Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


California’s Disgraceful Single Payer Healthcare Proposal

Anybody that needs an explanation for Americans’ hatred of politicians should take a look at California’s single-payer health insurance proposal Senate Bill (SB 562).

Both supporters and opponents of single payer will be disgusted by SB 562; or The Healthy California Act, passed by the Golden State’s Senate on June 1. All SB 562 does is ask the lower house of the state legislature; The Assembly, to write a single-payer health insurance law.

Capitol Journal reporter George Skelton labeled SB 562 “a hollow bill – a bill in name only” and rightly so. Absolutely no details of the single-payer system are provided; instead all SB 562 does is ban private health insurance and tells the Assembly to set up a system to provide healthcare to everybody.

The Healthy California Act does not even say how the healthcare would be paid for. The version of the law posted at the state legislature’s website says nothing about financing, but goes into great detail about the operations of the board that will administer the program.

Everything that’s wrong with Politics in America Today

The Healthy California Act is a perfect example of everything that’s wrong with American politics these days. It mandates a popular but highly expensive benefit, and fails to address taxes or financing.

My guess is that SB 562’s authors; Senators Ricardo Lara (D-Bell Gardens) and Toni Atkins (D-San Diego), are not serious about single-payer health insurance. Instead they see it as a popular issue that will advance their careers.

Lara is running for the statewide office of California Insurance Commissioner. His campaign website is decorated with pictures of healthcare for all rallies and posters. SB 562 looks more like a campaign stunt for Lara than as serious effort to create a program to help Californians.

This thesis is supported by the authors’ refusal to keep SB 562 in the State Senate and work out all the details. Instead they passed it on June 1, so they could leave on summer vacation.

The Senators who voted for SB 562 were happy to sign off on a potentially popular new benefit but not willing to implement the taxes needed to pay for it. Their actions are disturbingly reminiscent of Congressional Republicans that want to keep popular provisions of Obamacare but abolish all the taxes that pay for Obamacare programs.

Details are not that Hard

A particularly bothersome aspect of SB 562 is that Lara himself admitted that he had not studied single-payer healthcare. Instead he told The Los Angeles Times of vague plans to fly to Canada and Taiwan to study those nations’ health insurance systems.

Since dozens of scholars and experts have studied health insurance systems around the world Lara’s trip would not be necessary. His time would be better spent reading some reports about the health insurance systems in other nations. If Lara were planning to fly somewhere to check out a health insurance system he should visit Australia; which reportedly has a much better system than Canada’s.

Lara and Atkins failed to mention the potential costs of the system even though they’re well known. A May 2017 report from the Political Economy Research Institute (PERI) at the University of Massachusetts estimated 2017 healthcare expenditures in California at $368.60 billion.

Ironically enough that report was paid for by Lara’s political supporters in the California Nurses’ Association, Skelton reported. That means he must be well aware of it but afraid to propose anything that might lead to a tax increase.

Americans Want Single Payer but they don’t want to Pay for it

Most observers think California Single Payer would cost around $400 billion a year but most of it would be paid for by diverting funds from existing government programs like Medicare and Medicaid. Yet California would still have to come up with another $100 billion a year in taxes in a state that’s already overtaxed.

Lara’s spineless actions can easily be explained by a Public Policy Institute of California Poll. The Institute found that 56% of California voters supported single pay but only 43% favored tax increases to pay for it.

Instead of waging the tough battle for taxes Lara wants the photo opportunities and soundbites needed to win a higher, better paying political office. Mr. Lara just demonstrated that he does not care about his constituents or their health. All he wants to do is get elected to office at all costs.

Single Payer would Produce Enormous Economic Benefits

Lara’s refusal to address taxes is a shame because the PERI report concluded that single-payer would have enormous economic benefits for California. It would reduce payroll costs for small businesses by 22%; and payroll costs for medium-sized companies by 6.3% to 13%, by eliminating the need for health insurance.

Since small businesses accounted for 67% of the jobs created in America between 1993 and 2011 according to the Small Business Administration. It stands to reason that California would see a burst of new job creation and an influx of businesses into the state if SB 562 were to go into effect.

To these economic benefits we can add a 2.1% to 9.1% cut in expenses for the average middle class family by eliminating health insurance payments. That means a 2% to 9% increase in income for the family, and probably more for people with more expensive research such as older individuals and those with serious health problems.

The middle class increase would lead to more consumer spending that would spur more job creation and more economic activity across the board. That would be a real stimulus that would benefit all California residents.

PERI also proposes two excellent means of paying for single-payer. It recommends a 2.3% gross receipts or value added tax (VAT) and 2.3% state sales tax to pay for Healthy California.

How to Finance Single Payer

Unlike a sales tax, a gross receipts tax is collected every time a product is sold and not just on the final or retail sale. That means tax is paid when the manufacturer sales to the wholesaler and the wholesaler sells to the retailer. Its European equivalent the VAT is the main mechanism that finances the single-payer health insurance systems American liberals so admire.

Neither of those taxes seems that high and many Californians fed up with high-health insurance costs might be willing to vote for them. A wide variety of products and services including groceries are exempt from the taxes under California law.

Yet Mr. Lara is afraid of even mentioning those taxes. If his behavior is typical of Democrats then Americans should not hold their breath waiting for single-payer health insurance. Democrats like the idea of single payer but they are afraid to pay for it, politicians like that deserve to lose.