California PERI 2017

Economic Analysis of the Healthy California Single-Payer Health Care Proposal (SB-562)

By: Political Economy Research Institute
Authors: Dr. Robert Pollin, Dr. James Heintz, Dr. Peter Arno, Dr. Jeannette Wicks-Lim
Published: May 2017
Financed by: California Nurses Association
Legislation analyzed: SB 562


Download the Report: from the Political Economy Research Institute or below.


Summary

We estimate that, through implementation of Healthy California, overall costs of providing full health care coverage to all Californians could fall by about 18 percent relative to spending levels under the existing system. There will be two broad areas of cost saving under Healthy California. The first is a set of structural changes in the areas of: 1) administration; 2) pharmaceutical pricing; and 3) fee structures for service providers. We estimate that cost savings in the range of 13 percent of total costs are achievable through structural changes in these areas.

The second is through significantly reducing the high level of inefficiency that currently prevails in service provision. The major 2010 study of the U.S. Institute of Medicine found that, as a lower-bound estimate, cost savings in the range of 19 percent of total expenditures are achievable through addressing four major problems with service delivery: 1) unnecessary services; 2) inefficiently delivered services; 3) missed prevention opportunities; and 4) fraud. We assume that achievable cost savings in these areas through Healthy California will be around 5 percent—i.e. roughly one-quarter of the Institute of Medicine’s lower-bound 19 percent figure.

Assuming that universal coverage is achieved under Healthy California and that cost savings are also achieved to the extent we have estimated, the net impact will be to create a single-payer health care system in California that guarantees universal coverage for all California residents, while the overall costs of the full-coverage system will be about 10 percent less than the existing system. The overall annual costs of this single-payer system for California would be $331 billion as of 2017.