Proposition 23: Good Intentions, but Bad Results for California Residents

Dr. Edward Timmons    Conor Norris

Published:10/30/2020

When Californians head to the polls on Tuesday, among the many things they’ll have the ability to vote for is Proposition 23. Let’s take a closer look at the facts surrounding this ballot measure.

The stated goal of Proposition 23 is to protect hemodialysis patients by ensuring a high standard of care. Proposition 23 would require all hemodialysis clinics to have a physician serving on-site as an administrator, to ensure that the staff was providing proper care. The dialysis procedure presents several dangers to patients if inadequate care is being provided. On the surface this sounds like a great idea, but like everything else, there are costs associated with this proposal.

In 2005 New Jersey implemented a similar regulation that was previously unique in the country. The rule required that each dialysis clinic keep a nurse serving in an administrative capacity at all times. Serving as an administrator allowed them to oversee the care being provided to patients, like physicians in this California proposition. The regulation results in clinics needing to hire additional staff to meet these requirements.

What did we learn from New Jersey? In recently published research, we investigated the effect of this rule. We found no evidence that the rule reduced the death rate of patients or that the rule reduced the number of hospitalizations of New Jersey dialysis patients with Medicare. In short, very little changed for the quality of care patients received. But like everything in life, there were costs associated with the regulation. We found suggestive evidence that the New Jersey rule reduced the number of dialysis clinics in the state. Clinics already face full schedules and provide care for over 80 hours per week. Reducing clinics hurts patients as well, giving them fewer choices and likely giving them longer commutes to receive treatment.

Nurses were also potentially taken off of the frontlines to assist with treating COVID-19 patients. In April, Governor Phil Murphy quickly acted to waive New Jersey’s unique regulation in light of the pandemic. There was a very quick understanding that now was not the time to take critical health personnel off of the frontlines.

We see no reason to believe that California’s Proposition 23 will yield a different result. In fact, given the current strain on the healthcare system and the strong need for physicians, the new regulation may prove very costly. California, like the rest of the United States, is in the midst of a physician shortage. Requiring more clinics to begin staffing a physician will only exacerbate this problem.

Additionally, the increased cost of operation will put stress on smaller providers, exacerbating the trend of consolidation. The two largest clinics operate 75% of all dialysis clinics in California. Costly regulations only favor larger providers over smaller providers.

Unfortunately, the burden of this law will be felt the most by citizens of the state that can least afford it. For instance, diabetes is much more prevalent among low-income residents. One study estimates that diabetes is nine times higher among the poor. Asking California dialysis patients to incur additional transportation costs to dialysis clinics hardly seems like a step in the right direction.

It is no doubt that Proposition 23 is being considered with the best of intentions for California residents. Our analysis suggests that the costs of this proposal—exacerbated by the global pandemic—are far greater than the possible benefits.

Edward Timmons is director and Conor Norris is a research analyst at the Knee Center for the Study of Occupational Regulation. Edward Timmons is also professor of economics at Saint Francis University in Loretto, Pa.