California's looming single-payer disaster

Progressives advocating single-payer health care need to face financial reality.

Vermont had to abandon its attempts to impose a single-payer health-care system when its greatest champion, Gov. Peter Shumlin, discovered that it would cost far more than he had anticipated. Similarly, last year Colorado voters resoundingly rejected ColoradoCare when a study discovered that even tripling taxes wouldn't be enough to keep up with the costs.

Now it's California's turn.

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The Golden State's legislature has plowed ahead with a plan to impose single-payer care. But a new analysis from the state Senate on SB562 shows that the annual costs of such a system would exceed the state's current annual budget — even if federal funding continued at the same pace. "California would have to find an additional $200 billion per year, including in new tax revenues, to create a so-called 'single-payer' system," the Sacramento Bee reported after the publication of a report by the Senate Appropriations committee. Even that estimate assumes the state would retain the existing $200 billion in local, state, and federal funding it currently receives to offset half of a $400 billion total price tag.

$400 billion a year. That's 223 percent of California's total annual expenditures in an already bloated budget.

Let's put it another way: California could build four high-speed rail systems between San Francisco and Los Angeles every year for the same amount of money. (Assuming, of course, that the state ever manages to build the one in progress now, which is also being funded in large part by people who live outside of California.)

But wait! Can't they just use the money California employers pay now for health care by transferring those funds to the state in taxes? Theoretically yes — but it's still not enough. According to the Bee's report of the Senate analysis, "Employers currently spend between $100 billion to $150 billion per year, which could be available to help offset total costs. To get that cash into the California system, the state would have to impose new taxes to seize those funds — and even then, California's new health-care system would still come up short by between $50 billion to $100 billion every year."

As both Colorado and Vermont discovered, the prospects inevitably get worse from there. An analysis from the Colorado Health Institute showed that their state's ColoradoCare proposal would start off with a deficit of over $200 million in its very first year of full operation, even with a three-year headstart on new taxes to launch the system. By the end of the tenth year, the cumulative red ink would have exceeded $7 billion — which would be more than twice the state's annual GDP.

The solutions for this fiscal meltdown in a single-payer system, CHI noted, were all unpleasant. One option would be to cut benefits of the universal coverage, and hiking co-pays to provide disincentives for using health care. That would in some cases "reduce the level of insurance below what [Coloradans] have today," the study noted. The state could raise taxes for the health-care system as deficits increased, which would amount to ironic premium hikes from a system designed to be a response to premium hikes from insurers. Another option: Reduce the payments provided to doctors, clinics, and hospitals for their services, which would almost certainly drive providers to either reduce their access or leave the state for greener pastures.

Those are the only options available in closed systems. Our experiences with other state-run single-payer systems in the U.S. only reinforce the conclusions reached by CHI. Medicare and Medicaid have attempted to restrict provider payments while expanding their enrollments, and as a result providers have greatly reduced their access to new patients from both systems. The Veterans Administration has wait times for its clinics that stretch out so long as to have resulted in patient deaths, along with rampant corruption to hide failures and protect the bureaucrats at the expense of the patients. The Indian Health Service, which provides care to those on reservations, has such crises of funding that Native Americans stuck in the system joke about not getting sick after June.

When faced with the realities of single-payer systems, Colorado voters took the rational choice and overwhelmingly rejected it. California taxpayers had better hope that their elected officials make the same decision, but in this case, the third time might be the charm ... for disaster.