Both Colorado and Vermont gamed out the possibilities of a single-payer health care system, only to discover that it would create a fiscal nightmare. Colorado voters shot it down, while Vermont governor Peter Shumlin had to cancel his own campaign pledge after studies showed that budgets couldn’t possibly keep up with costs. Moreover, the failure of ObamaCare co-ops show that government-run insurance doesn’t work without access to massive amounts of red ink.
So of course California wants to take a third shot in the last 15 years to impose socialized medicine within the Golden State:
State Sen. Ricardo Lara (D-Bell Gardens) introduced a bill Friday that would make California the first state to adopt single-payer, also called “Medicare for all.” Canada has such a system.
In a single-payer system, residents would pay into a state agency that essentially functions as an insurance company. The agency would pay doctors and hospitals when people sought treatment.
Previous proposals in California suggested financing the agency by pooling the state’s current funding for Medicaid, Medicare and other health programs and then taxing employees 4% of their income and employers 7% of payroll.
That would present a problem almost immediately, however, which is that won’t be nearly enough to cover the costs. When the legislature passed a single-payer bill in 2008 — its second under then-Governor Arnold Schwarzenegger — the legislative analysts found that those revenues would fall $40 billion short in the first year.
“Where were they going to come up with the $40 billion?” said Micah Weinberg, president of the Economic Institute at the Bay Area Council. “It’s just not feasible to do as a state.”
Schwarzenegger vetoed the single-payer bill that year, the same as he did in 2006, and for the same reason — California can’t afford it. They have a Democrat governor now, and the repeal of ObamaCare might prompt another try and perhaps success in 2017. If so, then Californians had better start reading up on the analysis performed in Colorado last year, which not only showed a large deficit the first year after implementation, but escalating deficits every year after that, too. Within the first decade, Colorado — a much smaller state than California — would have been $7 billion in the hole.
Single payer would leave Californians much worse off, and the remedies look draconian, as I wrote last August for The Fiscal Times:
In a monopolistic government-run system, what options would Colorado residents have to fix these problems? CHI offers three ways to keep ColoradoCare from collapsing. The government-run system “could ask its members to approve tax increases,” (emphasis mine), which would erode buying power across the board and have a negative effect on the economy. Failing that, the government could choose to provide fewer benefits or stiff providers with lower payments.
These are precisely the options left when the government takes over a private-sector function. It operates from a scarcity model, choosing to ration and tax where a healthy market would provide opportunities for price signaling, competition, and increased production. None of the potential solutions to the fiscal crisis that would result from ColoradoCare add to the choices or options consumers would have in the market; it either restricts their buying power, their choices, or their providers. After all, how many doctors will choose to work and live in Colorado in a system where the government restricts what they can make from their work, and keeps reducing their pay?
Those who see private markets as zero-sum games may never be convinced of the folly of single-payer systems. The rest of us, however, must demand an end to this failing Obamacare system and an end to the fantasy of socialized medicine at the state or federal level. The only way to control health-care costs is to establish lightly regulated markets with price signaling to consumers, encouragement for providers to enter the market and a rational reconstruction of the concept of insurance to its proper place as an indemnification against unforeseen circumstances rather than as a maintenance program.
Until we do, we will continue to generate vast oceans of red ink and destroy an American health industry known for its innovation and expertise.