Class Warfare Blog

June 23, 2017

Details of California’s New Single Payer Health Insurance Plan

Filed under: Economics,Politics — Steve Ruis @ 9:32 am
Tags: , ,

My original home state, California, is moving ahead with a plan to create a single-payer, state-run health insurance program for all Californians. If California pulls this off, with over a tenth of the entire population of the U.S.,  it will be a massive demonstration project to use as a model for the whole country. (If it does work, expect the Republicans to drop their line about the states being the laboratories of democracy.”)

The difficulty, so far, is to how pay for this service. According to the Los Angeles Times “How would California cover this $331-billion bill? For the most part, much the same way it covers healthcare spending right now. Roughly 70% of the state’s current spending is paid for through public programs, including Medicare and MediCal. This funding — totaling about $225 billion — would continue, as is required by law. It would simply flow through Healthy California rather than existing programs.
“The state would still need to raise about $106 billion a year to cover the cost of replacing private insurance. This could be done with two new taxes.
“First, California could impose a gross receipts tax of 2.3% on businesses, but with an exemption for the first $2 million of revenue. Through such an exemption, about 80% of all businesses in California — small firms — would pay nothing in gross receipts tax, and medium-sized businesses would pay an effective tax rate of less than 1%.
“Second, the state could institute a sales tax increase of 2.3%. The tax would not apply to housing, utilities, food purchased for the home or a range of services, and it could be offset for low-income families with a 2% income tax credit.

Something doesn’t add up here, but I do not have all of the details. What doesn’t add up for me is the money currently being paid for health care as a “fringe benefit” to workers. In my last job, my health insurance benefit constituted about 7% of my wages. Since employee costs for my company constituted 80% of the total cost of doing business, this means that those benefits cost about 5.5% of the entire enterprise’s budget. If the state supplies health care for a 2.3% tax, businesses are getting a windfall of about 3% of their total expenditures. What happens to that money? Does it go to employees (it is their benefit) or does it revert to employers (as a windfall)?

I know this is a simplistic approach, but my thinking was that employed people were already paying from $6000 to $17,000 per year for their insurance (either as a benefit or out-of-pocket). Note these are rough estimates based upon individual and “family of four” values I have read. Those monies are currently being spent and if those insurance policies became moot and a cheaper state-sponsored policy (cheaper because overhead would be lower, a la Medicare), there would be no need for additional taxes, etc. for those folks, who are still the largest segment of the market. In other words, instead of paying for a business-based fringe benefit or a separate policy, those monies go to the employees and then are paid in taxes to provide the state-run health insurance. There would be no need of a sales tax per se.

Of course, it all depends on the numbers, but I think the drafters of these plans need to provide some information regarding the disposition of the amounts of money currently being paid by employers for health insurance benefits.

Addendum
According to Zane Benefits “In 2015, the average company-provided health insurance policy totaled $6,251 a year for single coverage. On average, employers paid 83 percent of the premium, or $5,179 a year. Employees paid the remaining 17 percent, or $1,071 a year.

“For family coverage, the average policy totaled $17,545 a year with employers contributing, on average, 72 percent or $12,591. Employees paid the remaining 28 percent or $4,955 a year.

Note that when they say “Employers paid,” this actually constitutes part of an employee’s compensation as agreed or negotiated into the employment contract. The question is: what happens to these negotiated sums when another entity takes over the health insurance function? Should the employers keep the money previously paid for private insurance and pay a tax or should the employees get that money and then pay a tax for the service.

Does this make a difference? Hell, yes. If we get the money and then pay the tax, then we can see how much of our tax money is actually going out in taxes. If the businesses pay it, it is hidden from us, plus the businesses have lobbyists who would be chiseling against that tax continuously.

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4 Comments »

  1. Years ago I read a very interesting paper on the costs to society of no education and no health care. France in particular reduced health care spending by deciding to spend more 😀 Increasing the investment in preventive care dramatically reduced costs overall in the long run.

    Like

    Comment by The Pink Agendist, née Mr. Merveilleux — June 23, 2017 @ 5:02 pm | Reply

    • Oh, you mean spend your money well … that is never brought up here … too socialist!

      Steve

      On Fri, Jun 23, 2017 at 5:02 PM, Class Warfare Blog wrote:

      >

      Like

      Comment by Steve Ruis — June 23, 2017 @ 7:05 pm | Reply

  2. Two things I have wondered about since my time with USMC ended in 1972. OK, three to be totally honest. The addition is why in hell the US of AA tries to “police” the entire globe. In my view, every war this country has been in, covert or actual hot war, since 1945 have been wars of choice. None were needed to be fought by the kids of this nation.
    The main items that have bothered me, why this country never had a true national health care system. Also, why the working class never got together and hold national strikes. While at my first real job after military service, I’d see on TV or read in news papers about a nation wide strike in France, Italy, or even the UK in the early 1970’s.
    We don’t have national health because it ‘sounds’ socialistic. Big deal, as pointed out above, it works. As to why no nation wide strikes, I think it is due to the politicians and religious leaders who do their best to keep us apart. I do not buy into various ‘races’. I believe there is one race of people, the human race.
    Sorry to rant on so long, these things have been bugging me for 40+ years.
    Oh, a good education system is absolutely needed for a country to prosper. My Dad made sure I learned as much as I could at school and the only time I got a “D” on my report card for one quarter (junior high, in Art class) he dragged me to see the teacher and he asked her what I needed to do to get at least a “C”. Parents need to be involved in the education of their children.

    Like

    Comment by davidambrose — June 25, 2017 @ 3:34 pm | Reply

    • There have been no national strikes since the 1960s due to a concerted effort to undermine and eliminate unions. The conservatives have been so go at this that ordinary working people are now anti-union. Amazing.

      On Sun, Jun 25, 2017 at 3:34 PM, Class Warfare Blog wrote:

      >

      Like

      Comment by Steve Ruis — June 25, 2017 @ 4:40 pm | Reply


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