Two of the most populous and legislatively influential states in the nation — California and New York — currently have single-payer healthcare systems under serious consideration. If enacted, these measures would eliminate the private health insurance industry in those states, including health insurance carriers, brokers and employer-sponsored health benefits, and replace them with state-run programs. Below are five reasons why all advisers cannot ignore the single-payer debate in these bellwether states.
1) This is the pre-cursor to a national conversation. Bernie Sanders’ “Medicare for all” message continues to be popular at the public level and has propelled a social movement based on the idea that healthcare is a human right and the healthcare delivery system should be a not-for-profit business. Progressive state legislators in California and New York are motivated by the uncertain future of the Affordable Care Act, and by fear about the loss of benefits for their state’s residents. They feel pressured to find a solution, and are putting their support behind state-based single-payer systems. Even Aetna’s CEO has acknowledged the need for a single-payer healthcare discussion at the national level.
2) Understanding the terminology is important. There is a lot of confusion around the terms used in this debate, and it’s critical for advisers to understand the differences. Single-payer, universal healthcare and “Medicare for all” are not synonymous, although they are often used that way by supporters and by the media. A single-payer plan creates one single source of payment to providers, typically through a state or federal program. Universal healthcare is a more broad term for a program that makes some level of basic coverage available to everyone (likely through a government program), but also allows for private insurance. “Medicare for all” is a type of universal plan in which the basic coverage would be provided by an expansion of the federal Medicare program, but would still allow for the purchase of private insurance, as it does currently. Both the Healthy California Act and the New York Health Act are true single-payer plans, which would eliminate private insurance.
3) A single-payer plan could affect much more than health insurance. The California single-payer plan, called the Healthy California Act, would end the sale of private health insurance in the state. This includes employer-sponsored health insurance, private individual health insurance, Medicare supplements and individual plans purchased through the Covered California exchange. The plan would make it illegal for doctors to privately provide any services covered by the state plan. The proposed plan also encompasses dental, vision, long-term care and workers’ compensation coverage.
4) Financing is the biggest hurdle. In both California and New York, initial funding estimates for these single-payer plans exceed the total annual state budgets and are likely to create massive sticker shock for state residents and businesses. The Healthy California Act has initially been estimated to cost between $330 billion and $400 billion, and the bill passed through two State Senate committees and the Senate floor on June 1 with no financing plan. It has now moved on to the State Assembly and must be voted on by July 14.
A few financing options have been proposed, including a 15% payroll tax increase, and a hybrid option that includes a 2.3% increase in gross receipts tax on businesses along with a 2.3% increase in the state sales tax. Since a financing plan has not been selected by the bill’s authors, no independent cost analyses have been conducted.
New York’s State Assembly voted in mid-May to pass the New York Health Act, which has an initial estimated cost of $80 billion, and the State Senate may vote on the bill this year, after declining to vote on prior single-payer bills in 2015 and 2016.
It’s also important to note that, unlike the federal government, both California and New York have balanced budget requirements that prevent them from going into debt. If the programs’ costs exceed projections or if federal funding doesn’t remain at current levels, it’s unlikely the programs could remain viable without significant cuts to services or reimbursement rates. Many national single-payer systems, like those in Canada and Great Britain, have faced funding shortages and have had to employ various methods of rationing care.
5) Supporters of single-payer healthcare are passionate and vocal. They see the single-payer version of universal healthcare as a moral imperative and believe that the current private insurance system is rife with waste, fraud and unnecessary administrative expenses (including broker commissions). They believe that a government-sponsored plan would end health disparities, effectively control costs, and assure that everyone has equal access to an excellent standard of care. In California, the single-payer bill is supported by the California Nurses Association (part of National Nurses United), a very powerful group that consistently demonizes the insurance industry in the media.
It’s critical that all advisers understand that the debate about single-payer healthcare has changed dramatically since early 2017, when the new administration took office and began pushing for the repeal and replacement of the Affordable Care Act. Progressive politicians are using the current uncertainty to move the single-payer idea forward, and they are finding vocal and passionate support from a growing group of active citizens who believe they are fighting for social justice.
Advisers need to be active participants in this debate, helping to educate legislators, clients and colleagues about the true impact of these plans with rational, informed voices as we move toward a national conversation that is likely to have an unprecedented influence on our industry.