Policy Rant: CA SB 562 and Federal Waivers

Skeptics of SB 562, the California single-payer bill, latch onto the question of obtaining federal waivers to help fund the new Healthy California Trust Fund, an independent public authority created by SB562 that will guarantee healthcare to all Californians thru single-payer financing. But these skeptics fail to recognize the political, statutory and legal paths available to ensure the new system receives all the federal funds for which Californians are eligible.

Through on-going consultations with advocates, administrators, legal authorities and health policy analysts, the sponsor of SB 562 is preparing for how the new system can build upon the existing Medicaid 1115 waiver for California, utilize newly granted state flexibility under the current Administration, apply for a 1332 waiver under the ACA, and establish Healthy California as a Part B provider for Medicare as well as subsidize Part D premiums, approaches consistent with current law and regulation.

Professor William Hsiao in his July, 2011, analysis of constraints to state single-payer, cites existing provisions of the Social Security Act that give states the opportunity to administer Medicare, an element useful to creating the “single channel” entity that reimburses all providers, the model for Healthy California.

He also discusses the usefulness to state single payer of Section 1332 of the ACA, which Congress intended to facilitate state universal healthcare systems, including single-payer financing. Converting federal tax subsidies under the ACA to monies into the new Healthy California Trust Fund, and getting federal tax credits for any employer and individual tax payments to fund the new Trust Fund, are the primary changes, the granting of which are contemplated by the legislative debate and the ACA statute. The waiver must certify the state program is budget neutral to the federal government and expands coverage. Hawaii obtained a 1332 waiver in January to provide federal tax credits for employer paid state taxes, replacing tax credits for employer paid insurance or coverage, a precedent relevant to SB 562.

Much uncertainty surrounds the future of Medicaid, but greater state “flexibility” is expected,along with reduced funding. Such flexibility does make it more likely that California can obtain those federal Medicaid dollars, however we organize our healthcare financing, provided we spend those dollars per the eligibility rules.

In other words, Californians will receive every federal healthcare dollar for which we are eligible, the question is in what form — can we use those dollars as part of the “single channel” created by the Healthy California Trust Fund to pay providers? And if we don’t get those monies, or the Federal government denies waivers to California while granting great flexibility to other states, we can litigate. These decisions are subject to judicial review.

In a political environment of gridlock and worse at the federal level, and increasing focus for change at the state level, with Democrats in control of California government holding 2/3 legislative majorities and the governorship, the politics strongly favor organizing to win in the golden state. With the resources of a nation, California can and should lead the country to achieve healthcare as a human right.


Founding Fellow, The Sanders Institute; Former Director of Public Policy, National Nurses United.

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