On October 7, 2023, California’s Governor approved Senate Bill (“SB”) 770, which directs the Secretary of the California Health and Human Services Agency (“Secretary”) to take steps towards designing a health care delivery system that provides benefits through a unified health care financing system, such as a single-payer health care system. Prior law established the Healthy California for All Commission to develop a plan to achieve a health care delivery system in California that provides coverage and access through a unified health care financing system. SB 770 is the next phase of the plan.

SB770 envisions a healthcare delivery system with specific attributes. To that end, the Secretary will research, develop and pursue a waiver framework in consultation with the federal government to create this new system. These attributes include:

  • A comprehensive set of medical, behavioral health, pharmaceutical, dental and vision benefits, including primary, preventative and wellness care services;
  • Long-term care supports and services;
  • Services that do not vary with age, employment status, disability status, income, immigration status, or other characteristics;
  • The identification and elimination of disparities among Medicare, Medi-Cal, employer-sponsored insurance, and individual market coverage;
  • The elimination of adverse impacts within the health care system of attempts to avoid covering the sick or providing the benefits patients need;
  • The absence of cost sharing for essential services and treatments covered under the program;
  • The establishment of sufficient reserves to guarantee solvency during public health emergencies and times of economic disruption;
  • A program to implement a just transition for members of the health industry workforce whose jobs may be disrupted;
  • Health care system financing costs limited to a specified percentage of individual income on a progressive sliding scale;
  • Cost-effective systemwide pooled purchasing to negotiate rates with providers;
  • Freedom of choice for patients to choose providers and for primary care providers to choose practice models;
  • Greater investments in public health, primary care, and health equity;
  • Improvements in cost, quality, and health care system oversight and integration;
  • A rate setting process using Medicare rates as the starting point for the development of final rates that avoid disruptions in the health care system and expand the availability of high quality vital services by sustaining a stable, experienced, and equitably compensated workforce;
  • Prohibitions on risk-bearing contractual arrangements that tend to incentivize providers to withhold needed care, while allowing for payment models that guarantee access, promote quality, ensure equity and enable multidisciplinary teams; and
  • Methods of payment, delivery and oversight implemented under the unified health care financing system that will continue to allow California the ability to receive the full benefit of federal expenditures and tax credits that currently underwrite the full scope of health services.

Next, SB 770 requires the Secretary to engage specified stakeholders to provide input on topics related to discussions with the federal government and key design issues. These stakeholders will include representatives of consumers, patients, community based health care service providers, community organizations, health care professionals, labor unions, employers, health policy experts, government agencies, and philanthropic organizations focused on health care. SB770 designates a number of key design issues for further analysis, such as health care delivery, consumer protections under the new system, health care quality and equity, and reducing costs.

SB 770 sets forth an ambitious 19-month timeline for the completion of a final waiver framework. By January 1, 2025, the Secretary will provide its interim report to the California Legislature (“Legislature”) detailing a preliminary analysis of the issues related to the federal discussions, and a summary of the input obtained from the stakeholder engagement process. The Secretary will also propose statutory language to the Legislature authorizing the development and submission of applications to the federal government for waivers needed to implement the unified health care financing system. The draft waiver framework must be completed and published on the agency’s website by June 1, 2025, with a 45-day public comment period to follow. The Secretary is required to incorporate these comments into a final waiver framework that will be submitted to the Legislature and Governor by November 1, 2025.

Not surprisingly, there remain many unknowns regarding the specific elements of SB 770’s unified health care financing system. For California residents, the costs to finance this health care system will be top of mind. Also, the role that health care service plans and health insurers operating in California will play in developing the new health care delivery system is unclear. Notably missing from the list of necessary stakeholders are health care payors. This absence may be a preview of the State’s position regarding continued availability of private health care payor options in California. However, it is too soon to tell. In the meantime, our firm will continue to monitor and provide updates on how the requirements of SB770 are implemented.