California’s Bloated Healthcare Sector and the Push for a Billionaire Wealth Tax

California’s healthcare system stands out as one of the most expensive and labor-intensive in the world. This bloat is evident in employment trends, skyrocketing hospital costs, and recent legislation like SB 525, all of which set the stage for SEIU-UHW to seek a billionaire wealth tax to sustain the status quo rather than reform it.

Healthcare employment in California is climbing as a share of the overall workforce, even as the state’s population has remained largely stagnant. Since 2016, overall healthcare employment in California surged from 1.6 million to 2.1 million and the proportion of workers in the industry is approaching 12%. Analysts have predicted continued healthcare employment growth through the 2020s, but that trend may be interrupted by federal Medicaid reforms.

And healthcare workers are getting more expensive, largely due to legislation backed by SEIU-UHW. SB 525, signed into law in October 2023, mandates phased minimum wage increases for healthcare workers up to $25 per hour for many facilities, with variations based on employer size and type. Legislators passed the bill without a comprehensive fiscal impact analysis available at the time of voting, leaving uncertainties about its full budgetary effects on Medi-Cal, private insurers, and overall spending. Estimates developed after Governor Newsom signed the bill suggest it could boost hospital operating costs by 4.5%.

The union-backed bill will cement California’s position as the most expensive state for hospitalization. According to KFF data, the state led the nation with adjusted expenses per inpatient day at $4,471 in 2023, far exceeding the U.S. average of $3,132. Notably, California’s giant not-for-profit hospitals are more expensive than the government-run hospitals and much more expensive than for-profit facilities, which cost $1,871 per day less. California policymakers have been hostile to investor owned hospitals for decades, minimizing their share of the healthcare market and thus the impact of their efforts at cost control.

Healthcare unions, hospital management, and other special interests have also pushed to maximize federal funding for California’s bloated healthcare sector. Besides advancing so-called provider taxes (like the one established by 2024 Proposition 35) to attract more federal matching funds, the healthcare establishment has extended coverage to illegal aliens and tried to get the federal government to pay for it. Even during the Biden Administration, the Health & Human Services Inspector General identified $53 million of improper federal reimbursements for California illegal alien healthcare. But that was just the tip of the iceberg: CMS Director Dr. Mehmet Oz recently announced that his team had identified $1.8 billion of such improper payments with the lion’s share going to California.

With Congressional and Administration Republicans implementing cost controls at the federal level. SEIU-UHW needs other funding sources to continue feeding California’s insatiable healthcare sector. Enter the 2026 Billionaire Tax Act—a ballot initiative that would impose one-time 5% wealth tax on California’s roughly 200 billionaires, potentially raising $100 billion. Ninety percent of this money would go to healthcare spending with much smaller bones thrown at teachers and those concerned with nutrition.

But this initiative appears to be backfiring with many billionaires leaving the state prior to the measure’s January 1, 2026 deadline date, and others making future departure plans. To the extent that these ultra-wealthy individuals take existing companies and new startup funding with them, SEIU-UHW’s gambit may well result in a long term decrease in tax revenue available to feed the healthcare behemoth.

Rather than continue the search for ever more money, California policymakers should instead look for economies. Withdrawing taxpayer-funded illegal alien health coverage would be a good first step toward reducing state healthcare costs.