Single-payer health care would cost more than California budget

California state Sen. Ricardo Lara, D-Bell Gardens, speaks at a rally for a single-payer health bill on April 26, 2017 in Sacramento. The cost of SB 562, authored by Lara and state Sen. Toni Atkins, D-San Diego, would reach $400 billion a year, an analysis released Monday found. less California state Sen. Ricardo Lara, D-Bell Gardens, speaks at a rally for a single-payer health bill on April 26, 2017 in Sacramento. The cost of SB 562, authored by Lara and state Sen. Toni Atkins, D-San ... more Photo: Rich Pedroncelli, Associated Press Photo: Rich Pedroncelli, Associated Press Image 1 of / 4 Caption Close Single-payer health care would cost more than California budget 1 / 4 Back to Gallery

Creating a single-payer health care system in California would cost $400 billion a year — including $200 billion in new tax revenue, according to an analysis of legislation released Monday by the Senate Appropriations Committee.

The projected cost far surpasses the annual state budget of $180 billion, and skeptics of the bill say the price tag is “a nonstarter.”

Half of the $400 billion would come from existing federal, state and local spending on health care. An additional $200 billion would have to be raised by imposing a 15 percent payroll tax on California employers and employees, the analysis found. But the cost of the new tax would be partially offset by reduced spending on health care coverage by employers and employees — which is how nearly half of Californians receive health insurance.

“This is the gigantic brick wall that everyone who was paying attention was letting us know we were about to run into,” said Micah Weinberg, a policy researcher and president of the Bay Area Council Economic Institute.

MBA BY THE BAY: See how an MBA could change your life with SFGATE's interactive directory of Bay Area programs.

The assessment is the first price analysis released for SB562, introduced by state Sens. Ricardo Lara, D-Bell Gardens (Los Angeles County), and Toni Atkins, D-San Diego, which seeks to transform California’s multipayer health system into a single-payer fee-for-service program that would cover all 39 million residents. The measure was approved by the Senate Health Committee in April and is now before the Appropriations Committee.

Many details about the bill have yet to be released, namely where the financing would come from. A spokesman for Lara said that Monday’s fiscal estimate is a “starting place” and that a plan to finance the bill would be released by September.

The analysis suggests the single-payer plan may not produce savings in the health system overall, said Larry Levitt, a health policy expert at the Kaiser Family Foundation.

Current estimated spending on employer-sponsored health insurance is $100 billion to $150 billion a year — so an additional $50 to $100 billion would have to be generated to meet the $200 billion mark for new revenue, the analysis found.

“A single-payer plan would likely be more efficient, but it also offers better benefits and covers more people, and that costs money that has to come from somewhere,” Levitt said. “These numbers point to what is probably the most controversial part of a single-payer plan, which is the financing. You can be sure that opponents will emphasize the 15 percent tax, even though there are also big premium savings for employers and individuals.”

State legislators have attempted a number of times over the years to enact a single-payer system in California, including a 2007 measure sponsored by former state Sen. Sheila Kuehl that was vetoed by then-Gov. Arnold Schwarzenegger. California voters have also rejected the single-payer concept, voting down a ballot initiative in 1994 that would have created a health care system administered and financed by the state.

At the federal level, single payer has long been a popular concept among liberal Democrats. But reform legislation has never come close to passing, even when the White House and both chambers of Congress were controlled by Democrats. Republicans oppose a single-payer system, believing it would carry a high price tag and take away individuals’ right to choose their coverage.

“There’s global evidence of how well (single payer) can work,” said Daniel Zingale of the California Endowment, a nonprofit health care foundation and a former adviser to Schwarzenegger. “But in a practical sense, there are big hurdles to overcome that are unique to the American health care delivery system. To do that is to take some of the profits out of things like drug manufacturing, medical devices and (health maintenance organizations). That’s a big political lift in a state and nation where the health care delivery system has been all about profits.”

Catherine Ho is a San Francisco Chronicle staff writer. Email: cho@sfchronicle.com Twitter: Cat__Ho