Economic Analysis of the Healthy California Single-Payer Health Care Proposal (SB-562)

By Robert Pollin, James Heintz, Peter Arno, and Jeannette Wicks-Lim
Political Economy Research Institute (PERI), University of Massachusetts – Amherst, May 2017

The State of California is considering a bill to create a statewide single-payer health care system. This study provides an economic analysis of the proposed measure, The Healthy California Act (SB-562). The study includes four major sections: 1) Cost Estimate of Universal Health Care Coverage in California; 2) Cost Saving Potential under Healthy California; 3) Financing Healthy California; and 4) Impact on Individual California Families and Businesses.

The primary goal of Healthy California is to provide high-quality health care to all California residents, including those who are presently either uninsured or underinsured. The study finds that the providing full universal coverage would increase overall system costs by about 10 percent, but that the single payer system could produce savings of about 18 percent. The study thus finds that the proposed single-payer system could provide decent health care for all California residents while still reducing net overall costs by about 8 percent relative to the existing system.

We propose two new taxes to generate the revenue required to offset the loss of private insurance spending: a gross receipts tax of 2.3 percent and a sales tax of 2.3 percent, along with exemptions and tax credits for small business owners and low-income families to promote tax-burden equity.

Within this proposed tax framework, Healthy California can achieve both lower costs and greater equity in the provision of health care in California for both families and businesses of all sizes. Thus, net health care spending for middle-income families will fall by between 2.6 – 9.1 percent of income.

Small firms that have been providing private health care coverage for their workers will experience a 22 percent decline in their health-care costs as a share of payroll. The small firms that have not provided coverage will still make zero payments for health care under Healthy California through their gross receipts tax exemption. Medium-sized firms will see their health care costs fall by between 6.8 and 13.4 percent as a share of payroll relative to the existing system. Firms with up to 500 employees will experience a 5.7 percent fall, and the largest firms, with over 500 employees, will experience a 0.6 percent fall as a share of payroll relative to the existing system.

In sum, the establishment of the Healthy California single-payer system will generate financial benefits for both families and businesses throughout the California economy. For families at most income levels and for businesses of most sizes, these financial benefits will be substantial. These benefits are in addition to those that the residents of California will achieve through having universal access to decent health care.

http://www.healthycaliforniaact.org…

This meticulous economic study of the the Healthy California single-payer health care proposal (SB-562) reveals that it would provide health care for all Californians while reducing net costs for almost all households and businesses. This study is much more credible than the staff committee report released last week, primarily because of the detail in this study and the application of well established health policy science to the analysis.

A multitude of articles based on the cursory staff study have been published stating that total costs and a hypothetical high payroll tax would be outrageous and totally unaffordable. This study lays those claims to rest and should be used to refute the rhetoric of the opponents of single payer reform in California.

In fact, California cannot afford to pass up this opportunity to bring health care to everyone while finally controlling our spending on it.

If you wish to see how a single payer system really could provide health care for everyone while reducing costs for businesses and households alike, you should download the full analysis and study it (link above).