Would Single Payer Violate The Gann Limit? – Pacific Research Institute

Would Single Payer Violate The Gann Limit?


The California Senate voted late on June 1 to create a single-payer health-care system that will cover every resident in the state with no money out of their pockets. But this “free” health care would be anything but. Its costs are going to be steep, painful, probably deadly – and might violate a key taxpayer protection in the State Constitution known as the Gann Limit.

Under the Healthy California Act (Senate Bill 562), the state would cover all medical expenses, even those incurred by illegal immigrants. There would be no premiums to keep current, no deductibles to meet before coverage starts, nor copays to contribute. All must participate, even those happy with their employer-provided health insurance or their private individual plans.

The cost? A mere $400 billion a year, according to a Senate Appropriations Committee estimate. For those who worry about such details, – which apparently excludes the 23 Democrats who voted for the bill – that’s more than three times the state’s proposed 2017-2018 $124 billion General Fund budget.

But maybe there’s nothing to worry about. A report funded by the California Nurses Association said single-payer will cost a mere $331 billion a year – only about 2.67 times the proposed state General Fund budget.

So what would we get for either $400 billion or $331 billion? Top-flight medical care that’s always available? Hardly. With more 40 million across the state – including an estimated 2.35 million illegal immigrants – placing demands on the system for “free” services, care will be rationed, wait times unbearable, and treatment and medical outcomes will suffer. Californians may have the privilege of paying a new 15 percent payroll tax to fund half the cost, if the Senate Appropriations Committee’s recommendations are adopted, with the rest coming from existing federal, state and local funds that would be redirected into the system.

Or maybe we’ll instead be mugged by a 2.3 percentage point increase in the state sales tax, along with a 2.3 percent gross receipts tax for businesses. This is how the California Nurses Association study plans to raise about $106 billion, with the remainder taken from federal and state sources.

It is the massive proposed state spending increases where the single payer proposal runs into trouble, even if it passes the Assembly and is signed by Governor Brown – both unlikely propositions.

The Gann Limit is the 1979 proposition approved by voters that imposes state and local government spending limits. The Senate Appropriations Committee says that “to successfully implement the bill” and fund it with the 15 percent payroll tax, “the voters would need to amend the State Constitution to either repeal the Gann Limit or exempt the taxes to fund the Program from the Gann Limit.”

Since support for the single-payer system drops from 65 percent to 42 percent if it requires a tax hike, according to the Public Policy Institute of California’s poll, it likely would be rejected at the ballot box.

Californians may also be asked to suspend Proposition 98, which dedicates a portion of state tax revenue to fund education, to implement single-payer. Absent a voter-approved suspension, the Senate Appropriations Committee notes that half of the proposed new taxes for single-payer would go to education. Prop. 98 has become a sacred cow of state politics, and its suspension will be no easy task.

Californians are already overtaxed. Yet lawmakers are thinking about adding to the load just months after they passed a $52 billion tax hike for transportation. California has the highest marginal state income tax rate in the country at 13.3 percent and the highest state sales tax. For the fifth consecutive year, the Small Business and Entrepreneurship Council’s Small Business Tax Index ranked California dead last.

The collective crush of these tax burdens are factors in the exodus of those leaving California for better economic opportunities elsewhere. Creating an enormously expensive single-payer system will only produce more economic refugees, including the former employees of health care giant Kaiser Permanente, which has said that a single-payer system will put it out of business in California.

While the financial costs would be extreme, the human costs are likely to be worse. Pacific Research Institute President Sally Pipes recently noted that single-payer systems have allowed hundreds of veterans awaiting care in the US VA hospital system to die; caused a “humanitarian crisis” in Britain; and triggered a stream of Canadians leaving behind their “free” care to seek treatment in America.

During the national health care debate in the 1990s, P.J. O’Rourke somewhat famously said that “if you think health care is expensive now, wait until you see what it costs when it’s free.” It’s an insightful observation anyone can understand. Yet its simple logic is lost on the political majority in Sacramento that seems to determined to drive California into Blue State ruin.

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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