On June 5, 2017, California state senators passed SB 562, a healthcare bill that would offer free healthcare services to all California residents. If it sounds too good to be true, it is. Because providing free medical care for 40-plus million people comes with a huge price tag.
In this post, we’ll break down SB 562, including what it means and how it could affect you.
What Is The Single-Payer System?
“Single payer” is a system in which all payments for healthcare services are funded by a single entity. In most countries with a single-payer system, the federal government finances all medical bills. In the case of SB 562, California’s state government would become the “single payer” — which means the state would cover all medical expenses for every state resident.
This includes full coverage for all Californians, regardless of their income, occupation, health condition, or immigration status.
Is Healthcare Really Free Under Single Payer?
Yes. The bill would eliminate private payment of any kind for medical services, including emergency services, wellness visits, dental, vision, and nursing home care. There would be no copays or deductibles, and patients would not need a referral to see a specialist.
Where Does The Money Come From?
The answer to this question is the root of the bill’s problem. Under the current version of SB 562, the state would pay for healthcare expenses — but at a very, very high cost.
Based on an analysis by the Senate Appropriation Committee, a single-payer system would cost the state $350 to $400 billion (that’s billion with a b). To pay for this bill, California would pool its money from local, state, and federal sources, including federal money allocated for the state’s Medicare and Medicaid programs.
However, revenue from existing government sources would only amount to about $200 billion. To cover the leftover $150 to $200 billion, SB 562 proposes a 15% payroll tax. This tax would stand in for the health insurance premiums that businesses pay to private insurers to offer employee healthcare coverage.
Would I Still Need Health Insurance?
No. The state government would pay for medical services, so you wouldn’t need health insurance to protect you. In fact, insurance companies would be prohibited from offering health benefits that the state already covers.
What Happens To Health Insurance Companies?
SB 562 bill would do away with private insurance companies. Instead, the state government would set up a program, called Healthy California, to negotiate directly with healthcare providers. The billing process would be much simpler than under the current system: you see a doctor, and the doctor bills the state.
Will SB 562 Become Law?
Probably not. At least not this version of a single-payer system.
The California Senate passed the bill, but it has to go through the state Assembly. Then Governor Brown has to sign the bill into law. Brown is skeptical about the bill’s hefty price tag, so he’ll probably veto it.
What’s The Catch?
SB 562 would be the “most radical system” yet for healthcare policy, said Micah Weinberg, President of the Economic Institute at Bay Area Council, during LISI’s Think Tank Webinar. In addition to its astronomical cost, the bill creates many complications that would prevent it from actually working.
For one, SB 562 would only apply to California residents. If no other states adopt the single-payer model, it would be almost impossible for one state to run a public healthcare system alongside a private national system.
Second, California has no way to pool its funds into one pot. A transition to single payer would require a waiver from the federal government to redirect federal funding for state programs, including Medicaid. Given the bitter debate over U.S. healthcare policy, it’s very unlikely that Washington would agree to aid a complete dismantling of the national healthcare system — especially in one of the country’s most populous states.
Still Need Health Insurance? We’re Here To Help
California’s current proposal is a response to America’s uncertain position toward U.S. healthcare policy.
The American Health Care Act (AHCA) threatens to repeal and replace Obamacare — but only 8% of Americans actually want the U.S. Senate to pass the GOP bill. And while SB 562 is an extreme (and unrealistic) version of a single-payer system, it symbolizes a shift in public sentiment: that Americans want increased access to affordable, quality healthcare.
So, we’re a long way off from a single-payer system or a complete reworking of the U.S. health insurance market. As the law stands, you still need to obtain health insurance to avoid the individual mandate penalty.
Need healthcare coverage now? Talk to an agent at Regency West. Our licensed health insurance agents will help you navigate the healthcare system. They’ll make sure you find the right plan, whether you’re covering yourself, your family, or your small business.
Get in touch today! Visit us online at RegencyWest.com, or call 858-699-0286.