LAO Confirms California Single Payer Reduces Health Care Spending, Contains Annual Growth

[courtesy of California Progress Report]

By State Senator Sheila Kuehl

This is my fifth essay for 2008. I interrupt my presentations on the current budget crisis to report on a confidential analysis of SB 840, my legislation creating a single payer health insurance system, requested by anonymous members of the Assembly [the requesters’ names are not revealed, as a matter of course, by the Legislative Analyst’s Office (LAO)] and conducted, in the middle of their budget analyses, by the California Legislative Analyst’s Office. My first 2008 essay was an update on the 2007 “year of health reform”. The second set out some background information on actions taken by the legislature to re-balance the 2007-2008 budget given shrinking revenues. The third reviewed the Governor’s budget as he presented it in January of this year. This essay will analyze the LAO review of a single payer system for California.

Why the Legislative Analyst Looked at SB 840

The LAO, in addition to their yearly on-going analysis of state spending and the budget, receives requests from members of the Legislature to look at the fiscal impacts on the state of various legislative measures. You may recall that during the discussion of the omnibus health measure put forward by the Governor and then-Speaker Fabian Nunez, Senate President pro-temps Don Perata asked the Legislative Analyst’s Office to report on the potential impact of the bill on State finances. In so doing, the LAO took into account a proposed funding initiative the Governor had submitted for the next ballot go-round which, if adopted by the people, would have set out a plan to fund the measure to be put on the ballot later in the year.

The LAO’s report was presented to the Senate Health Committee and the programmatic bill did not pass the Committee. The funding mechanism was not in front of the Committee and did not go on the ballot.

Following the defeat of that bill, three members asked the LAO to analyze SB 840, not only for its impact on State spending (which was found to be favorable), but also for the larger issues raised in funding the new program.

The new LAO report did not actually analyze SB 840

Although the LAO’s report clearly showed the kinds of savings a single payer plan would provide for the State, workers, employers and private individuals, it was not an assessment of SB 840. SB 840, now awaiting a hearing in the Assembly Appropriations Committee, does not contain details concerning taxes, premiums, expenses or other financial matters, but rather constructs a Blue Ribbon Panel, made up of statewide officers, to research and propose the actual funding mechanism and put it out for a vote of the people, along with the entire health insurance plan.

This is made necessary by the fact that any change to state revenues that increases revenues (even though all premiums for single payer would take the place of all premiums, co-pays and deductibles now paid by those who are insured) must garner a 2/3 vote in both houses. No Republican will vote for SB 840 and so, the bill with the current Blue Ribbon Panel in it, needs only a majority vote to go to the Governor’s desk.

What the LAO found

The LAO study confirmed that a single payer health care system saves money and lowers the rate at which health care costs grow each year. This has always been the main argument for single payer – the total monies devoted to health care spending in California in any given year are more than enough to guarantee comprehensive universal health care to all Californians.

Generally, the LAO report agreed with the findings of the Lewin Group study of 2006 with regard to the impact of single payer on the growth in health care spending and found that Lewin’s projections for the legislation’s impact on health care spending were reasonable. Like Lewin, the LAO analysis identified substantial savings on administrative costs, bulk purchasing of drugs and durable medical equipment, and confirmed that it would lower the rate at which costs grow every year.