Testimony by Sen. Kuehl on SB 840 Assembly Appropriations Committee

By Sen. Sheila Kuehl

July 16, 2008

As you know, since most of you are co-authors of this bill, SB 840 is California’s plan to establish a functional, modern, universal health care system for the 21st Century. 

This bill covers every California resident with comprehensive, affordable health benefits, contains the growth in health care spending while improving quality.

And most importantly it guarantees every patient with total choice of their doctors and hospitals.

Each year health care costs grow 2-3 times faster than wages.  The Journal of Health Affairs recently reported that health care spending will nearly double over the next decade.  This means that, in 10 years, healthcare will cost 20 cents of every dollar our nation produces.

With that kind of cost inflation, discussions about covering the uninsured are pointless. Our failure to address this problem is close to gross negligence. 

In the real world, 50% of bankruptcies are due to medical costs, employers are eliminating benefits if they can, and if not, like so many school districts and other public employers, they may face bankruptcy.

Our own budget crisis is greatly affected by the rising health care costs. The state budget buys a lot of healthcare - directly through public programs and as employers.

If costs grow 2 to 3 times faster than wages, but the taxes that pay for the health care are a function of wages, then we are basically stuck in quicksand - each year sinking deeper and deeper.

In response to exploding health care costs, we are dismantling our system.  Not one of us in this room has the level of health care benefits we had 10 years ago – and we’re paying a lot more for what we still have.

The US is now in a state of severe health care rationing. Doctors’ reimbursements are frozen. Coverage for the insured is very fragile and unreliable due to rescission, improper denials, gutted benefits, and growing deductibles.  Patients experience shockingly long wait times, shorter hospital stays, fewer specialist visits, limited drug formularies, and rushed doctor visits.  And yet…costs keep rising.

In 2005, the Lewin Group completed a financial analysis of the bill which found that the bill would be fully funded in 2006 with a combined payroll tax of about 12%.   The report additionally found that the bill would produce savings of about $29 billion in the first year alone, most of which will be spent on insuring the uninsured and improving the health care benefits for all of us. 

The Lewin study found that SB 840 would save California businesses 16% off their employee benefit costs, while families would save hundreds of dollars a year and state and local government would save nearly $1 billion in the first year alone.

Many of you have heard about the recent LAO report that evaluated the health care funding model developed for the Lewin Report in 2005.  However, the LAO did not evaluate SB 840.  The LAO was not asked to evaluate the impact that SB 840 would have on total health care spending.  It was asked whether the funding numbers I developed to fund the bill in 2006 would still work in 2011, 5 years after massive health cost inflation.

SB 840 actually establishes a premium commission to determine the right numbers in whatever year that single payer is enacted.  Numbers that will have to be approved by a 2/3 vote in the Legislature or by the voters in order for SB 840 to take effect.

SB 840 is the plan which lays out how California will take its existing health care spending and use it more efficiently to cover everyone.

The LAO wrote that the Lewin findings, which determined that the funding plan would ably fund SB 840 in 2006, were reasonable.  The LAO assumed all of the same kinds of administrative and other cost efficiencies that Lewin assumed and determined that SB 840 would in fact slow the growth in health care spending.

The LAO analysis confirmed that under SB 840, current health care spending in 2011 would be more than sufficient to fund the system in that year.  Therefore, whatever they expect costs under SB 840 to be, they will be higher without single payer. 

The LAO analysis is a terrifying wake up call about rising health care costs.  If their estimates are correct then your coming years as legislators will be entirely absorbed by the tidal wave that is coming. 

SB 840 is the only health reform proposal that has been proven to effectively contain health care costs without totally dismantling our system. 

SB 840 provides truly universal health care.  Affordable, patient centered health care.  With doctors in charge - not insurance companies.  It’s tested, it’s possible, a majority of Californians support it and it’s time.  I urge your 'aye' vote.