California's New Single-Payer Proposal Embraces Some Costly Old Ways -AND- What would California's proposed single-payer healthcare system mean for me?

CAL/AAEM News Service at
Fri Jun 16 23:32:53 PDT 2017



May 31, 2017


California's New Single-Payer Proposal Embraces Some Costly Old Ways



huimyLw5gW56J1thC1aH3H5CuNM&_hsmi=52559400> Kaiser Health News



By Chad Terhune 


Three of the dirtiest words in health care are "fee for service."


For years, U.S. officials have sought to move Medicare away from paying
doctors and hospitals for each task they perform, a costly approach that
rewards the quantity of care over quality. State Medicaid programs and
private insurers are pursuing similar changes.


Yet the $400 billion single-payer proposal that's advancing in the
California legislature would restore fee-for-service to its once-dominant
perch in California.


A state Senate analysis released last week warned that fee-for-service and
other provisions in the legislation would "strongly limit the state's
ability to control costs." Cost containment will be key in persuading
lawmakers and the public to support the increased taxes that would be
necessary to finance this ambitious, universal health care system for 39
million Californians.


Several health experts expressed skepticism about the bill's prospects in
its current form.


"Single-payer has its pros and cons, but if it's built on the foundation of
fee-for-service it will be a disaster," said Stephen Shortell, dean emeritus
of the School of Public Health at the University of California-Berkeley. "It
would be a huge step backwards in delivering health care."


Paul Ginsburg, a health economist and professor at the University of
Southern California, agreed and said the legislation reads like something
out of the 1960s in terms of how it wants to reimburse providers.


"There's broad consensus we ought to go from volume to value. This bill
ignores all the signs pointing to progress and advocates a system that
failed," he said.


Backers of the Healthy California proposal are pushing for a vote in the
Senate by Friday so the legislation can go to the state Assembly and remain
in play for this year's session.


The authors say that their single-payer proposal won't rely entirely on
old-fashioned fee-for-service and that there's plenty of time for the bill
to be amended. According to the authors, some of the criticism in the
legislative analysis reflects a misreading of the bill: It would, they say,
include some use of managed care.


In managed care organizations such as HMOs, providers receive a lump sum
every month based on how many people they have enrolled. The idea is to
encourage providers to offer preventive care and to scrutinize every test or
treatment, since they bear the losses if they go over budget.


More than other states, California embraced this approach. In its Medicaid
program, about 80 percent of enrollees are in managed care.


Michael Lighty, director of public policy for the California Nurses
Association/National Nurses United, the lead sponsor of the California bill
said "it will be a mixed-payment approach. Per capita payments are
envisioned in this system."


"We want to address how different payment methodologies work before
mandating specifics in the bill," he added.


Lighty said more provisions to curtail costs will be added shortly.


As opposition builds over congressional efforts to dismantle the Affordable
Care Act, progressives in California and New York have responded to the ACA
repeal threat by crafting proposals for universal coverage. (Such efforts
failed earlier in Vermont and Colorado.)


Single-payer supporters are tapping into Americans' deep dissatisfaction
with the high costs and red tape embedded in the current hodgepodge of
private insurance and public programs. But some defenders of the existing
national health law say single-payer proposals are a costly distraction from
the immediate fight in Washington over the health care safety net that
millions of Americans rely on.


The California legislation, Senate Bill 562, requires that payments to
providers be made on a "fee-for-service basis unless and until another
payment methodology is established by the [Healthy California] board,"
according to the bill.


It says health care delivery systems can choose to be paid on a capitated
basis. But the analysis by the state Senate Appropriations Committee said it
may be difficult for the single-payer program to establish such a payment
system because of other features in the law, such as patients' ability to
see any provider with no referral necessary. A report in April from the
state Senate Health Committee made a similar determination, saying multiple
provisions in this bill "would make cost control unlikely to occur."


The bill doesn't address other innovative approaches being rolled out across
California and the country. For instance, Medicare and private insurers are
shifting to "bundled payments" for knee and hip surgeries, in which
providers are paid a set fee for all treatment. More physician groups and
hospitals are forming accountable care organizations (ACOs), which try to
coordinate care within a budget.


While fee-for-service medicine can lead to excessive spending, Lighty said,
ACOs and other "pay-for-performance" initiatives haven't been entirely
effective at reining in costs either.


The California bill faces another daunting challenge: coming up with the
estimated $400 billion annually required to pay for universal coverage.
Existing government money used for health care could cover half of that
amount, but the other half may need to come from payroll taxes on workers
and employers - not a politically palatable prospect. (The taxes could be
offset in some measure by reduced health spending by employers and workers.)


Every Californian, regardless of age, employment or immigration status,
would be eligible for coverage and there would be no premiums, copayments or
deductibles. In addition, patients could see any willing provider without a
referral and receive any service deemed medically appropriate.


Those factors would make it difficult for the program to use "drug
formularies, prior authorization requirements or other utilization
management tools," the Senate analysts wrote. As a result, they estimated
that health care utilization may increase by 10 percent compared to
fee-for-service in Medi-Cal, the state's Medicaid program.


At a hearing May 22, state Sen. Jim Nielsen (R-Tehama) said the single-payer
proposal appears to invite patients to "come in for what's almost like a
blank check."


State Sen. Ricardo Lara (D-Bell Gardens), a chief sponsor of the bill,
acknowledged the concern and said he's looking at what single-payer systems
outside the U.S. do to contain costs.


The bill's sponsors are opposed to the proliferation of narrow insurance
networks that exclude providers to keep costs down. But the Senate analysis
said that approach means the state couldn't use potential exclusion from the
single-payer system as a means of negotiating favorable prices, as health
insurers often do.


Lighty said significant costs can be pared from the current system in other
ways. For instance, consumers will no longer subsidize lavish salaries for
hospital CEOs and excessive profits because reimbursements will be tied to
"efficiently providing health care services."


Lara said eliminating the middleman role of health insurers and
consolidating the state's purchasing power would lead to huge savings. "By
pooling health care funds in a publicly run fund, we get the bargaining
power of the seventh-largest economy in the world," he said.


Insurers and brokers in California and nationwide oppose single-payer
proposals because they could literally put them out of business. And
legislative analysts and health policy experts question whether California
would be able to exert sufficient bargaining power. They noted the political
constraints that Medicare has faced in flexing its market power on prices.


"Our system of government may mean single-payer is much less successful than
in other countries," Ginsburg said. "We are so open to lobbying it means we
can't count on some of the very strong actions other countries have taken to
keep costs down."




June 1, 2017


What would California's proposed single-payer healthcare system mean for me?



htmlstory.html> LA Times



By Melanie Mason


The prospect of a universal single-payer healthcare system in California -
in which the state covers all residents' healthcare costs - has enthralled
liberal activists, exasperated business interests and upended the political
landscape in the state Capitol. But some are still trying to sort out what
exactly all the fuss is about.


Let's start with some caveats. This proposal faces a steep climb before it
becomes a reality. It almost certainly will require new taxes to finance it
and that would entail the major lift of cobbling together a supermajority of
votes in both houses of the Legislature for approval. Even if that happens,
it still faces another hurdle: Gov. Jerry Brown, who has been publicly
chilly toward the idea. Voters would also need to OK the proposal to exempt
it from spending limits and budget formulas in the state constitution. And
there's yet another big obstacle: getting approval from the federal
government to repurpose Medicare and Medicaid dollars.


Still, single-payer has emerged as a litmus test for California Democrats.
The proposal, by state Sens. Ricardo Lara (D-Bell Gardens) and Toni Atkins
(D-San Diego) is still evolving, but here's what we know so far about the
bill and how it would work: 


What is single payer? Is it the same thing as a "public option?"


*  Under a single-payer plan, the government replaces private insurance
companies, paying doctors and hospitals for healthcare.

*  That's different than a public option, in which the government offers an
alternative to other insurance plans on the market.


It's all in the name: In a single-payer system, one entity - in this case,
the state of California - covers all the costs for its residents'
healthcare. Effectively, the government would step into the role that
insurance companies play now, paying for all medically necessary care.


A number of countries, including Canada and the United Kingdom, have
single-payer models. While there have been calls for a similar system in the
United States for decades, the cause was energized by Vermont Sen. Bernie
Sanders' 2016 presidential campaign, which backed a "Medicare for all"
healthcare system, modeled on the existing program for Americans aged 65 and


Other efforts to enact state-level single-payer systems have fallen flat. A
2011 program in Vermont was abandoned three years later due to financing
concerns. Last year, voters in Colorado rejected a ballot initiative to
create such a program.


The California bill bears the imprints of Sanders' campaign - and of the
California Nurses Assn., which has long pressed for a single-payer plan. It
has become a rallying cry for the progressive flank of the Democratic party.


"The model here is not the United Kingdom or Canada," said Darius
Lakdawalla, a health economist at University of Southern California. "The
model here is Medicare."


The proposal is different than a "public option," in which the government
subsidizes an insurance plan that competes with private insurers. A public
option was debated in the run-up to passage of the Affordable Care Act, but
ultimately not included. House Minority Leader Nancy Pelosi recently
returned to the concept, telling California Democrats at their convention in
May, "I believe California can lead the way for America by creating a strong
public option."


Gerald Kominski, a professor of health policy at UCLA, said a public option
would offer a backstop in states where insurers have dropped out of the
Obamacare marketplace. Covered California, the state's marketplace, is
generally seen as robust compared to other states.


"Sure, there's room for a public option in California," Kominski said, "but
I'm not convinced there's an overwhelming need."


How would this change how I get healthcare?


*  No more coverage through work or through federal public programs - it
would all be in one state-subsidized plan.

*  Virtually all healthcare costs would be covered.


Whether you're insured through an employer, through Covered California or on
public programs such as Medi-Cal, as long as you've established California
residency - regardless of legal immigration status - you would be enrolled
in a single plan, which the bill's backers call the "Healthy California"
plan. That would eliminate the need for employer-provided plans and other
commercial options.


Michael Lighty, policy director for the California Nurses Assn., put it
bluntly: "You'll never have to deal with an insurance company again."


Benefits would be generous, including all inpatient and outpatient care,
dental and vision care, mental health and substance abuse treatment, and
prescription drugs. Patients would be able to see any healthcare provider of
their choosing.


I'm on Medicare. What would this mean for me?


*  Federal programs like Medicare and Medi-Cal would be merged into the
single-payer plan.

*  But there's no guarantee the Trump administration would approve such a


Older Californians on Medicare would also be wrapped into this plan. The
plan envisions using all the existing federal dollars going toward Medicare
and Medi-Cal beneficiaries in California in the state's single-payer model.


But there's a hitch: The federal government - a frequent punching bag for
California Democrats at the moment - would need to grant a waiver to
redirect that money.


"The question is: Will the Trump administration approve such a waiver?"
Kominski said.


In one sense, he said, the request could align with conservative ideology
that calls for increased power of states relative to the federal government.


"On the other hand, for political purposes, I can see the Trump
administration saying there's no way we can sign a waiver," Kominski added.


Supporters say they believe they can obtain a waiver, but have gotten no
indication from the Trump administration that they'd be inclined to sign it.
It is unclear what would happen if they cannot get federal approval.


Would this affect how much I spend on healthcare?


*  No more co-pays, premiums or deductibles

*  But Californians would be hit with higher taxes


At this point, it's hard to say. The existing language of the proposal does
away with a lot of the financial burdens associated with the current
healthcare system, such as premiums, deductibles and co-pays.


"When [patients] go to a provider, they won't have to pay anything," Lighty
said. "They won't get a bill from the insurance company after surgery. They
won't be told to pay thousands of dollars to get into an ambulance. All of
that goes away."


Average premiums for Californians who get insurance through an employer (as
the majority of people in the state do) were just under $600 per month in
2016, according to the California Health Care Foundation - higher than the
national average.


But the new system would not eliminate those costs entirely.


"If you're paying for health insurance right now through healthcare premiums
and cost-sharing, you'd end up paying instead through taxes," said Micah
Weinberg, president of the Bay Area Council Economic Institute. "There are
some people who at the end of the day will end up paying more, others who
will end up paying less."


A recent state Senate analysis pondered a 15% payroll tax as a way to raise
the estimated $200 billion needed in revenue to cover the program's costs.
The analysis assumes another $200 billion would come from existing federal,
state and local funds.


The nurses' union paid for their own study of the proposal, conducted by
economics professors at the University of Massachusetts Amherst. Assuming
federal waivers, the analysis suggests $225 billion could come from
repurposed Medicare and Medi-Cal funds.


An additional $106 billion would have to come through new revenue. The study
suggests two new taxes: a 2.3% gross receipts tax on businesses and a 2.3%
sales tax coupled with a tax credit for families that currently qualify for


These ideas are all possible scenarios to generate new revenue, but the bill
currently does not contain any specific tax provisions.


"It's not free healthcare. That's something people really need to
understand," Weinberg said. The key question, he added, is "do you pay the
government or do you pay a private insurer?"


What about overall healthcare costs for the state?


*  A legislative analysis estimated overall costs would be $400 billion per

*  Proponents of the plan are touting savings from the single-payer system
and have come up with a lower annual price tag: $330 billion.


The Senate analysis pegged the total cost for the plan at $400 billion per
year. Half of that would come from existing money, the other half from new
revenues such as a payroll tax. Because the plan would eliminate the need
for California employers to spend money on their workers' healthcare (an
estimated $100 billion to $150 billion annually), the total new spending on
healthcare shouldered by the state under the bill would range from $50
billion to $100 billion yearly.


The $400-billion price tag is more or less in line with what Kominski and
other researchers at UCLA estimated was the total healthcare spending in
California in 2016: around $370 billion. Around 70% of those expenditures
were paid by taxpayer dollars, the study found.


The UMass Amherst analysis, commissioned by the nurses, suggested that a
single-payer system would decrease overall healthcare spending in the state
by 18%, thanks to streamlined administration and the possibility of
negotiating for reduced prescription drug prices. The total annual tab,
according to the study, would be around $330 billion.




Jeff Wells
Deputy Editor, CAL/AAEM News Service


Brian Potts MD, MBA
Managing Editor, CAL/AAEM News Service

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