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Government-Monopoly Health Care in California: Legislative Analyst Concludes That Taxes Must Be Hiked One-Third More Than Anticipated – Pacific Research Institute

Government-Monopoly Health Care in California: Legislative Analyst Concludes That Taxes Must Be Hiked One-Third More Than Anticipated

California’s non-partisan Legislative Analyst has weighed in on the costs of government-monopoly health care. Backers of such systems are rushing to the barricades, but the revelations serve as welcome enlightenment for all Californians.

Last year, Governor Schwarzenegger, former Assembly Speaker Fabian Nuñez, and an unlikely alliance of business and union leaders floated an ill-conceived proposal that would have compelled every Californian either to buy a high-priced private health insurance policy or submit to a government program like Medi-Cal. Senator Sheila Kuehl’s SB 840 pretty much fell off the radar screen, even though it takes a simpler approach.

Instead of mandating private coverage, it simply abolishes all private health plans and forces every Californian into a government-monopoly, Canadian-style, “single-payer” bureaucracy. Senator Kuehl’s analytical support for SB 840 is a glowing report her supporters commissioned from the Lewin Group in January 2005 (for a previous version of the legislation, SB 921). I debunked this report in June 2006, in an analysis titled Deadly Solution, and the governor vetoed the measure in September 2006. Nevertheless, Senator Kuehl pitched the same bill into the legislature again last year.

Now that the Schwarzenegger-Nuñez reform has collapsed, the SB 840 forces are mounting a counterattack. Front-line troops include the California Nurses Association, who picketed the annual meeting of America’s Health Insurance Plans in San Francisco earlier this month. Their T-shirts, bags, and buttons bore the command: “Ask me about single-payer health care!”

Republican Senator Dick Ackerman did ask, and the answer was not pretty, according to the recent analysis that he requested from the Legislative Analyst’s Office (LAO). Although completed on May 22, it took a while for the LAO’s report to emerge and its publication remains somewhat mysterious. On June 16, the Sacramento Bee’s Dan Weintraub penned a column on the LAO report, although nobody outside the legislature had yet heard of it. Mr. Weintraub’s piece came headlined “Single-payer health concept one thing, math another.” In other words, government-monopoly health schemes are much more expensive than anticipated.

An apparently startled Senator Kuehl replied immediately via an “essay” that she would “interrupt” her analysis of the budget to write about the “confidential analysis” that Mr. Weintraub had spilled. Remarkably, her column claims that the “LAO confirms single payer reduces health care spending, contains annual growth.” Then, on June 17, up popped the analysis on the LAO’s website.Certainly, the LAO concludes that costs for health services will grow at a slower rate under government monopoly. However, citing “other experts,” the LAO also warns that “there may not be enough physicians or hospital capacity to provide those services” (pp. 23-24). Strangely, LAO also comes to the odd conclusion that demand for health care will increase, not just because it’s free, but because people might move here to take advantage of it! The report reflects no attempt to quantify how many Americans actually go to Canada for “free” health care.

The LAO does not cite my 2006 study, which estimated how much health care capacity California would lose, through physician emigration and lost capital investment, under government-monopoly health care. That would have brought more precision to the negative impacts the report hints will result from government monopoly.

The most important news from the LAO’s report is that the single-payer camp grossly underestimated how much taxes it would need to fund fully the government takeover. Indeed, all four new and increased taxes proposed in SB 840, plus existing federal health transfers and currently funded state programs (Medi-Cal, etc.), would only pay for three quarters of 2010-2011 single-payer budget, and four-fifths in 2015-2016 (p. 8).

Senator Kuehl’s solution, confided to the LAO, is that SB 840’s originally proposed taxes should be increased by about one-third: from 12 percent to 16 percent on the new payroll taxes, and from 11.5 percent to 15.5 percent on the new investment income taxes (p.12).

With such a surge in taxes, no wonder Senator Kuehl wanted to keep the LAO’s report confidential. The revelations, however, should launch a new dialogue on health care. When Californians ask about single-payer health care, they should inquire what it costs. A truthful answer would concede: “An awful lot more than we thought.”

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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