California is studying a single payer system. It is doing the homework to make explicit the assumptions that are needed to make the system work. Modern Healthcare has some details:

SB562 would guarantee health coverage with no out-of-pocket costs for all California residents, including people living in the country illegally. The state would contract with hospitals, doctors and other healthcare providers and pay the bills for all residents similar to the way the federal government covers seniors through Medicare.

The measure envisions using all public money spent on healthcare — from Medicare, Medicaid, federal public health funds and “Obamacare” subsidies. That’s enough to cover about half of the $400 billion cost, according to the legislative analysis.

The rest would come from higher taxes on businesses, residents or both. It would take a 15% payroll tax to raise enough money, the analysis said.

Matt Bruenig makes one very good point before I want to look at some details:

After the implementation of single payer, the report says, health expenditures in the state of California would total $400 billion per year, or 15 percent of the state’s GDP. This is 3 percentage points lower than the share of GDP the US overall spends on health care.

I have a couple of questions about the finances.

Does the analysis assume or not assume the AHCA will be passed? If it does not assume the AHCA, there is a potential $10 billion Medicaid annual gap in the financing. More importantly it is assuming some incredibly complex and currently not authorized in law much less by rule making waivers.

What happens when there is a recession? California has a balance budget constraint. Wage and capital gains income taxes tend to be pro-cyclical. They go up in good times and crash in bad times. How is this program financed in bad years?

Finally, we need to look at the distributional fight inherent within universal access programs. Single payer is exceptional for the fifty two year old making $11 an hour with either no benefits or Bronze level benefits. It is not as good of a deal for a twenty nine year old independent contractor making $39,000 a year who has a cheap policy in the individual market. It is a really bad deal for the mid-40s couple making $200,000 with exceptional coverage through work.

The American political system is most responsive to people who have a lot to lose, people who have power and people who can mobilize significant resources. In this case, that is an apt set of descriptors for the mid-40s couple making very good money.

Single payer is hard. California is trying to make explicit the trade-offs needed to get a single payer system off the ground. There are choices to be made with winners and losers from each choice made. And each set of people whose current situation is changed for the worse will scream.

Update 1 And oh yeah, how does this play nicely with ERISA, the controlling law on most employer sponsored benefits including health insurance?