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California Achieves Near-Universal Coverage, but Budget Deficits and Single-Payer Proposals Remain

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On January 1, 2024, California took a significant step toward achieving universal health coverage for its residents. By expanding its Medi-Cal program, the state now ensures that every resident, regardless of immigration status, has the opportunity to receive comprehensive medical services and health care coverage. This effectively achieves “near-universal coverage” within California’s borders.
 
Serving approximately 40% of all Californians, Medi-Cal, the state's Medicaid program offering free or low-cost health coverage to income-eligible residents, historically excluded many undocumented immigrants. However, since 2016, the state has been steadily expanding coverage through its own funding. This included immigrant children first, then young adults, followed by adults ages 50 and older, and finally, in 2024, adults ages 26-49.
 
This latest expansion is estimated to cover an additional ~700,000 undocumented adults, bringing the total to nearly 1.4 million covered through these efforts. This significant step means that nearly all Californians, regardless of immigration status, now have access to health care and health insurance through various channels like employer-sponsored plans, the Covered California public exchange, Medi-Cal, Medicare, and others.
 
This achievement was not through a Single Payer system, which would replace all existing health care payers and access systems with one government-run program, but rather through an expansion of existing state programs. While the cost of this Medi-Cal expansion is not insignificant, it pales in comparison to the estimated $500 billion annual price tag of a Single Payer proposal, which is nearly double California’s current entire state budget.
 
Still, discussions in the California legislature continue regarding the introduction of a Single Payer system and overhaul of all health care, for all residents, within the state. One of the biggest obstacles in introducing a Single Payer system is financing it – in addition to logistics, a restructure of health care workers and hospital systems, medical tourism, and much more.
 
California Budgets – Health Care Abilities and Limitations
California's budget process starts with a bit of a guessing game. By January 10th, the governor must propose a spending plan (a “budget”) for the upcoming fiscal year (July 1 – June 30), even though the California Franchise Tax Board doesn't start gathering tax revenues until April 15th. This initial proposal, based on projections, sets the stage for lawmakers' discussions, and identifies the administration’s fiscal projections and priorities. Once the tax season kicks in, things become clearer. In May, the governor revises the budget based on actual revenue, making adjustments as needed. Finally, by June 15th, the legislature must pass the final budget.
 
While federal budget debates often become gridlocked, California's system, with its single-party dominance in 2/3+ of the legislature and statewide offices, typically avoids such impasses. However, some contentious budget items are often delayed and passed later in "budget-trailer bills" during the final hours before the legislature adjourns on August 31st. Despite its limitations, the governor’s initial proposal remains crucial for understanding the state's available funding and sets the stage for negotiations and legislative items in the year ahead.
 
Governor Newsom’s budget proposal of $291.5 billion includes a $37.86 billion deficit, which is notably smaller than the Legislative Analyst’s Office’s projected $68 billion shortfall a few weeks prior. While the projected numbers differ, both clearly estimate a budget deficit of nearly $38 billion – or more.
 
In contrast, California’s state budget had a $100 billion surplus in 2022-2023. The current fiscal year 2023-2024 has a $31 billion deficit. In Newsom’s press conference for his budget announcement, he noted that the swings in California’s economy are heavily dependent on the wealthiest Californians’ personal income taxes, which fluctuate.
 
While budget deficits are never welcomed news, Governor Newsom highlighted natural budget cycles – but did not call for alarm. His budget focuses on “promises kept” in pillar areas like addressing homelessness, mental health, a safer California, climate change, wildfire mitigation, career education, and economic dominance.
 
Newsom’s Budget Summary includes highlights of priorities and budget solutions. His two-hour budget press briefing did not focus on health care, other than media questions about a need to revisit a health care worker wage increase, approved by SB 525 in 2023.
 
The largest health care news in Newsom’s budget proposal relates to the preservation of all funding necessary to fully implement the Medi-Cal expansion to income eligible adults aged 26-49 regardless of immigration status. The projected costs of such expansions are $1.4 billion ($1.2 billion General Fund) in 2023-2024, $3.4 billion ($2.9 billion General Fund) in 2024-25, and approximately $3.7 billion ($3.2 General Fund) each year moving forward. While these numbers are costly, remember that the cost to implement a state-facilitated Single Payer program would be $500 billion+ annually.
 
Aside from California becoming the first state to achieve near universal health care, the health care items related to the budget deficit include deferred spending, transfers, and reductions in health care spending. In budget briefings and documents, there was no mention of Covered California, health insurance agents, or Single Payer – which may indicate 2023-2024 is a survival year for the administration, rather than an expansion year. But things are always cooking in Sacramento.
 
Single Payer Moving Forward – AB 2200 (Kalra-D)
Even with California’s budget in the red, talks of Single Payer proposals and ideas in Sacramento continue.
 
On February 7, 2024, Assemblymember Ash Kalra introduced new Single Payer legislation, AB 2200. The bill details a program called “CalCare” in California, which would replace all existing health plans, health payers, and hospital/care systems within the state. CalCare was introduced in previous legislation (AB 1400) two years ago but died in the legislative process, mostly due to financial concerns for the very costly measure.
 
Notably, the new AB 2200 bill does not contain a financing mechanism. With California in the red, hefty new taxes would be required to fund this measure. Adding another layer of complexity, California is concurrently working on a Medicare/Medicaid waiver proposal, which will request the diversion of all federal spending on these programs to the state, so it can finance a Single Payer program like CalCare (a measure passed by SB 770 in October 2023). Of course, this approach hinges on federal approval and would eliminate Medicare and Medi-Cal entirely in California.
 
The Biden administration has been vocal about improving upon the existing Affordable Care Act (ACA) and preserving Medicare, and a GOP controlled administration would likely oppose such request. Add in obstacles related to future White House administration changes, obtaining these funds will be a challenge – though California is required to try. It must finalize its waiver proposal plans by Fall 2025.
 
Word & Brown is active with the California Agents and Health Insurance Professionals (CAHIP) association, as CAHIP responds to the new AB 2200 legislation proposal with its coalition partners. Word & Brown will also continue to be involved in SB 770 waiver discussions as they occur in the coming months, in conjunction with CAHIP and the National Association of Benefits and Insurance Professionals (NABIP).
 
California’s legislature operates in two-year terms and is currently in the 2023-2024 session. This means lawmakers have only until August 2024 to pass and implement this major legislation – and all other legislation introduced this year, as well as two-year bills lingering from 2023. The challenge is further compounded by the fact that all 80 Assemblymembers and half of the 40 Senators face re-election in November, potentially impacting their willingness to champion such a costly and disruptive bill.
 

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