Will California Really Enact a Single-Payer Plan?

The California State Senate has passed S.B. 562, the Healthy California Act, which would create a single-payer plan in California. While it has passed its first major milestone in the Senate, the measure faces significant obstacles.

Even if this bill passes the Assembly (it has not yet even been assigned to a committee), it is doubtful whether the governor will sign it. Governor Brown has built his legacy on restoring the state to fiscal soundness. Estimates are that this bill would cost $400 billion per year, more than twice the entire state budget. The governor has not yet taken a position on the bill, but has reportedly expressed skepticism.

Even if Governor Brown were to sign the bill, it would be necessary to get a waiver from the Trump Administration to fold Medi-Cal into the single-payer system and it is questionable whether the administration would do that. Even if California could get a waiver regarding Medi-Cal, the bill also calls for folding Medicare into the single-payer system and there is no mechanism in the Medicare law to allow that. It would literally take an act of Congress to make that happen and it is doubtful that the current Congress would approve such a bill.

Even if all that were to happen, there would still be a need to find funding for the plan. Any new taxes would require a two-thirds supermajority vote in the legislature, which is always difficult. Some observers have stated that implementation of the bill would require amendments to the state constitution, which must be approved by voters.

If all of the above obstacles were overcome, there could very well be legal challenges, such as under the preemption provisions of the Employee Retirement Income Security Act (ERISA). ERISA prevents states from enacting laws that relate to employee benefit plans.

The bottom line is that nothing is likely to happen this year or even next, if at all. It would be much easier to enact single-payer legislation at the federal level than at the state level.

The Healthy California Act, would create the Healthy California program to provide comprehensive universal single-payer health care coverage. The bill, among other things, would provide that the program cover a wide range of medical benefits and other services and would incorporate the health care benefits and standards of other existing federal and state provisions, including, but not limited to, the state’s Children’s Health Insurance Program (CHIP), Medi-Cal, ancillary health care or social services covered by regional centers for persons with developmental disabilities, Knox-Keene, and the federal Medicare program.

The bill would require a board to seek all necessary waivers, approvals, and agreements to allow various existing federal health care payments to be paid to the Healthy California program, which would then assume responsibility for all benefits and services previously paid for with those funds.

This bill would also provide for the participation of health care providers in the program, require care coordination for members, provide for payment for health care services and care coordination, and specify program standards. The bill would state the intent of the Legislature to enact legislation that would develop a revenue plan, taking into consideration anticipated federal revenue available for the Healthy California program. The bill would create the Healthy California Trust Fund in the State Treasury, consisting of any federal and state moneys received for the purposes of the act.

This bill would create the Healthy California Board to govern the program, made up of 9 members with demonstrated and acknowledged expertise in health care. The bill would provide the board with all the powers and duties necessary to establish the Healthy California program, including, but not limited to, determining when individuals may start enrolling into the program, employing necessary staff, and negotiating and entering into any necessary contracts. The bill would also require the Secretary of California Health and Human Services to establish a public advisory committee to advise the board on all matters of policy for the Healthy California program.

This bill would prohibit health maintenance organizations and health insurers from offering health benefits or covering any service for which coverage is offered to individuals under the program, except for certain organizations, such as Kaiser. The bill would authorize health care providers to collectively negotiate rates of payment for health care services, rates of payment for prescription and nonprescription drugs, and payment methodologies using a 3rd-party representative.

This bill would prohibit this act from becoming operative until the Secretary of California Health and Human Services gives written notice to the Secretary of the Senate and the Chief Clerk of the Assembly that the Healthy California Trust Fund has the revenues to fund the costs of implementing the act.


About John Garner

John Garner has over thirty five years of experience in employee benefits. He specializes in compliance, health care reform, the Health Insurance Portability and Accountability Act (HIPAA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), and the Employee Retirement Income Security Act (ERISA). He helps clients with life, health, and disability benefits, cost containment, flexible benefits, and claim consulting.

Subscribe to the Bolton Blog