Governor’s health care proposal puts politics before patients


In California, politics is taking precedence over patients.

That’s the only conclusion to draw from Gov. Gavin Newsom’s recently released health care plan. He’s looking to impose price controls on prescription drugs. He’d like to expand Medicaid to undocumented immigrants up to the age of 26. He’s called for re-imposing the individual mandate, which would require everyone in the state to obtain coverage. He wants to subsidize the purchase of health insurance for those making up to six times the poverty level. Oh, and he wants to set the stage for a state takeover of the health care system.

California can’t afford his plan. If implemented, the state’s patients would receive far worse care.

After his inauguration, Governor Newsom signed an executive order expanding the authority of the Department of Health Care Services, which oversees Medi-Cal. The Department is now empowered to “negotiate” drug prices for every Medi-Cal beneficiary, including the 49 percent of those enrolled in privately run managed care plans.

A payer the size of the state government will certainly be able to secure low prices from many drug manufacturers. But some, especially those who have spent years and billions of dollars developing new medicines, will surely balk at the cut-rate prices the state will demand. And so Medi-Cal patients won’t have access to those new drugs.

That’s exactly what happens in Canada, where the government effectively dictates drug prices by “negotiating” directly with manufacturers. Canadians have access to 57 percent of the new medicines introduced between 2011 and 2017. Americans, on the other hand, have access to 90 percent of those innovative therapies.

The governor’s plans for Medi-Cal don’t stop there. He’s also proposing to enroll 138,000 undocumented adults between the ages of 19 and 26 in the entitlement. The price tag for that idea? A cool $260 million the first year.

He also wants to provide subsidies to about 250,000 individuals making up to $72,840 and “middle income families” bringing in $150,600 to help them purchase insurance through the state’s Covered California exchange. Thanks to Obamacare, the federal government already subsidizes exchange coverage for individuals earning up to $48,000 a year and families of four with incomes up to $98,000.

To cover the $500 million annual tab for these new subsidies, Newsom would reinstate Obamacare’s individual mandate, which requires people to obtain insurance coverage or pay a fine. Previously, those who opted not to buy health insurance had to pay the greater of $695 or 2.5 percent of their income.

If a family of four making more than double the state’s median household income needs subsidies to afford health insurance, then health insurance is too expensive.

For that, Obamacare deserves the blame. Between 2013 — the year before most of Obamacare’s regulations went into effect — and 2017, average individual market premiums more than doubled.

The governor’s ultimate goal is a state-run, single-payer health insurance system. He has already petitioned President Trump and Congress to allow the state to use federal funds for such a program.

By ignoring his request, the Trump administration may be doing Newsom a favor. The single-payer plan the state Senate passed in June 2017 — SB 562, which Newsom has endorsed — would cost $400 billion a year, according to a report from the state Senate Appropriations Committee.

Even if the state were able to re-direct $200 billion in existing federal, state, and local funds toward a new single-payer system, there’s no practical way for it to come up with another $200 billion in new tax revenue. That sum is equivalent to Newsom’s entire proposed state budget for 2019.

California’s patients may be safe from a government takeover of the health care system for now. But the other components of Newsom’s healthcare plan will reduce access to medicines, increase health costs, exacerbate the state’s doctor shortage, and put California on the road to single-payer.

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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