Americans frustrated by out-of-touch policies in Washington should brace themselves for a new onslaught coming from the West.
In California, lawmakers are considering two legislative proposals that would create a state system of single-payer, government-run health care and impose a legion of new tax increases to fund it. The proposals would simultaneously cause chaos within the health care system and harm the national recovery after two years of coronavirus-related disruptions.
For starters, the bill would effectively eliminate all private health coverage for services provided by the government-run system. Less than a decade after Barack Obama’s infamous promise — “If you like your plan, you can keep it” — became PolitiFact’s Lie of the Year, the California bill would cancel the health plans of millions of Golden State residents.
In its place, the bill would create a government-dominated health system that would set Medicare payment levels as the default standard for reimbursing doctors and hospitals. But right now, many doctors and hospitals lose money on their Medicare patients — they only break even by charging higher amounts to patients with private health coverage. Eliminating higher-paying private insurance and paying providers lower Medicare rates for all their patients amounts to giving doctors and hospitals a massive pay cut — this at a time when providers are already leaving medicine due to COVID-related burnout.
Then come the tax increases California legislators have proposed to pay for some, but likely not all, of the cost of this new government-run health system. A 2.3% excise tax on all business revenue over $2 million will hurt low-margin businesses the most. By taxing revenue and not profit, the bill will increase financial losses for firms struggling to break even, potentially causing some businesses to close.
A 1.25% payroll tax on businesses with at least 50 California employees will discourage small businesses from hiring their 50th worker — or encourage them to move jobs out of California to avoid the levy. Just as Obamacare’s employer mandate discouraged businesses from hiring additional workers, so too will this tax make it harder for Californians to find work. And it comes as California’s unemployment rate, driven high by prolonged COVID lockdowns, remains stuck at 6.9% — the highest in the country.
When it comes to individuals, California would impose a “surcharge” on households with taxable income over approximately $150,000. While it might sound appealing to some to hear that “the rich” will pay for their “free” health care, this levy will only serve as further incentive for entrepreneurs to move out of the Golden State to escape its punishing taxes. Silicon Valley has served as an engine of global innovation for half a century and provided financial windfalls to California’s state budget too — yet lawmakers seem hellbent on killing the goose that laid the golden egg.
While lawmakers would have voters believe that only tech moguls would pay for this new government-run health system, they left themselves a convenient “out” in the process. The constitutional amendment proposing a funding mechanism for the single-payer system would exempt the new program from state spending caps and would allow the legislature to pass tax increases funding the program with a simple majority vote — down from the two-thirds majority currently required. These two changes would give the legislature a virtual free pass to use single-payer health care as a means to tax and spend California into fiscal oblivion.
And if all that isn’t bad enough, the bill would also provide health coverage to all California residents, “without regard to the individual’s immigration status.” At a time when our nation already faces a crisis on our southern border, the California proposal would encourage additional migration from residents seeking “free” health care.
Washington lawmakers may have put single-payer on the back burner for the time being, but rest assured that they would use developments in California as a justification to take control of the portions of the health system the government doesn’t already dominate. For the sake of our health system and our economy, California should stop its relentless march towards single-payer health care.
Mary Vought is the founder of Vought Strategies and a visiting fellow at Independent Women’s Forum. You can follow her on Twitter @MaryVought