California: Single-Payer Program
Upshot
For the second time in the past two years, Democratic state legislators failed to advance legislation, A.B 1400, that would establish CalCare, a single-payer health care coverage program for the state’s 39 million residents, despite large majorities in each chamber. Pursuant to a bill requirement, the program would not be implemented until the CalCare Board determines that revenue is sufficient to pay for program costs.
CalCare would be offered to all residents at no cost, regardless of immigration status, and require participating providers to accept a prospectively-set fixed global budget for the total number of services provided on an annual basis. The budget would utilize current Medicare rates as the basis for prospective payment rates.
Legislators estimate that implementing CalCare would cost the state approximately $356.5 billion annually. The state conceded that it would likely need to generate additional revenue, such as tax increases, to support the program. The bill also states that it would leverage existing funding streams from Medicaid and private insurance, which would both be consolidated under the program.
The bill failed largely due to industry pushback and lack of support from Gov. Gavin Newsom (D). The Governor approved legislation in 2018 to create the Healthy California for All Commission and has since expressed support for incremental reform towards universal coverage.
Background
California operates a state-based Marketplace and 12 insurers offered coverage in 2022. In 2019, the state enacted legislation to create an individual mandate and a premium subsidy program, which both took effect in 2020. Approximately 1.8 million residents enrolled in Marketplace coverage during the 2022 open enrollment period.
Gov. Newsom initially expressed support for a single-payer system when he ran for office in 2017. However, since taking office, the governor has instead shifted his support towards more modest reforms. In 2018, Gov. Newsom signed into law legislation that created a commission to study the single-payer concept and the possibility of pursuing federal waivers to support such a program. The Healthy California for All Commission has convened fifteen meetings and issued reports related to a unified financing system in the state, though such reports have not materialized into concrete policy initiatives. Gov. Newsom has also taken incremental steps towards universal coverage, including expanding Medicaid coverage for all income-eligible residents, regardless of immigration status.
Summary
A.B 1400 would establish the California Guaranteed Health Care for All (CalCare) program to provide comprehensive universal single-payer health care coverage and a health care cost control system for all residents of the state. By July 1, 2024, the CalCare Board would be required to conduct a fiscal analysis to determine whether the program can be implemented and whether revenue is more likely than not to pay for program costs. California residents would also be required to approve a proposition to raise or modify taxes through a ballot measure. The program would feature the following:
CalCare Board: The Board would govern CalCare and consist of nine voting members with expertise in health care. Members would be appointed by the Secretary of California Health and Human Services. The Board would be required to conduct a fiscal analysis to determine whether the program could be implemented and whether additional revenue is needed to implement the program by July 1, 2024.
Eligibility and Enrollment and Beneficiary Cost Sharing: Every resident of the state, regardless of immigration status, would be eligible and entitled to enroll in CalCare. Enrollees would not be required to pay a premium, copayment, coinsurance, deductible, or any other form of cost sharing for all covered benefits.
Benefits: Covered health care benefits for enrollees include all the following categories of health care items and services, and the CalCare Board is authorized to add any item or service to the covered benefits. The program to provide coverage of items and services included under CHIP, Medicaid, Medicare, and EHBs. Covered service categories include the following:
Inpatient and outpatient medical and health facility services, including hospital services and 24-hour-a-day emergency services.
Inpatient and outpatient health care professional services and other ambulatory patient services.
Primary and preventive services, including chronic disease management.
Rehabilitative and habilitative services and devices, including inpatient and outpatient care.
Oral health, audiology, and vision services.
Prescription drugs and biological products.
Medical devices, equipment, appliances, and assistive technology.
Diagnostic imaging, laboratory services, and other diagnostic and evaluative services.
Mental health and substance abuse treatment services, including inpatient and outpatient care.
Emergency services and transportation.
Necessary transportation for health care items and services for persons with disabilities or who may qualify as low income
Provider Participation: The bill details that a health care provider or entity would be qualified to participate as a provider in CalCare if the health care provider or entity furnishes services, is physically located in California, and meets all the following requirements:
The provider or entity is a health care professional, group practice, or institutional health care provider licensed to practice in California;
The provider or entity agrees to accept CalCare rates as payment in full for all covered health care items and services;
The provider or entity has filed with the board a participation agreement; and
The provider or entity is otherwise in good standing.
Additionally, participating CalCare providers would not be considered a qualified provider if they contract with other entities to furnish the covered services. While participation is not mandatory, providers would not be permitted to contract with other insurers to furnish medical services if they wish to participate in CalCare.
Payment for Health Care Items and Services: The Board would be directed to adopt regulations regarding contracting for, and establishing payment methodologies for, the covered health care items and services provided to enrollees by participating providers. The bill stipulates that the payment rate be “reasonable and reasonably related” to all the following:
The cost of efficiently providing the health care item and services;
Ensuring availability and accessibility of CalCare health care services; and
Maintaining an optimal workforce and the health care facilities necessary to deliver quality, equitable health care.
The bill also provides that an institutional provider’s prospectively set budget for all services, or global budget, would be determined before the start of a fiscal year through negotiations with providers. The Board would take into account the historical volume of services, the actual expenditures of a provider in the most recent Medicare cost report, and in rural areas, the need to mitigate the impact of availability and accessibility of health care services.
The Board would be directed to used existing Medicare prospective payment systems to establish and serve as the comparative payment rate system in institutional provider global budget negotiations. Additionally, the Board would engage in good faith negotiations with health care providers’ representatives to determine rates for fee-for-service payment for health care items and services under CalCare.
Funding: The Board would be authorized and directed to seek all federal waivers, such as Section 1332 and Section 1115 waivers, and other federal approvals and arrangements and submit state plan amendments as necessary to operate CalCare. The bill would also establish the CalCare Trust Fund to administer the program. The fund would consist of revenue generated through the revenue plan; federal payments received as a result of any waiver; and any other state money that would have been spent on Medicaid, Medicare, or any other state-funded health program. A separate measure was introduced to implement the revenue plan, which would increase taxes on certain businesses and high-earning households.