The Scoop on California’s New Medicare for All Bill
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Welcome to Code WACK!, your podcast on America’s broken healthcare system and how Medicare for All could help. I’m your host, Brenda Gazzar.
How does California’s new Medicare for All bill compare to previous attempts? Would most families have to pay more for health care or would they actually save money under this bill? To find out, we spoke to Dr. James G. Khan, a University of California San Francisco professor emeritus. He’s a health policy and health economics expert who has consulted for the World Health Organization and the World Bank.
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Q: A new California single-payer bill, AB 1400, was recently introduced by Assemblyman Ash Kalra. How do you think this bill compares with previous legislation?
Kahn: Well, the new bill, AB 1400, is excellent. It’s modeled largely on the House of Representatives bill HR 1384. The benefits are excellent — comprehensive, inclusive in terms of who qualifies. Those are all mostly features of past California bills.
What’s a little bit different about this bill is it is entirely based on fee-for-service payments for providers, for doctors and other providers, as well as global budgets for hospitals and other institutions. By comparison, some of the prior bills had specific allowance for capitated systems like HMOs, like Kaiser, could participate as a capitated system. That’s probably a bit better, although in my view we could also do capitated payment as long as we take the profit motive, out of the picture and as long as capital investments, like new hospitals, are controlled by the state, not by the provider.
Host: Capitation, a common payment arrangement with HMOs gives health care providers a set amount each year for each patient assigned to them for care. The provider gets the same amount no matter how much care the patient needs.
Kahn: Another appealing feature of AB 1400 is that it disallows financial incentive schemes that have been tried and not worked under the current Medicare system. For example, Accountable Care Organizations, known as ACOs, are systems that (the Centers for Medicare and Medicaid Services) has tested to financially incentivize provider groups — not capitated groups — but fee-for-service providers to try to spend less while maintaining quality and the idea would be that any savings to Medicare would be shared with the providers. And these have been tried in five iterations over 15 years and evaluated time after time and have never worked. Yet, they’re still quite popular in Washington because there are vested interests who like them not because it helps society and so this bill wisely says those kinds of incentive systems are not permitted.
Q: Okay. Will it cost more than we pay now, including everything that is currently paid by the federal and California state governments, counties, cities, college districts, families and businesses?
Kahn: No, it will cost less. You knew that when you asked the question! One of the clear findings from economic research about single payer is that the savings that can be achieved are greater than the added costs of providing insurance to everyone so the added costs come from the fact that if everyone’s insured and well insured, they’re more likely to see the doctor, they may be more likely to go to the hospital. In the jargon of the field, utilization increases. Utilization means how many hospital days, how many doctor visits, etc. Of course it goes up.
If that were the only thing that happened, there would be a small increase in costs. But it’s not the only thing. The biggest thing is administrative simplification so all of the effort that we put into complex payment systems, all of the effort that the insurance companies put in, and that providers are forced to put in in order to get paid, costs a lot of money. The estimate currently is more than $600 billion per year in the United States is wasted on excess paperwork so if you can get those savings and in California, it’s a little bit smaller obviously because California is not the whole nation but if you can capture those administrative savings, that already more than pays for the increase in utilization.
When you add on top of that drug prices can be negotiated, you’re going to see additional savings beyond that and potentially as well, reductions in fraud and unnecessary care, so there are quite a few different ways that you get savings and those savings are greater than the added cost of better insurance, even in year one and the savings, only grow over time.
Q: So what does that mean then for most California families and businesses?
Kahn: On average, families and businesses will stop paying premiums and there’ll be no more out-of-pocket costs. And so those savings for the family will be greater than the increase in their taxes to get more money into the government system, I won’t lie. There are people, probably my household. I happen to be well paid, university professor. We’re going to probably have to pay more in new taxes, then we save on our insurance because we’re really well off and we’re really lucky right now, but for people who make middle-class incomes — $50,000, $75,000, $100,000, $125,000 — all of those people as well as people who are really poor will come out better, because the amounts they’re paying right now again — premiums and out of pocket costs — will go away, and their new taxes will be minimal so they’ll save.
Q: How important is it that the state capture the dollars the federal government currently spends on Medicare, Medi-Cal and Covered California premium subsidies? What needs to happen to bring those dollars into the single-payer system?
Kahn: Yeah, it’s really important because, again, a lot of the advantage of single payer financially is in the simplification of the payment systems, so in order to have a single payment system and a single set of benefits you need to bring the money in and use that money to pay for people like Medicare beneficiaries to participate in the single-payer system with the same comprehensive benefits, and the same billing system. That’s really important. Another thing is right now one of the problems in our health system is that people…who have insurance that pays less like Medi-Cal, which is California’s Medicaid system, Medical pays for less per visit. And so a lot of doctors won’t take Medicaid patients, or make it harder to get appointments. Those kinds of differences create — aside from the inefficiency — they create inequities, and we need that to go away, so it’s really important to have all of the major systems, ideally, all of the systems of paying for medical care folded in.
Now this is tricky because we need the cooperation not only of the executive branch so happily currently run by a Democrat, but also probably some changes in law in order to really fold things in and so that’s part of the battle. Some people believe that we might as well go for federal reform because even state reform will require federal action. I can’t say. I’m not a political strategist, but I tell you if you have a system that only covers 40% of people and it doesn’t have people from Medicaid, it doesn’t have people from Medicare like that, then it’s not really single payer. It’s better but it’s not really single payer.
Q: Okay. Is there anything else you’d like us to know about AB 1400?
Kahn: Just that people should let their elected representatives know that they like AB 1400 and encourage the development of a financing plan. As is usually the case in California, the single-payer proposal does not have a financing plan. The main reason for that is that financing in the state of California requires a supermajority whereas just a bill to set up a program without financing just requires a simple majority, and so it’s a politically prudent approach but we do need to have the discussion about how to finance single payer. We know it’s going to save money but we still need to bring money into the government to allow the government to set up a single-payer fund, and we have options for how to do that.
There’s a lot of interest these days in wealth taxes because of the profound wealth and income inequality that we see, more than ever in history. There’s also interest in taxing high incomes, but there’s also strategy involving a payroll tax which allows companies that are currently paying premiums to continue their contribution but to the system rather than to the individual employee so there are choices to be made there and I think that conversation will be more interesting once we have those discussions.
Thank you, Dr. Kahn.
Find more Code WACK! episodes on ProgressiveVoices.com and on the PV App. You can also subscribe to Code WACK! wherever you find your podcasts. This podcast is powered by HEAL California, uplifting the voices of those fighting for health care reform around the country. I’m Brenda Gazzar.
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