Patterico's Pontifications


Gavin Newsom Now Tries to Square Extravagant Promises with Economic Reality

Filed under: General — JVW @ 6:52 pm

[guest post by JVW]

Meanwhile, on the other dysfunctional coast. . .

Newly-installed Golden State Governor Gavin Newsom has began sketching the outlines of his budgetary priorities for the coming year and, indeed, for pretty much his entire term. To the surprise of no one, he proposes increasing spending from last year, continuing on the trajectory that his predecessor initiated in his final term. Though Gov. Newsom insists that most of the new spending — much of it based upon possibly unrealistic expectations of a $21.4 billion surplus this year — will be one-time expenditures on items such as paying down debt and shoring up pension funds, he does propose enough ongoing spending increases in areas such as education and health care to give pause to anyone who wants to see the state maintain a viable road towards financial sanity.

And it’s the health care part of it that promises to have the most far-reaching impact on whether or not the state hews to a path of fiscal discipline. Wanting to be seen as a leading progressive, Gov. Newsom campaigned on the idea of guaranteeing insurance for every resident of the state irrespective of immigration status, while grudgingly acknowledging the challenges of paying for such a lavish program. Now that he is in charge, he has started to take the first steps towards implementing his goals.

As you might expect, his proposals are laced with the tolerable, the misguided, and the downright awful. The state will seek to control costs through negotiations with drug prices (tolerable); California will implement a state version of the now-waived Obamacare individual mandate and impose non-compliance fines (sorry Justice Roberts! I meant “taxes”) which will then be used to subsidize plans for lower-income recipients (misguided); and, finally, we plan to expand the Medi-Cal program for illegal immigrants by extending the eligibility age limit from 19 to 26 (downright awful). Though Newsom believes that these changes will largely be revenue-neutral due to projected savings and new revenue from the first two items, legislative analysts have already pegged the annual costs of a broader legislative majority-backed proposal to offer Medi-Cal to all illegal immigrants at $3 billion. The governor’s proposals are but the first steps towards his more ambitious plan of a statewide single-payer plan for which he has already requested a waiver from the Trump Administration, almost certainly assuming he will be denied (frankly, the Trump Administration ought to give him the go-ahead, just so that Gov. Newsom gets the pressure ratcheted-up from his far left).

Central to the ideology of the pro-single payer advocates is that people desperately want health insurance but, for whatever reason, are unable to pay for it. This turns out to be largely untrue. A group of researchers has acknowledged that Covered California, the state-run insurance exchange established under Obamacare, has lost 250,000 enrollees since the Trump Administration waived the penalties for not purchasing a plan. They further report that enrollment this year is thus far 24 percent lower than in 2018, suggesting that numbers will continue to plummet. All this, of course, during a strong economy which has produced record employment levels. Clearly there are hundreds of thousands of my fellow Golden Staters who can afford health insurance but simply would rather spend their money on other things, contrary to the popular folklore of strapped families choosing between fixing their fifteen-year-old minivan or paying this month’s premium.

The aforementioned research team, located at USC, has come up with two plausible scenarios under which California can expand health care coverage without going to single-payer. The more ambitious scenario sees the state making health insurance more affordable for a broad section of Californians through both subsidies to purchasers and tight regulations of the markets, admittedly making the assumption that the regulation won’t lead to massive defections by providers. The second option targets specific segments of the population who can mostly pay for policies but might be more willing to do so if the pot is sweetened with increased subsidies. Starting with a baseline of 51% of the state currently covered, the ambitious plan is estimated to potentially add another 19% to that total to cover 7 out of 10 residents of the state at an annual cost of $4.2 billion above and beyond what the state already spends (assuming that the feds will chip in $1.1 billion), while the more modest option would add an additional 7% to the total to reach nearly 6 out of 10 total residents at an additional annual cost of a mere $220 million.

But that’s admittedly mostly the low-hanging fruit, i.e. the people who could afford to shoulder at least some of the cost and who wouldn’t consume massive amounts of health care on an annual basis. So the problem, obviously, is that short of going to single-payer there isn’t a whole lot that the state can do to meet its professed goal of 100% coverage, and going to single-payer would, without much doubt, be a ridiculously costly initiative especially as California would become a magnet state for those with expensive health care needs. The large number of illegal immigrants in the state presents a serious challenge since under Obamacare they are currently ineligible to receive federal subsidies. This means that the plans demanded by immigrant activists and endorsed by Gov. Newsom to cover them would have to be paid entirely by the California taxpayer.

Universal coverage advocates like Gavin Newsom have long gotten away with playing a cynical game. They endorse single-payer as a solution and paper over the obvious financial shortfalls by cheerfully insisting that they will find a way, but then they quietly seek to assure business interests and financial stakeholders that they won’t wreck the budget or gut the economy to pay for it. No doubt the endgame for Gov. Newsom is really to buy time with incremental reforms as long as the Trump Administration is around to blame for the state’s failure to enact a bolder plan, and then hope that the next Democrat administration comes in two years and nationalizes the issue in order to take Gov. Newsom off the hook. A guy who believes that boardroom bolshevism can be made to work as his party moves more towards a revolution of the proletariat is no doubt fooling himself, but we shouldn’t let him fool us as well.


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