Ventura County Star

Lawmakers told state health plan would cost less

Kuehl's single-payer bill moves toward a possible repeat veto

By Timm Herdt (Contact)
Thursday, April 19, 2007

SACRAMENTO A state-run system of health insurance that would provide comprehensive healthcare for every Californian could be paid for with a tax in which employers would pay about 8 percent of their payroll and individual workers would pay about 4 percent of their wages, supporters testified Wednesday.

The testimony came as the Democratic-controlled Senate Health Committee moved toward creating another showdown with Republican Gov. Arnold Schwarzenegger, approving a healthcare reform bill virtually identical to one he vetoed last year.

Although Sen. Sheila Kuehl's proposal to create a single-payer system in California that would eliminate private health insurance was approved by lawmakers last year, that legislation put aside the issue of financing. This year, Kuehl proposes to also tackle the financing by creating a tax system similar to Social Security a payroll tax that splits the costs between employers and employees.

"You pay your share, you get healthcare. It's that simple," said Kuehl, D-Santa Monica. "The money it would cost businesses and individuals under our plan is less than under any other plan."

She asserted that companies that now provide health benefits to workers and individuals who now have insurance would pay less in taxes under her plan than they now pay in premiums, co-payments and deductibles.

Citing an economic study, Kuehl said the total amount spent on healthcare in the state would be reduced by about $17 billion because eliminating the profits and administrative costs of private health insurers would more than offset the cost of insuring the more than 6 million Californians now without health insurance.

The insurance industry disputes the study's assumption that 30 percent of private health insurance premiums go toward administrative costs, asserting that the figure is actually between 9 percent and 15 percent.

Kuehl's financing bill does not yet specify what tax rates would be required, but Lenny Goldberg of the California Tax Reform Association said a payroll tax of about 12 percent would be necessary, with a 2-to-1 split between employers and employees.

The actual rate would be somewhat lower because the proposal would exempt the first $7,000 of every worker's wages, a provision that Goldberg said "greatly relieves the burden on low-wage employers."

It would mean that for a full-time minimum-wage worker, companies would pay less than $700, or about 4 percent of that worker's wages. Each worker would pay about $350 a year.

Revenue from the payroll tax would be supplemented by an as-yet-unspecified tax rate levied on individual income of more than $200,000 a year and an unspecified tax on nonwage earnings, such as interest and dividends.

Critics, led by the California Chamber of Commerce, said the proposal represents too radical a shift from the status quo.

"What this bill proposes to do is essentially ban an industry," said lobbyist Dominic Di Mare. "We don't support the outright banning of an industry because their performance is substandard to your standards."

No alternative plan in mind

Under questioning from Sen. Darrell Steinberg, D-Sacramento, Di Mare acknowledged that the Chamber of Commerce is greatly concerned about the lack of universal access to healthcare and the soaring costs of premiums paid by employers. But the organization has yet to support a reform plan or develop one of its own. "We have been stymied by the magnitude of the problem," he said.

Kuehl insisted that the problems with the status quo will continue to grow until, inevitably, the pressure will become such that either Schwarzenegger or some future governor embraces the single-payer approach she advocates.

"Those who say this can never work are just flat-out wrong," she said, "because it has to happen The runaway growth in healthcare costs keeps families from being upwardly mobile. It stifles wages and prevents businesses and entrepreneurs from being globally competitive."

Both the bill creating the single-payer system and the bill to finance it were approved on 6-4, party-line votes with majority Democrats in support. The single-payer bill next goes to Appropriations Committee; the financing bill will be next heard by the Revenue and Taxation Committee.

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