California Faces Reality: States cannot do single payer without federal government

California Faces Reality: States cannot do single payer without federal government

By Kevin Zeese, Health Over Profit for Everyone.

The debate over single payer in California seems to have come to an end with their single payer bill all but dead. A commission was appointed to study the issue and concluded single payer was not possible without changes or waivers to federal laws. They reported the reality: no state can put in place single payer on its own.

Senate Bill 562 passed the Senate last year but stalled in the Assembly when Speaker Anthony Rendon blocked it. He went on to appoint a commission to study how California could achieve universal coverage which released a report two days ago entitled  A PATH TO UNIVERSAL COVERAGE AND UNIFIED HEALTH CAREFINANCING IN CALIFORNIA.

The report substituted new language for single payer a “unified state program.” A unified program can be achieved, but even that is complicated, a one-payer program cannot be achieved. The report describes the fragmented health system in California, similar to everywhere in the country, with employment-based programs, state programs and the largest of all, federal programs.

The report says to accomplish a “unified state program” “would require substantial and unprecedented changes in federal and state law. . .”  The report summarizes some of the changes needed:

“The federal government is the largest source of funds for health care in California today. Redirecting those funds would require federal permissions and actions such as statutory changes to redirect Medicare funds to a state-based pool. Similarly, either statutory changes in federal Medicaid law or an agreement on a means to track eligibility and expenditures for Medicaid-eligible populations that enables California to claim federal matching yet preserves simplicity and equity goals, would be needed. Further, Congressional action would be required if revenues linked to federal ESI [Employer Sponsored Insurance] tax exclusion were to be redirected to state control.”

ERISA is another blockade for single payer as 17.5 million Californians get their insurance through ERISA programs. The report states “Although direct state intervention in ERISA plans is impermissible, either federal ERISA statute would need to be amended or California would need to devise financing approaches that do not run afoul of ERISA legal challenges and associated delays.” ERISA is blocks single payer from being enacted in any state.

The report notes that Vermont found these same problems when it attempted what it called “single payer,” i.e. it found it could not put in place single payer without changes in federal law and could not afford a state effort of universal coverage. They summarize the Vermont experience writing:

“Other states have sought to establish a single payer system. Vermont pursued a single payer approach that went further than most yet was never implemented. Vermont’s exploratory effort began in 2010, followed by 2011 legislation to establish Green Mountain Care, a government-financed system to replace most health insurance in Vermont. As planning efforts evolved, it became clear that Medicare, Medicaid, health plans for veterans and military personnel, and plans serving workers at out-of-state companies would continue to operate in Vermont even after the implementation of Green Mountain Care. In 2014, after serious planning efforts, Governor Peter Shumlin withdrew the plan citing ‘the limitations of state-based financing, the limitations of federal law, the limitations of our tax capacity, and the sensitivity of our economy.'”

The California Commission examined the specific federal law changes that were needed writing:

Federal funding and permissions: The federal government is the largest source of funds for health care in California today. Federal funds flow via:
– Medicare, the federal program that serves most people aged 65 and over and certain people with disabilities;
– Medi-Cal — California’s Medicaid program– the jointly funded state-federal program available to people who meet income eligibility criteria;
– The provision of subsidies under the Affordable Care Act for income-eligible individuals and families who obtain insurance through Covered California;
– The exclusion from federal taxable income of employer and employee premiums for employer-sponsored health insurance;
– A variety of additional federally funded coverage programs such as Tricare (for the dependents of active duty military and military retirees).

To redirect funds from these sources to a unified state-based pool would require federal action. For example:
– Because existing federal law does not grant the federal Secretary of Health and Human Services authority to redirect Medicare’s funding streams or trust fund dollars to states, bringing Medicare funds into a unified state-based public financing pool would require federal statutory changes.
-Federal Medicaid requirements tie federal matching funds to the services provided to Medicaid-enrolled individuals. To claim federal Medicaid funds for use through a unified financing pool, California would either need a change in federal law, or would have to continue to track eligibility and expenditures related to individuals who meet complex eligibility criteria. Some steps required for continued compliance with federal Medicaid rules might well be in conflict with the simplicity and equity principles of unified public health care finance in California.
– Subsidies through Covered California might be redirected to a unified financing pool under existing Section 1332 waiver authority, if ACA statutory guardrails including federal deficit neutrality are met.
– If California moved away from employer-based financing of health insurance, and wages were increased in California to compensate for the elimination of employer contributions to health care, federal income tax revenues would increase. To capture the resources associated with the current federal tax subsidy for employer sponsored insurance, Congress would need to pass legislation providing for a direct payment to California in the amount of the estimated increase in federal tax revenues.
– To redirect federal funds that currently support special populations such as CHAMPUS enrollees and veterans would involve revisiting long-standing expectations regarding benefits.

This list is daunting but still incomplete, e.g. it does not include Tricare for military personnel and retirees, the Federal Employee Health Benefits Law for federal employees, the Veterans Administration and Indian Health Service.

This commission report tells state-based single payer advocates a reality many do not want to hear — single payer cannot be implemented by a state without significant changes in federal law. Some will continue to deny this fact — and it is a fact — but hopefully more will accept the reality that in order to create a single payer program the only path is for the federal government to enact National Improved Medicare for All.

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