On June 1, 2017, the California state senate passed the “Healthy California Act (HCA.)” The bill (SB 562), which is now in the state assembly for further action, aims to replace all private/government insurance plans in the state with a single, government-run insurance plan.
There are numerous reasons the bill will likely not pass. For example, the California state government would need to spend US$400 billion per year (more than twice the current spend) to fund the proposals in the bill, in turn requiring a massive increase in taxes, including a 15 percent payroll tax increase (source: California Senate Appropriations Committee). There’s limited political support for the bill, even among Democrats. There’s also minimal popular support, per a Pew Research Center poll, which concluded that only 30 percent of California residents prefer having the government be the sole payer. Previous similar attempts at a single, state-run payer system have failed due to the expense involved.
On the other hand, there are voices of support for a single payer system, including Bernie Sanders, the longest serving independent in U.S. congressional history, and Mark Bertolini, Aetna’s CEO, who in May 2017 asked the nation to ponder such an arrangement.
If a single payer system were ever implemented, sweeping changes would impact multiple parties.
How would a single payer system look if it were ever implemented?
- If the government was the sole provider of health insurance, commercial payers would get absorbed into the government-run business
- If the government expanded Medicare coverage to all citizens, commercial payers would die out due to strong competition from government plans
- If the government sublet to a single commercial payer to handle the insurance market, there would be large-scale consolidation in the payer market
While there are many ways in which this could play out, a move to a single payer system would in most cases be a bane for the payers.
- A commercial payer-controlled single payer system would severely undermine providers’ negotiating power. However, a government-controlled single payer system would give them some negotiating leverage
- They would experience significantly reduced administration costs, as everything would be sponsored by the single payer
Thus, healthcare providers would experience positives as well as negatives in a single payer system.
Outsourcing Service Providers:
A single payer system would bring many opportunities to outsourcing service providers. For example:
- Payer consolidation would require third-party support across system integration, consulting, process expertise, BPO, and many other areas
- A government-run consolidation would lead to new areas of investments, similar to the Medicaid Management Information System (MMIS) that the states currently run
- Integration of everything, including clinical data, under one umbrella payer would enable service providers to develop much more powerful analytics and insights
Single payer system’s governmental requirement for service providers
Of course, not all would be rosy. As a single payer system would require service providers to work with the government instead of commercial entities, they would likely face slower processing, a smaller appetite for innovation, and bureaucratic red tape. Additionally, payer consolidation would lead to outsourcing industry consolidation, likely putting some service providers out of business.
We don’t mean to spook outsourcing service providers with our views. Nor are we encouraging them to start investing in expanding their offerings. But we are recommending they keep an eye on the progress of the HCA and other similar acts around the country. Doing so might just save them from the same fate Nokia suffered at the hands of Google and Apple.