Study sees state health plan generating huge debt.

Approval of initiative would create costly system, it says

Two recent studies -- one by a pro-business political group and the other by the University of California at Berkeley -- suggest the single-payer health care initiative would create a system that would be promptly mired in tens of billions of dollars of debt if voters approve the measure in November.

The two studies' conclusions directly contradict those of an earlier study done by a UC San Francisco medical professor, and they prompted foes, supporters and even those neutral about Proposition 186 to lash out at each other last week.

The more critical of the two studies was issued last month by Palo Alto-based Spectrum Economics Inc. and was commissioned by Taxpayers Against the Government Takeover, a group of high-powered health care businesses and a variety of industry trade groups. Members of that group -- which strongly opposes the single-payer initiative -- include the California Chamber of Commerce, the California Bankers Association and the California Association of HMOs.

"They can promise the world, but can they pay for it?" said Richard Wiebe, communications director for Taxpayers Against the Government Takeover.

Proposition 186 -- modeled after the Canadian single-payer health plan -- proposes California government administer the $100 billion worth of health care services its citizens consume annually. It would bar private health carriers, abolish Medi-Cal and seek a federal waiver to abolish Medicare payments in the state. Administrative costs would be capped at 4 percent of the proposed state system's annual budget. An elective office of health care commissioner would also be established.

Proponents of the plan -- which include the California Physicians Association, California Nurses Association and California Teachers Association -- say it would cut health care costs and expand benefits, while making them accessible to everyone.

Californians for Health Security, a grass-roots movement spearheaded primarily by physicians, cited a study by University of California at San Francisco medical professor Kenneth Grumbach that estimates the program would run a $4-billion surplus its first year of operation in 1996.

Californians for Health Security was responsible for gathering the 600,000 signatures needed to put the measure on the ballot.

In stark contrast to Grumbach's projection, the Spectrum study estimates the plan would result in an $8.5-billion deficit in 1996, mushrooming to nearly $47 billion in 1998.

"I expected a deficit, but the size of it is about three times what I initially thought," said Richard Carlson, Spectrum's chairman. "The (Grumbach) calculations have to be the screwiest amateur job I have ever seen."

In addition to creating a huge deficit, the proposed single-payer program would require taxpayers and businesses to shoulder an additional $40 billion a year in payroll, income taxes and a $1-a-pack cigarette tax, according to Spectrum's study. That, in turn, would cost the state as many as 415,000 jobs within three years of the plan's implementation, it estimates.

Spectrum's study took about two months to complete. Carlson said. It was based primarily on financial data from the California Public Employees Retirement System, which administers the largest employee health plan in the state, along with numbers from the Franchise Tax Board and the Employment Development Department.

Stephen Hopcraft, a Californians for Health Security spokesman, quickly dismissed the Spectrum study: "Where can I throw up now?" he quipped. "Spectrum's conclusions are ludicrous."

Hopcraft would not comment further until he had taken a closer look at the Spectrum study.

Meanwhile, a non-partisan study undertaken by the School of Public Policy at UC-Berkeley reached conclusions similar to Spectrum's.

Authored by Berkeley public policy professor Dwayne Banks, that study is based on macroeconomic forecasts regarding the growth of California's economy and has three sets of projections pegged to slow, moderate and rapid economic statewide growth.

Under moderate growth assumptions, Banks calculated the proposed single-payer system would be $40 billion in debt by 1998. With slow-growth assumptions, the deficit would balloon to $45.9 billion. Under rapid-growth assumptions, the deficit would be $34 billion, he concluded.

"There would be lots of administration problems with that plan," Banks said, noting that transferring the administration of health care services from the private sector to the state would be nearly impossible to achieve in a timely manner.

The Grumbach study, according to Banks, was based on the meshing of annual consumer price indexes and gross domestic product figures. Grumbach then made arbitrary deductions using methodology considered unreliable by most economists, Banks insisted.

Grumbach could not be immediately reached for comment.