The Senate Health Committee today will consider a California Chamber of Commerce-opposed job killer bill that seeks to establish a government-run, single-payer health care system in California.
SB 562 (Lara; D-Bell Gardens/Atkins; D-San Diego) has been identified as a job killer because it creates a new single-payer government-run multibillion-dollar health care system financed by an unspecified and undeveloped “revenue plan” which will penalize responsible employers and individuals and result in significant new taxes on all Californians and California businesses.
Although the financing mechanism for SB 562 has not yet been specified, past legislative attempts at government-run health care have proposed major increases in payroll and income tax on businesses and individuals. California just passed a $52 billion tax over 10 years of which the business community pays a significant share. Adding another tax burden under SB 562 will cost employers and taxpayers billions of dollars and result in significant loss of jobs in the state.
Employers Cannot Sustain an Added New Tax Burden
A payroll tax increase, such as the one needed to finance this bill, not only has a detrimental impact on businesses already in California; it also discourages companies from locating and establishing a business here.
A large payroll tax would penalize responsible California employers and be a deterrent and disincentive to new employers. Additionally, payroll tax increases would likely lead to job layoffs as existing business and employers would be forced to cut costs to sustain the added new tax burden.
Significant Job Losses Will Result
The measure itself recognizes the significant job losses it will cause to those in the health insurance industry whose “jobs may be or have been ended as a result of the implementation of the program.” Even if those individuals are transitioned to other jobs within the program, it’s unlikely they will be compensated in the manner they had been in the private sector.
Health insurance industry positions will not be the only ones affected by this measure. The construction industry will suffer as well, since provider rates will include payments for provider capital improvements only if the provider is a nonprofit or governmental agency and only with prior approval. This provision will lead to a massive reduction of capital improvement by for-profit hospitals, medical groups and others, leading to construction job losses.
California Has Already Rejected Government-Run Health Care
California voters have twice rejected a government-run health care system—in 1994 and 2004. Past focus groups and numerous opinion polls on health care reform have reinforced that California residents do not want a single-payer government-run system.
In 2008, the California Legislative Analyst’s Office (LAO) estimated that sustaining a single-payer system in California would require more than $210 billion in the first year, an amount increasing up to $250 billion in subsequent years. Even with the 12% tax on employers and employees under the 2008 measure, the LAO report predicted a net shortfall of $42 billion in the system’s first full year of implementation and even higher thereafter. Just to cover the shortfall, the LAO estimated a tax of 16% on employers and employees would be needed, resulting in a multibillion-dollar tax increase on Californians.
Government-Run Health Care Less Efficient and Effective
Although the legislation’s goal of providing health coverage for all Californians is a laudable one, establishing a single-payer statewide bureaucracy is the wrong approach. The CalChamber and coalition opposing SB 562 fundamentally disagree with the two bill’s major premises that government systems are more efficient than private business, and a single-payer system would be less costly than the current private system.
Significant budget shortfalls that will likely occur year after year would ultimately require drastic cuts in services. SB 562 will reduce the level and quality of health care and benefits currently enjoyed by millions of Californians. The bill will lead to increasingly long wait times to see a physician and will likely take away choice—not just choice in physicians, but choice in coverage.
Under current law, those who wish to buy more, less or different coverage than others often can make those choices, just as those who have other priorities can exercise them in the market. Under SB 562 one size fits all, no matter what an individual’s preference might be.