(UPI) — California’s proposed single-payer healthcare system would cost an estimated $400 billion annually and half of the money would come from a new payroll tax, according to a state legislative analysis.

The report was prepared before state legislative hearings considering overhauling healthcare coverage to all 39 million Californians.

In the proposal, the state-run system would replace existing employed-provided insurance and government-financed programs that include Medicaid and Medicare. Residents would not have to pay premiums, co-payments or deductibles.

According to the report, employer-sponsored insurance now covers about 45 percent of the population followed by Medi-Cal at 26 percent, Medicare at 10 percent, the individual market at 9 percent and other federal coverage at 2 percent. About 8 percent of the state’s population is uninsured.

About $367 billion was spent on healthcare last year statewide, according to the UCLA Center for Health Policy Research.

The legislative report estimated about $200 billion of existing government funds could be used for the single-payer system.

That leaves $200 billion required from new taxes.

Employers and employees statewide now pay between $100 billion and $150 billion annually — and that cost would be eliminated.

So the new spending under the bill would be between $50 billion and $100 billion each year.

The annual state budget is $180 billion.

In one proposal, a new payroll tax on employers — with a rate of 15 percent of earned income — could provide the new revenue. But the tax increase would need to be voted on separately in the Legislature.

The analysis cautions the proposal represents “unprecedented changes to a mature healthcare system.”

“Therefore, there is tremendous uncertainty in how such a system would be developed, how the transition to the new system would occur, and how participants in the new system would behave,” the report said.

And how to pay for it is a major issue.

“This is the gigantic brick wall that everyone who was paying attention was letting us know we were about to run into,” Micah Weinberg, a policy researcher and president of the Bay Area Council Economic Institute, said to the San Francisco Chronicle.

Larry Levitt, a health policy expert at the Kaiser Family Foundation, said “a single-payer plan would likely be more efficient, but it also offers better benefits and covers more people, and that costs money that has to come from somewhere.”

Democratic state Sen. Ricardo Lara, a chief sponsor of the SB-562 — The Healthy California Act, said the current system can’t be sustained because health coverage is becoming unaffordable for many people because healthcare costs are rising faster than the overall economy.

But State Sen. Jim Nielsen, a Republican member of the Appropriations panel, expressed concerns during the hearing Monday. “The impact on employers will be astounding,” Nielsen said. “How can you say this will be fiscally prudent for the state? The state has never gotten anything right in healthcare.”

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