California would operate more like Medicare — with the government contracting with private physicians — rather than like the VHA, which directly employs them.


D. Will I Get to Choose My Doctor?

The intent of the program is to contract with all qualified health care providers in California to provide care for program enrollees. Because health insurance companies would not be allowed to compete with the program for business, current and future California health care providers would need to contract with the program in order to stay in business. Proponents of the bill state that this means enrollees would get to choose their doctor without worrying about whether their insurance will cover it.

Opponents of single payer have long argued that such a program will ultimately harm patients because there will ultimately be fewer doctors. The Heritage Group, a conservative think tank, asserts that a single payer system would result in lower payments to physicians, which in turn would result in fewer doctors willing to undergo the necessary training and education because it will no longer be financially rewarding. For instance, perhaps individuals would be deterred from entering medical school because they would incur loans that they might have more difficulty paying off.


E. What Would It Cost Consumers?

Under the HCA, there would be no cost-sharing requirements for covered benefits. This means that enrollees would not be required to pay deductibles, co-pays, co-insurance, or premiums in order to receive coverage and services. However, in order to pay for the program, the state may need to raise taxes for individuals. It is unclear whether the increased taxes would cost more or less than average annual insurance premiums. The program would also provide premium assistance to low-income individuals enrolling in a Medicare Part D prescription drug program.


III. Government Funding and Cost

This section examines how the program would be funded and looks at the anticipated governmental costs of this type of program. There has not yet been an official fiscal analysis of the bill.


A. How Would Healthy California Be Funded?

Under the proposed bill, the state of California would establish the Healthy California Trust Fund. This would provide the necessary funds for operating expenses. The trust fund would primarily receive funding from the federal government; all healthcare-related federal funds (including subsidies) that would otherwise be paid to the State of California, California residents, or health care providers instead would be made directly into the Healthy California Trust Fund.

Currently, California receives reimbursement from the federal government for certain healthcare expenditures, including Medicare and Medicaid. Under Healthy California, the state would seek a waiver from the federal government that would allow it to receive pool money received for programs like Medicaid and Medicare into one fund. This fund, that would also likely include monies obtained through taxes, would then be used to pay for implementation of the single payer program.

To ensure that California would continue to receive proper funding, all California residents who qualify for coverage under Medicare or Medicaid would have their benefits administered by the Healthy California Board.


B. What Would it Cost?

Currently there are few detailed analyses of the cost of the program or how it would be financially sustainable. The bill does not contain a specific revenue plan, but only requires the state legislature to develop such a plan for the purpose of determining how to fund and sustain the program. Governor Jerry Brown has expressed significant concern with the cost of a single payer model, noting that healthcare in California already amounts to about 18% of the state’s gross domestic product.

On the other hand, some analysts argue that single payer systems generally reduce healthcare costs. According to one analysis utilized by the organization Physicians for a National Health Program (“PNHP”), a third to a quarter of current health care costs are driven by “insurance company overhead, profit, and administrative costs.” These costs, asserts PNHP, would be “recovered under single-payer and could be reallocated to the delivery of meaningful health care services.”

In addition, according to many proponents of single payer, the current fragmented payment system (with multiple insurers paying different prices for services and medications) results in a loss of bargaining power with drug companies and providers. The Commonwealth Fund analyzed current government health systems (such as Medicare, the VHA, the Department of Defense and 340B Program plans). The analysis found that these government programs spend significantly less on prescription drugs. Specifically, the VHA “pays drug prices that are roughly half as much as those paid by retail pharmacies” because 1) these agencies wield significant market power to negotiate with drug companies and 2) price controls cap costs. If California transitioned to a single payer model, it might also be able to save costs due to enhanced bargaining power.


IV. Who Would Run the Healthy California Program?

An independent public entity called the Healthy California Board would govern the program. The nine member board would be comprised of individuals with proven healthcare experience. The members would represent sectors of healthcare, labor, and the general public.

The Governor, Senate Committee on Rules, and Speaker of the Assembly would appoint the board members, and each member would serve four year terms. The board would be responsible for, among other things, negotiating contracts with health care providers and healthcare systems, and seeking necessary waivers and approvals to allow existing federal health-related payments to be made directly to the program.

The California Secretary of Health and Human Services would also establish a public advisory committee to advise the board on all policy matters. The uncompensated committee would consist of a diverse group of individuals, including physicians, nurses, labor representatives, consumers, representatives from hospital systems, and mental health care providers.

The Governor, Speaker of the Assembly, and Senate Committee on Rules would have roles in appointing members to the advisory council. Appointees would serve four year terms and must have worked in the field in which they are representatives (e.g., nursing or mental health) for at least two years prior to appointment.


V. Has This Been Done Before in the U.S.?

Medicare, the VHA, and the Department of Defense (“DOD”) are three single payer programs that already exist in the United States. The City of San Francisco also has its own type of single payer program for city residents who are uninsured and who do not qualify for Medi-Cal. Several states, such as Vermont and Colorado, have made serious efforts to pass single payer programs but have been unsuccessful in doing so.

This chart shows how the Healthy California program compares to other existing government based payer programs.

Gov’t Pays Medical Bills Gov’t Employs Doctors Cost Sharing (Out of Pocket Costs for Individuals and Families)
HCA Yes No No
Healthy SF Yes No*

*contracted providers do include City Public Health Departments

Yes
VA Health System Yes Yes No
Medicare Yes No Yes
DOD Yes Yes (but also reimburses for services rendered by private physicians and hospitals) Not for active duty members and family; fees for out of network care that is not pre-approved

 


VI. Could it Really Pass into Law?

Despite multiple proposals at both state and federal levels over the years, single payer bills have largely been unsuccessful in the United States. This is often due to political disagreement over how such systems would be funded, intense opposition from the insurance industry, and the daunting task of overhauling how care is paid for and delivered.

This does not mean that California will not pass a single payer system bill. In fact, the City of San Francisco created a type of single payer program called Healthy San Francisco that provides universal healthcare to its otherwise uninsured residents. Lt. Governor Gavin Newsom, who was instrumental in implementing San Francisco’s program, has indicated that he will run for governor on a single payer platform. Although he has cited the San Francisco program as a model for the entire state, this program is different in some key respects from what is being proposed in the Healthy California Act. For one, the San Francisco program does not prohibit private insurance companies and operates as a system of last resort. It is also not the primary source of insurance for residents of San Francisco.

Any efforts to implement a statewide system would likely face an uphill battle. Health insurance companies will almost certainly lobby against this measure, as they have done in other states with similar bills. Additionally, other critics have concerns about cost and feasibility. Many state politicians, including leading democrats such as Dianne Feinstein, are so far unwilling to back this bill. Yet some analysts think given the current political climate and unpopularity of the AHCA, this may be the perfect time for California to pursue a single payer system.

As it now stands, SB-562 is moving forward. On April 26, 2017, the bill passed in the California Senate Health Committee by a 5 to 2 vote. It has now been referred to the Committee on Appropriations, which reviews all bills with a fiscal impact on the state.


VII. Who Supports SB-562?

To find out which individuals and organizations currently support SB-562, click here.


VIII. External Discussion and Analysis

Bernie Sanders Wants California to Lead on Health Care
The Sacramento Bee
May 6, 2017

It May Not Be the Time for Single-Payer Healthcare in California, Assembly Leader Says
The Sacramento Bee
April 28, 2017

California Single Payer Healthcare Bill Passes First Committee Test
Los Angeles Times
April 26, 2017

What Would Single Payer Healthcare Look Like in California
Los Angeles Times
March 30, 2017

Single-Payer Health Care Bill Introduced in California Senate
California Health Line
February 22, 2017