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California’s single-payer plan costs $400 billion — twice the state’s entire budget

The state’s ambitious bid to establish a single-payer health care system has a hefty price tag.

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Dylan Scott covers health care for Vox. He has reported on health policy for more than 10 years, writing for Governing magazine, Talking Points Memo and STAT before joining Vox in 2017.

California is undertaking an ambitious bid to establish a single-payer health care system, and now its plan has a price tag: $400 billion a year.

The state legislature has been debating a plan this year to implement a government insurance program to cover all Californians, including those without legal status.

It’s a very generous proposal, as currently conceived. The state would pay for almost all of its residents’ medical expenses — inpatient, outpatient, emergency services, dental, vision, mental health, and nursing home care — under the plan, and Californians would not have any premiums, copays, or deductibles. Those sweeping benefits drive up costs.

The major test for any effort to create a single-payer health care system is how to pay for it. California now knows the math it’s contending with. The plan, according to the estimate by the state Senate’s Appropriations Committee, would cost twice as much as the entire state budget that Gov. Jerry Brown is proposing for the next fiscal year.

Lawmakers have been waiting for an estimate of the costs, which they received on Monday. Here is the bottom line, from the Los Angeles Times:

The analysis found that the proposal would require:

*A total cost of $400 billion per year to cover all healthcare and administrative costs.

*Of that, $200 billion of existing federal, state and local funds could be repurposed to go toward the single-payer system.

*The additional $200 billion would need to be raised from new taxes.

Lawmakers have not settled on a plan for paying for the new system, though the analysis released Monday noted a 15 percent payroll tax on employers would cover the increased costs.

Such a significant tax increase could prove politically troublesome, even if employers and employees would see reduced costs through the elimination of insurance premiums, which the Times reported range from $100 to $150 billion per year. Residents would also no longer have to pay most of their health care bills.

Polling on single-payer plans is notoriously fickle, but this February 2016 survey from the Kaiser Family Foundation demonstrates the dilemma California officials will now face:

Half of Americans said, in the abstract, that they would support single-payer. But 20 percent flipped and said they would oppose the idea if it meant many Americans would have to pay higher taxes. That’s nearly twice the percentage of people who flipped to say they would support such a plan because it would reduce insurance premiums and out-of-pocket health care costs.

Kaiser Family Foundation

Vermont is the most recent state to try (and fail) to create a single-payer health care system, as Vox’s Sarah Kliff documented. The state had begun developing its own proposal, to be pursued under an Obamacare waiver, but ultimately scuttled the plan in 2014 after seeing the concept’s cost estimates and the necessary tax increases.

Single-payer health care is increasingly popular in theory among Americans, as Republicans in Washington seek to roll back Obamacare. But the practical and political challenges highlighted by this California news are something that proponents will need to grapple with if they want it to become reality.