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New analysis of California's single-payer bill shows savings

A new analysis of legislation that would create a state-run health care system in California predicts that most consumers and businesses would end up coming out ahead or breaking even. The head of the association representing the state's health care plans calls the study "overly optimistic."

The 85-page report by the University of Massachusetts Amherst estimates the state would be on the hook for $106 billion a year after accounting for existing federal funding. That price tag is nearly half of what the bill's author, Sen. Ricardo Lara (D-Bell Gardens), estimated in a prior report to the senate appropriations committee. UMass Amherst economist Robert Pollin, the lead author of the new report, says Lara's report didn't consider savings from administrative costs.

"Overall, it actually is going to cost less," says Pollin. "It’s going to cost about 8 percent less and you can get full coverage." 

The report estimates a single-payer system would cost the state $331 billion annually if every Californian were covered, compared with an estimated $400 billion under the current system.

In a single-payer system, the state pays for all medical care and insurance companies are mainly removed from the equation, eliminating premiums, deductibles and co-pays.

An official in Lara's office characterizes the analysis as a starting point to develop a funding model for SB 562. The state senate is set to vote on the bill by the end of the week. 

Pollin’s analysis proposes two new taxes to raise the funding: a 2.3 percent sales tax and a business tax which could either be in the form of a 3.3 percent payroll levy or a 2.3 percent gross receipts tax.

"Basically, what we show is that businesses at all levels benefit: small, medium and large. Households all benefit by paying less in net health care relative to what they’re paying now," Pollin tells KPCC.

The analysis estimates middle-income families would see a savings, and high-income families would pay slightly more than they do now on health care. 

Not everyone is impressed satisfied with the findings.

"The projected cost savings in this analysis are overly optimistic and rest on the shaky assumption that California will continue to receive the same level of waivers from the federal government," Charles Bacchi, president and CEO of the California Association of Health Plans, said in a statement.

The Association opposes the bill, along with the insurance industry.

About 71 percent of the $368.5 billion California currently spends each year on health care comes from federal funding. The bill’s backers are counting on $225 billion dollars of existing funding to remain in place.

The bill is expected to do well in the Democratically-controlled legislature, but an endorsement from the governor is far from guaranteed.

"People are often asking us why did we select Dr. Pollin [to conduct the analysis], but what you may or may not know is that he actually was one of the economic advisors to Gov. Brown when he ran for president and is friends with the governor," Lara said to laughter during a press conference Wednesday. "So we’re making sure that we solicit people [who] are close to the governor, [who] are friends."

Regardless of whether the line was intended as a joke, Lara’s bill may be a hard sell to a governor with an austere budget. Although Brown has supported the idea of Canadian-style health care in the past, he has spoken skeptically of Lara's bill in recent months.

Dr. Pollin says he’s in touch with the governor and that he's trying to convince Brown that the numbers will work. Pollin says the two plan to discuss his research in detail when the governor returns from a trip to China.