Healthcare in the Crosshairs

Al Jacobs

If you’ve paid attention these past few years, you’re aware of a lot of disagreement on our nation’s healthcare. With the enactment in 2010 of the Affordable Care Act (ACA), generally referred to as Obamacare, the details of providing medical services to Americans became a federal mandate.

Upon its implementation, we were assured of the following benefits: (1) a massive decrease in the number of persons without health care, (2) a substantial drop in the cost of health insurance, with tax credits to help pay the premiums, (3) a reduction in the federal deficit, (4) general improvement in health due to the expanded coverage offered, resulting in higher worker productivity, (5) elimination of insurance denial due to preexisting medical conditions or massive premium increases on various pretexts and (6) illness no longer means financial ruin.

The legislation, encompassing 2,300 pages, enjoyed hasty approval on a straight party line vote, and became law March 23, 2010, with few legislators having any knowledge of its contents. Over the next seven years, as its provisions were incorporated into the workings of our healthcare apparatus, both the benefits and limitations became recognized.

To its credit, over 20 million previously uninsured citizens became added to the roles of the insured, though critics contend many of these were merely Medicaid recipients who might have previously qualified if they chose to do so. Nonetheless, a substantial number of individuals received coverage for the first time.

As for the not so favorable results, the costs of the program became a major concern. Contrary to assurances by President Obama promising a $2,500 reduction in healthcare premiums for the average family, rates climbed instead by nearly twice as much.

There’s no doubt this contributed significantly to the support Donald Trump received during his 2016 candidacy for the presidency. Concerning Obama’s other assertions, including the claims if you liked your doctor or your insurance, you could keep them, these became an embarrassment which further undermined confidence in ACA. As a result, the controversy resulting from the malfunctions of Obamacare became an important reason the Republican Party fared well in the last general election.

Since the seating of a GOP congress and the inauguration of President Trump last January, the repeal and replacement of Obamacare received a lot of attention. However, after the institution and funding of ACA, many identifiable groups with vested interests established themselves.

Doing away with a program funneling money to favored parties is not easily accomplished. This recently became evident when congress found itself unable to agree on a replacement. So for now, while the majority party haggles over details, Obamacare remains the law of the land.

With the congressional effort to rescind ACA marching in place, the focus shifts elsewhere.

As is often said, nature abhors a vacuum, and so not to be upstaged by the federal government, my home state is going through the motions of implementing a competing program of its own. Under the title Healthy California Act, State Senators Ricardo Lara, D-Bell Gardens, and Toni Atkins, D-San Diego, are the sponsors of California Senate Bill 562, described as a single-payer healthcare system. The proposed law’s intent is to provide free medical service to everyone, documented or otherwise, residing in the state.

When enacted, it will become “… a system that will make it possible for everyone living in California to receive comprehensive health care services. Individuals will have free choice of licensed health professionals and services of any type of professional setting, from a solo practice to a clinic, a group practice, or hospital system. People will no longer have to worry about deductibles or copays.

“Covered benefits will include services to keep people healthy–mentally and physically–as well as those services that diagnose and treat diseases. In addition to emergency services, surgeries, and hospital stays, services such as case management, home health care, day care, and hospice are covered. Vision and dental care are also included.”

Proponents contend the single-payer system, where all costs will be borne from state resources, will make health care more affordable and efficient because it eliminates the need for time-consuming administrative functions as well as the soaring costs of insurance premiums.

Instead, benefits will simply flow out without the waste and duplication of documentation or middle-man markups. Whether or not these presumed advantages actually result in an efficient and cost-effective operation is questionable.

Such single-payer systems are not uncommon, but their performances are often criticized, the Veterans Administration being one routinely castigated. As another example, Vermont instituted such a program in 2011, but discontinued it in 2014 due to uncontrollable costs.

Whether or not the Healthy California Act might prove to be as beneficial and cost effective as its supporters claim, it must conduct an uphill battle if it’s to be approved. Although on May 25, 2017, the Senate Appropriations Committee endorsed it on a 5-2 party-line vote, it will face a more challenging reception in the full State Senate.

Thereafter it must receive a majority vote in the Assembly and finally be signed into law by an increasingly cost-conscious Governor Jerry Brown, whose spokesman, following the committee vote, declined to comment on the pending legislation.

To put matters in perspective, you should be aware a recent report by Elizabeth G. Hill, Legislative Analyst for Senator Lara’s Appropriation Committee, sets the anticipated annual cost of the Healthy California Act as proposed to be $400 billion. Of that, $200 billion will come from existing federal, state and local funding for healthcare; the remaining $200 billion must be raised from higher taxes.

You might note Hill’s analysis proposes one scenario wherein a new payroll tax of 15 percent on earned income, to be extracted from all employers, supplies the needed funds. In any event, inasmuch as the entire California 2017-18 budget submitted by Governor Brown on January 10th, including his Rainy Day Fund, totaled only $123 billion, you may wonder how enactment of SB 562 might affect the state.

Rather than contemplate how Health California Act would decimate California, I’ll conclude this on an encouraging note. Because of the obvious flaws built into the proposed legislation, as well as the massive costs designed to bankrupt the state, it’s unlikely SB 562 will ever become law.

I’ll go further in my prediction. I’m convinced if Senators Lara and Atkins even suspected the Healthy California Act ran the risk of enactment, they’d withdraw the bill at once. I’m certain their intent is nothing more than romancing their constituents with a grandiose program for the notoriety it brings them.

On the matter of government-enacted programs which pass benefits on to persons at little or no cost to the recipients, I’ll leave you with a final thought. The ancient adage is remarkably accurate: You’ll never know how unaffordable something can become until it’s absolutely free.

Al Jacobs, a professional investor for nearly a half-century, issues a monthly newsletter in which he shares his financial knowledge and experience. You may view it on


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