(CALMATTERS) – It would cost California between $494 billion and $552 billion annually to operate the single-payer health care system envisioned in a bill that died last month in the supermajority-Democratic Legislature, according to a Tuesday analysis. The cost estimate from the nonpartisan Legislative Analyst’s Office is significantly higher than one prepared by committee staffers in January, which projected single-payer could cost California between $314 billion and $391 billion annually. It’s also between $9 billion and $67 billion higher than the $485 billion California is expected to spend across all health care funding sources in 2022.

The eye-popping price tag — for reference, the record-breaking state budget blueprint Newsom unveiled in January barely topped $286 billion — could only strengthen the political headwinds single-payer already faces in California. Another massive hurdle for single-payer supporters: the legislative analyst’s conclusion that “with higher demand and potentially lower supply from lower payment rates than today, CalCare could create shortfalls in the quantity and/or quality of health care available to Californians” while also “exacerbat(ing) the state’s workforce challenges.”

Other key takeaways from the legislative analyst’s report:

  • The cost estimate doesn’t include the cost of setting up CalCare — which, among other things, would require developing “information technology systems for tracking and reimbursing more than 100 million health care claims and encounters.” Those startup costs could be at least tens of billions of dollars and could require “years of planning and resources,” including securing approval from the federal government.
  • Even with a series of new tax hikes to pay for CalCare, the state would still face an estimated annual funding shortfall of between $70 billion and $193 billion — and the costs to run CalCare would likely grow by at least $20 billion to $30 billion annually.
  • When operational, CalCare would be responsible for overseeing and funding around 15 percent of economic activity in California — which has the fifth-largest economy in the world.