One topic we haven’t spent too much time on in depth is the prospect of having a single payer healthcare system here in California. Proponents of such a system have made many arguments in favor of it. It was a major plank in Sen. Bernie Sanders’ presidential campaign platform. There has also been discussion about whether Obamacare was designed to fail to pave the way for a single payer system down the road.
So far, these debates have been happening largely on the national stage with proponents and opponents lobbying Congress one way or the other. With the rise of the American Health Care Act as the fulfillment of a promise Republicans made to their constituents to repeal and replace Obamacare, the prospect of a single payer universal healthcare system seems to be more pie in the sky than ever before.
That is, unless you live in California. State Sens. Lara and Atkins have introduced SB 562, the Healthy California Act. This bill would extend healthcare benefits to every resident of California, citizen or not. While the merits of such a bill will likely be hotly debated here in the Golden State, one aspect of it cannot be denied — the cost.
Until just recently, the cost of such a venture was unknown. A single payer healthcare system in a state as large as California has never been attempted in the US. We have nearly 40 million people living here. The economic impact of single payer has always been a major sticking point in practical implementation. Exactly how much is this going to cost us?
$400 billion. That’s billion with a B. And that’s not a one-time cost. That’s an annual cost. To put that in perspective, California’s total annual budget is estimated to be around $250 billion. The legislative analysis estimates that around $200 billion in existing state and federal funds could be used to offset the cost of a single payer healthcare system, but that leaves another $200 billion to be raised through other means.
This being California, it’s practically a surefire bet that those other means will inevitably be new taxes. We would be almost doubling our current budget. Double. I suspect most of these increased taxes will be levied against our businesses. The argument will likely be that they will no longer need to pay for employee healthcare plans, so the money they would have spent should be directed to this new tax. I also predict a new affluence tax on individuals and couples making more than $500,000 annually (or maybe $250,000!). The analysis itself proposes one scenario where an increased payroll tax of 15% could foot some of the bill.
The net result will be an ever accelerating free fall to the bottom of the business friendliness rankings and an increased exodus of the middle class to more tax friendly states. After all, around 65% of general fund revenue comes from direct personal income taxes. Don’t worry though. Our legislators will surely find a way to pass this first and then figure out how to pay for it later. I’m sure we will be talking about this a lot more in coming weeks. Be sure to check out our podcast archives to keep up to date on everything going on in California.