The United States spends $3.5 trillion — 18 percent of the gross domestic product — on health care and yet has a lower life expectancy, higher infant and maternal mortality, and worse related health outcomes than most other developed countries. California fares somewhat better, spending less than the rest of the country with 23 percent lower hospital admissions per 1,000 members of the population and 22 percent lower emergency department visits per 1,000 members of the population.
In the city of Berkeley, strides have been made in improving infant and maternal mortality, increasing immunization rates and lowering obesity overall and among all racial and ethnic groups. Yet persistent inequities remain.
As a country, state and city, we spend far more on health care services than we do on the underlying social determinants of our health such as ensuring that everyone has access to fresh foods and adequate housing and lives in safe neighborhoods. At the same time, most people who live in “vulnerable communities” without such characteristics have the added challenge of lacking access to affordable health care. For example, a recent California Health Policy Survey revealed that 23 percent of Californians said they had to wait longer than they thought reasonable to get an appointment for medical care. This figure was 33 percent for the one-third of Californians who are on Medi-Cal, the federal and state program that provides some health insurance coverage for those with lower incomes.
While the current administration works to reverse the expansion of health insurance coverage under the Affordable Care Act, or ACA, California has a unique opportunity to build on having achieved one of the lowest uninsured rates in the country at seven percent. Some Democratic presidential candidates are advocating for a “Medicare for all” single-payer approach to universal coverage. California can lead the way in implementing a more pragmatic approach to universal coverage while the “Medicare for all” debate is decided in our national election.
It is projected that by 2020, seven percent of Californians — or 3.72 million people — will be uninsured, of which about 1.5 million are undocumented. An additional 730,000 will be eligible for Medi-Cal coverage; 350,000 will be eligible for insurance premium subsidies in the ACA exchange; 410,000 will be eligible for nonsubsidized ACA coverage, and 750,000 will be eligible for employer coverage, according to the projections.
We estimate the cost of covering undocumented Californians to be $2.7 billion (adjusted for inflation) taking into account that about 1 million already have restricted-scope Medi-Cal coverage for emergency and pregnancy-related services. The cost of covering the 730,000 Medi-Cal eligibles is estimated to be $2 billion based on average Medi-Cal per enrollee spending of $6,560 by 2020 with 41 percent covered by the state given the federal and state split of funds.
To increase the affordability of ACA exchange coverage we propose an additional premium subsidy of approximately $62 per month which will cost the state $1.1 billion. This support would also apply to the 350,000 ACA subsidy-eligible uninsured. Overall, we estimate the total cost of covering the uninsured to be $5.8 billion, of which $2 billion is already the obligation of the state under Medi-Cal.
We propose two sources of public financing for the $5.8 billion — a provider and payer tax, and a statewide employer mandate. We propose a 1 percent tax on the commercial revenues of institutional providers such as hospitals, nursing homes and home health services; large physician groups of 25 physicians or more; pharmaceutical sales; and commercial health plans. Providers directly benefit from the tax through the reduction in charity care they currently have to provide to those without insurance coverage, and they would benefit economically from the spending of these new funds.
Such a tax has been used successfully in many other states including Arizona, Colorado, Indiana, Louisiana, Minnesota, Oregon and Virginia. It would raise $2.5 billion in revenue. The remaining would come from a statewide employer spending requirement modeled after Gov. Gavin Newsom’s proposal for a universal health care access program when he was mayor. All for-profit employers with more than 20 employees who do not themselves offer health care coverage and nonprofit employers with more than 50 employees who do not themselves offer coverage would be required to make contributions on behalf of their employees. Scaled to the state level, this would result in $3.3 billion in revenue.
The above sources could be augmented, if needed, by two additional novel sources of revenue — an airport landing fee and a rental car tax. The idea of a “solidarity tax on airplane tickets” was first introduced by the French president at the World Economic Forum in 2005 to help fund global health initiatives to end worldwide epidemics and since has been adopted by eight other countries. Applying a landing fee of $1,000 to $2,000 on all planes landing in California, varied by size of the plane, could generate between $950 million and $1.9 billion.
Likely to be contested by some, the legality of such a fee would be determined by the courts. Perhaps it would be more feasible to increase the tax on rental cars that based on experience in other states such as Texas can potentially be used for other than transportation projects. Using the 6.5 percent to 10 percent tax rate currently used in Texas, for example, would generate between $600 million and $800 million annually. Subject to approval by the legislature and governor, the two additional sources of funds could be used to cover out-of-pocket expenses such as copayments, deductibles and coinsurance for new and low-income enrollees.
We believe that our cost estimate of $5.8 billion to achieve universal coverage is within reach of what California can reasonably afford using the public-private mix of sources we have identified above. Universal financial access to care can help address unmet health needs, reduce delays in care, increase the use of preventive services, help prevent unnecessary emergency department visits and hospitalizations and help our children get better starts to life. It is the right thing to do, and we have the means to do it.
Stephen Shortell is the Blue Cross of California Distinguished Professor of Health Policy and Management Emeritus and a professor in the Graduate Division of Public Health, and Richard Scheffler is a distinguished professor of health economics and public policy emeritus and a professor of the Graduate School both in the School of Public Health, at UC Berkeley.