California's Single Payer Healthcare Proposal: what to Know

Curated by Claudia Shannon / Research Scientist / ishonest

California is looking to introduce a state-funded single-payer healthcare system to provide quality healthcare and long-term care to its residents.

A state assembly committee approved the proposal last week to create the system, AB-1400.

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The bill now heads to the California State Assembly, where it will be voted on by Jan. 31.

California previously considered establishing a single-payer healthcare system in 2017, but the bill was quickly dismissed due to outstanding hurdles, such as how the system would be funded.

Although single-payer systems, like AB-1400, have been proposed several times at the state and federal level in the United States, none have ever been fully enacted.

Healthcare professionals say it’s unclear how likely AB-1400 is to pass.

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Several industry groups oppose the bill, but health officials could address their concerns by coordinating with hospitals and healthcare professionals to establish a fair and equitable healthcare system.

“Californians face a series of trade-offs here: higher taxes in exchange for lower point-of-service costs, system efficiencies in exchange for fewer choices in how your healthcare bills are paid, and potential improvements in predictable and equitable healthcare access in exchange for uniformity in what is covered and what is not,” said Brigham Walker, a research assistant professor in the Department of Health Policy and Management at the Tulane School of Public Health and Tropical Medicine in New Orleans.

How would the system work?

According to Dylan Roby, PhD, an associate professor of health, society and behavior at the University of California Irvine Program in Public Health, the system would be built on a fee-for-service model, similar to Medicare.

Advocates have argued that the COVID-19 pandemic has shed light on gaps in care and the disparities based on race, ethnicity, income, and location.

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A single-payer system would eliminate costly premiums, copays, and deductibles, which would help close gaps and expand access to care to all.

Private providers in the state could continue to operate but would require fee settings so that providers receive standardized payment rates.

“Quite a few issues would have to work out given the integrated healthcare providers — like Kaiser Permanente’s medical group and Kaiser Foundation Hospitals — that represent a large part of the healthcare providers in California,” Roby said.

A program like AB-1400 could also have negative impacts on healthcare workers.

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For example, if the payments for providers’ services are in line with Medicare rates, hospitals and physicians — who typically charge more than Medicare rates — could potentially see a decrease in their rates.

“AB 1400 wouldn’t just change everything on Day 1. There is a deliberative stakeholder process that would be required to figure out how much providers would be paid, how to finance parts of it, how to navigate federal waivers for Medicare and Medicaid, etc.,” Roby added.

How would it be funded?

CalMatters reported that a legislative analysis estimated that the single-payer system would cost $314 billion to $391 billion a year.

Roby says the system would likely be partially funded by tax increases.

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The amount of funding required would depend on the benefits included in the single-payer system along with the payments issued to providers, according to Roby.

“If payment to providers is based on lower Medicare rates, perhaps the program would be quite affordable,” Roby said.

Proponents of the single-payer system have argued that the system would not cost more or require large tax increases because it would essentially realign health insurance premiums currently paid by individuals and employers.

In general, single-payer health systems are believed to be less costly than multiplayer privatized healthcare systems.

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“Californian providers report over a billion dollars annually in uncompensated care costs, and many patients face needlessly high bills due to limited provider networks, so the increased predictability of a single-payer system may reduce cost exposures for both providers and patients,” Walker said.

The bottom line:

California has proposed a bill that would enact a single-payer healthcare system to offer high-quality care and long-term care to all California residents.

Though multiple single-payer systems have previously been proposed at the state and federal levels, none have been implemented. The system would follow a fee- for-service model, similar to Medicare.

It’s unclear how likely the bill is to pass. Still, healthcare system professionals say several issues and cost considerations need to be ironed out before this system can be established.

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