Will California Create Nation's First Universal Health Care System?

Updated 2 p.m. Wednesday

California Democrats on Tuesday took their first step toward abolishing the private health insurance market in the nation's most populous state and replacing it with a government-run plan that they promised would never deny anyone the care they need.

But the proposal that cleared a legislative committee in the state Assembly is still a long way from becoming law. Assembly Bill 1400, which would create a universal health care system called CalCare, faces strong opposition from powerful business interests who say it would cost too much. And even if it does become law, voters would have to approve a major income tax increase to pay for it — a vote that might not happen until 2024.

Still, Democrats hailed Tuesday's vote for jump-starting one of their long-stalled policy goals and signaling they won't back away from a fight even during an election year. In an hours-long hearing, some lawmakers and advocates assailed a health care industry they say has benefited corporate interests at the expense of consumers.

Ady Barkan, a 38-year-old father of two, was diagnosed with ALS six years ago and now is mostly paralyzed. He testified at Tuesday's hearing with the help of a computerized voice that spoke as he typed using technology that followed the movement of his eyes. Barkan said he has battled his private insurance carrier to get treatment he needed, including suing them to get a ventilator that keeps him alive.

"Even good health insurance, which I have, does not cover the cost of the care I need to survive," he said.

The bill that advanced on Tuesday would create the universal health care system — CalCare — and set its rules. It cleared the Assembly Health Committee on an 11-3 vote. Republicans voted no, arguing the bill would cost too much and pay doctors and nurses less, potentially worsening a shortage of health care workers.

Assemblymember Ash Kalra, a Democrat from San José and the author of the CalCare proposal, said Tuesday it could be 2024 before the tax increase proposal to pay for CalCare made it to the ballot.

An analysis from CalMatters breaks down the proposed tax increase:

• A 2.3% excise tax on businesses after their first $2 million in income
• A 1.25% payroll tax on employers with 50-plus workers
• An additional 1% payroll tax on wages for resident employees earning more than $49,900
• A progressive income tax starting at 0.5% for Californians earning more than $149,500, up to 2.5% for people making about $2.5 million annually (with rates being adjusted for inflation)

The California Taxpayers Association, which opposes the plan, estimates it would raise taxes by about $163 billion per year.

"If government-run health care becomes law, millions of Californians will flee the state — either to avoid the $163 billion per year in new taxes or to escape the lengthy waits for care that will become the norm," Assembly Republican Leader Marie Waldron said.

Even some Democrats who voted for the bill had sharp criticism for the proposal. Assemblymember Autumn Burke, a Democrat from Inglewood, said advancing the bill without a funding source made a mockery of the process.

"This bill has been sold to my community that it is going to change things now and that it is free. And neither one of those things are true," she said.

Business groups, led by the California Chamber of Commerce, said the government-run health care system would be so expensive that the tax increase still wouldn't be enough to pay for everything. In 2018, California's total health care expenditures totaled $399.2 billion, accounting for 13.2% of the state's gross domestic product, according to an analysis by the Healthy California for All Commission.

"Completely abolishing the current system in face of an unrelenting pandemic by annually taxing Californians hundreds of billions of dollars is not the solution," said Preston Young, a policy advocate for the California Chamber of Commerce.

Kalra, the San José Democrat and author of the proposal, said he knew opponents would focus on how much the plan would cost. But he said that argument distracts from the fact that Californians are already paying "the highest health tax in the world."

"You may refer to it as premiums, deductibles, co-pays, denial of care," Kalra said, saying none of those costs would exist under a universal health care system. "It's clear as day they are being fleeced, and far too many understandably feel helpless about it."

California's health care system is paid for by multiple entities: patients, insurance companies, employers and government. But a universal health care system would be paid for by a single entity — the government, or the "single payer."

A single-payer system has been a staple of California progressive political rhetoric for decades. But it's not been easy to accomplish in a state where most people pay for private health insurance through their jobs. In 1994, voters overwhelmingly rejected a ballot initiative that would have created a universal health care system. Another attempt passed the state Senate in 2017, but it never got a vote in the state Assembly.

Questions about how to pay for a single-payer system have doomed previous plans. In 2011, Vermont enacted the nation's first universal health care system in the country. But state officials abandoned it three years later because they said they couldn't afford to pay for it.

Gov. Gavin Newsom promised to do it when he ran for governor in 2018, and voters elected him in a landslide. But in his first three years in office, Newsom has focused more on making sure everyone in California has health insurance. He has expanded Medi-Cal, the state's health care program for lower-income Californians, to cover people 26 years old and younger and 50 years old and older, regardless of their immigration status. On Monday, Newsom proposed extending Medi-Cal again, this time to all eligible Californians, regardless of immigration status, older than 26 and younger than 50, at a potential cost of $2.7 billion per year.

Also on Monday, Newsom reiterated his support for a universal health care system, but declined to say whether he supported the plan in the Legislature because he said he had not read it. Asked if he had "given up" on a universal health care system in California, Newsom pointed to a commission he founded that is examining such a system and how much it would cost.

He also said he's working with President Joe Biden's administration on the "flexibility" required for California to implement such a system.

"When you're governor, you've got to be in the 'how' business," Newsom said. "I believe in a single-payer financing model. The 'how' at the state level is the question that needs to be answered thoughtfully."

This story includes reporting from Adam Beam of The Associated Press.