Published Jul 21, 2001
Cal Care: A Single Payer Health Care Plan for California
Submitted to the Health Care Options Project, July 16, 2001
Prepared by Health Care for All-California
We embark on the HCOP project in challenging times. In spite of our wealth, technologic genius and sincere good intentions, our health and our health system are seriously ailing. By World Health Organization standards our health is the poorest among industrialized nations and poorer even than such countries as Oman and Morocco in spite of spending much more than anyone
else on healthcare. Equally disturbing is our ranking as one of the most unfair systems in the world. We rank even lower in fairness -- equitable cost sharing -- (55th) than in health (37th) .
Our efforts to solve our problems have failed because we have addressed the symptoms, not the underlying causes. Cal Care addresses the fundamental finance and delivery problems of our health care system and the path to their resolution. This proposal will demonstrate that California can provide high quality care to all Californians for less than we currently spend on health care if we establish a single payer system.
"If the United States were to shift to a system of universal coverage and a single payer with authority to oversee the health care system the savings in administrative costs would be more than enough to offset the expense of universal coverage. In the short run savings in insurance overhead would be $34 billion and in hospital and physician administrative costs another $33 billion. The cost of serving the newly insured would be about $18 billion.
Global budgets, negotiated physician fees, controls on expensive technology could.lead to substantial further savings."
A single payer system rationalizes health care costs, planning and delivery. It dramatically lowers administrative overhead by creating a single payer for health care thereby eliminating or lowering costs such as claims, eligibility reviews, advertising and risk assessment. It lowers drug and durable medical equipment costs through bulk purchasing. It decreases capital costs by analyzing system wide needs and eliminating redundant
expenditures. It utilizes global budgets to plan for major system-wide needs. It puts someone in charge to oversee the system as a whole. It also saves money by emphasizing prevention, primary and other quality improvements. Health Care for All welcomes the opportunity for an analysis of the Cal Care single payer system.
2. Target Populations and Eligibility
All California residents including those over 65 years of age are eligible for Cal Care if they have lived in California for 6 months or are employed in California or are the dependents of eligible Californians.
3. Mechanisms for Expanding Coverage/Insurance/Risk
Cal Care creates a universal risk pool. All eligible Californians are
included on an equal basis. Private insurance products are not prohibited, but it is unlikely that Californians or California businesses will opt to purchase them because the health taxes are mandatory and the benefit package generous and portable. Some may purchase policies for non-covered benefits if offered.
4. Administration and State Regulation
One of the major findings of the GAO study is that a key reason for U.S. health system inefficiencies is that, "No one has responsibility for the condition of the system as a whole." Cal Care addresses this shortcoming with an elected Health Care Commissioner who will be in charge of the single payer system as a whole and who will have full authority to implement its provisions. The draft proposal of Cal Care will delineate an administrative system with sufficient specificity to permit micro-simulation modeling. The Commissioner will head a Cal Care public administrative entity, the Cal Care Commission. In each county there will be a Cal Care administrative office headed by a County Health Commissioner who will be in charge of implementing Cal Care at the local level.
Each county will have a Consumer Council headed by a County Consumer Advocate. The councils will assist the local Commissioner to develop system policy and evaluate quality of care. The first state Commissioner, local Commissioners and County Consumer Advocates must have advocated for a single
payer system prior to its enactment.
The greatest savings realized through a single payer system are achieved by streamlining administration. This will be accomplished in Cal Care by consolidating all administrative systems, including regulatory systems, under the authority of the Health Care Commissioner, which will eliminate the enormously expensive private insurance bureaucracies and public program eligibility screenings. The goal of Cal Care is to lower system wide
administrative costs to 5% in the first two years the system is fully
operational, 4% in the third and fourth years, and 3% thereafter.
Administrative structures will be described in sufficient detail in the
draft proposal to allow projections of actual savings to be made by micro-simulation modeling. Data from countries such as France and Canada where streamlined administrative systems are in place will be analyzed. Contacts have already been established with the France Health Ministry, the World Bank and OECD.
5. Cal Care Benefit Package
Cal Care can establish a generous benefit package because so much money will be channeled from administration into health care.
1. Diagnostic tests, treatments, pharmaceutical, durable medical equipment;
2. Inpatient and outpatient hospital-based medical, surgical and mental health services;
3. Preventive and health maintenance services, including health education;
4. Rehabilitative services and devices including means to maintain the independence of disabled and chronically ill people in their homes and communities;
5. Hospice care;
6. Clinic services, including mental health, dental, eye and podiatry;
7. Office-based services by licensed providers;
8. In-home services for chronic and acute conditions, including attendant care;
9. Institutional and residential long term care for (1) Californians
employed two or more years or a corresponding number of part time months by an employer who has made payments to Cal Care or (2) Californians who have resided for two or more years and paid the Cal Care tax described below or who were exempt from paying it or were entitled to such benefits under federal or other law or were a dependent of an eligible Californians;
10. Emergency care;
11. Language interpretation, including sign and Braille and assistance to non-readers; and
12. Alternative and complementary package.
5.1 Cal Care Benefit Package, Special Considerations
In the draft proposal the following considerations will be addressed:
1. Cal Care prohibits discrimination based on current or preexisting conditions, genetic condition or defect, physical or mental disability, race, religion, sex, sexual orientation, immigration status, national origin or ancestry, primary language or marital status.
2. Cal Care includes choice of provider. The capacity of a provider and the availability of needed services at a facility or integrated system may limit the choice.
3. Californians traveling out of state are covered up to 90 days in each 12-month period. Californians temporarily living abroad are covered and may receive services abroad for up to a year if they continue to pay the health tax. Emergency services will be reimbursed at prevailing local rates. Non-emergency services will be reimbursed at Cal Care rates.
4. Methods will be established for evaluating benefits and safety of alternative and complementary medicine and for their inclusion in the benefit package. We will provide an alternative package in the draft proposal.
5. State and local Health Commissioners in consultation with the County Consumer Advocate and Councils make changes in the benefit package.
6. For modeling purposes, costs should reflect the savings achieved by bulk purchasing and closed formularies, decreased administrative overhead, system-wide capital planning and emphasis on preventive and primary care. Whenever possible and appropriate, analyses should be based on the actual
experience in countries where these mechanisms are in place.
7. It will be useful to have a comparative cost-analysis of the Cal Care, Kaiser and Medi-Cal packages.
6. Finance Mechanism
Cal Care financing is a blended approach of single payer savings and public financing. Cal Care establishes a single payer for health care in California, the Cal Care Commission. Within the Commission a Cal Care Health Fund will be established. All current funding sources will contribute at these approximate levels: government 44%, employers 25% and individuals 31%.
All funding sources will be folded into the Cal Care Health Fund as waivers, exemptions, agreements and conforming legislation are obtained. Cal Care revenues cannot be commingled with the state General Fund and must be used exclusively to implement Cal Care. Cal Care funds are also not considered state revenues for the purposes of Sections 3 and 8 of Article XVI of the California Constitution (Gann Limits). In the event of system shortfalls, the Health Commissioner may take any orall of the following steps:
1. Institute co-payments that do not limit access to medically necessary care;
2. Modify the benefit package, except that medically necessary care may not be limited; and/or
3. Decrease the amount paid to providers.
6.1 Single Payer Savings
The savings and cost containment achieved by Cal Care will offset the cost of insuring the uninsured and expanding the benefit package. Single payer savings are generated by streamlined administration, bulk purchasing, control of capital costs, global budgets, creation of universal risk pool, emphasis on primary and preventive care and other quality improvements.
6.2 Public Financing
Cal Care will be a publicly financed system. There will be a progressive health care tax on individuals that replaces premiums, co-pays and deductibles. The tax will either be based on an increase in the state income taxation rate of X% or on a surcharge of X$ on the total individual and joint income tax obligation. There will be a flat payroll tax on all employers at a rate of X%. Tobacco settlement funds will either be transferred to the Cal Care Health Fund as per the Master Settlement
Agreement or there will be a tax on producers of all tobacco products of X%. Everyone will receive a credit against the health taxes/surcharges for any mandatory payments made to other plans.
To diminish the administrative burden agreements will be sought to fix the federal, state and local contributions to the rate of change of GDP and population. Attempts will be made to capture collateral sources for services provided to non-Californians. The draft proposal will detail the health taxes and surcharges with enough specificity to allow them to be analyzed through micro-simulation modeling. These cost estimates will be a valuable
tool for future policy development. The Cal Care proposal should be modeled with and without federal and other waived sources folded in.
California licensed and certified providers and facilities will be eligible for payments. Funds allocated to the fee-for-service and integrated delivery system sectors will be based on the number of patients in each sector. Capitation payments to integrated delivery systems will be adjusted for incidence and severity of disease and disability, qualifications of available providers, and existence of tertiary medical centers and public hospitals. There will be adjustments for epidemics, unforeseen changes in
health status, new technologies, and new treatments. Health facilities may choose to be reimbursed on the basis of negotiated facility budgets or as capitated-integrated networks. There will be a minimum of one-year enrollment in integrated systems.
Compensation for physicians, physician assistants, nurse practitioners, and others who provide services as employees will be covered by facility budgets. Initial reimbursements will be set in accordance with existing professional association and union contracts. Future compensation will be determined through negotiations between the Cal Care Commissioner and duly
chosen professional associations or unions.
8. Subsidies and Replaced Coverage
Cal Care will be the sole payer/purchaser of health care services. Cal Care replaces all other coverages. There will be no direct subsidies. The personal income tax will be progressive. Cal Care will be budget neutral to federal, state and local governments except for start-up and transition costs. Current federal government funding sources will be folded into the Cal Care Health Fund as the necessary waivers, exemptions, agreements, and conforming legislation are obtained. Until this is accomplished, Medicare and other federal programs will be billed on a fee-for-service basis. Non-Californians who are not indigent will be responsible for bills incurred in California.
It is anticipated that the transition to a fully operational single payer system will take seven years. The major tasks will be:
1. Projecting the magnitude of savings and efficiencies;
2. Designing the tax structure;
3. Obtaining waivers, exemptions, agreements, and conforming legislation;
4. Consolidating administration; to develop a bulk purchasing system;
5. Analyzing capital and health service needs statewide;
6. Educating the public about the new system;
7. Distributing membership cards; and
8. Planning for simplified enrollment.
Key steps in the transition will be:
1. The Legislature will appropriate sufficient start up funds, including unemployment compensation and the one-time costs of retraining displaced workers.
2. The Governor will appoint a Transition Health Care Commissioner, who shall have advocated for a single payer system prior to its enactment, to oversee the transition.
3. The Transition Commissioner will appoint a Transition Team composed of representatives of key health system stakeholders.
4. The Commissioner may introduce the system in phases or in its entirety and set the date for the election of the first Health Care Commissioner.
10. Key Assumptions
1. Health care is a right.
2. A single payer administrative system will decrease costs of
3. Bulk purchasing will decrease the cost of drugs and durable medical equipment.
4. System wide planning will decrease the cost of capital expenditures.
5. Emphasis on preventive care and health maintenance will decrease the costs.
6. Under a fully realized single payer system high quality universal care can be provided for less money than we now spend.
11. Effects of Cal Care Proposal on Health Care System and Market Experience
There will be many effects on the health care system and marketplace. The exit of private insurance entities and possibly of some for profit-integrated systems may decrease tax revenues and generate some unemployment. Margins of profit for the pharmaceutical and durable medical equipment industries will decrease when bulk purchasing is initiated but may be offset by the increase of 7 million consumers. Freedom of choice to select providers and facilities will have a positive impact on health
because they will have to compete on the basis of quality. The market may be challenged initially to absorb 7 million new consumers. However, it will respond. New jobs created, new training programs initiated, new buildings constructed, and new orders placed for merchandise increased orders for goods as the system expands.
In the long run, the health of the population will be improved when preventive, primary care and health maintenance are emphasized. This will lower Workman's Compensation costs, decrease sick days and help stabilize the work force. There will be a shift from non-productive to productive labor as workers move out of the insurance and public program bureaucracies
to health worker positions or to the single payer administration. Productive employment will enhance mental health. Work satisfaction will improve for physicians and other providers as they spend more time providing care and less time on administration, as they experience fewer disincentives to provide care, and as they receive stable, risk-adjusted reimbursement.
As demonstrated around the world, wherever health care financing and delivery are rationalized, health care costs are lowered and health care quality is raised.
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