For more than a decade, this blog has tracked what I have called “The Path to Federalization,” the steady, incremental expansion of federal authority over what was once an exclusively state-run workers’ compensation system. From the World Trade Center Health Program in 2010 to the Affordable Care Act’s Libby Care pilot, from Supreme Court validation of the individual mandate in 2012 to the Medicare Secondary Payer offset debate, each chapter has added a new stone to that path. California’s 2026 gubernatorial race is laying the boldest stone yet.
As KFF Health News reported on May 8, 2026, single-payer healthcare has become the defining litmus test of the California governor’s race. Leading Democratic candidates, Tom Steyer, Katie Porter, Tony Thurmond, and Xavier Becerra, have all embraced some version of a government-run health system for the state’s 40 million residents. The price tag is staggering: an estimated $731.4 billion annually, with no candidate yet presenting a credible funding plan.
For practitioners in workers’ compensation, this is not a distant political story. It is a direct and immediate threat, and opportunity, that would fundamentally reshape every claim, every settlement, every Medicare Set-Aside, and every exclusive-remedy calculation in the largest workers’ compensation market in the United States.
I. The California Battleground
California already accounts for nearly one-quarter of the national workers’ compensation market. Its combined ratio reached 127% in 2024, the highest in more than two decades, prompting the Insurance Commissioner to approve an 8.7% rate increase in 2025, the state’s first in a decade. Medical inflation, cumulative trauma litigation, and a “telelegal revolution” that has spread high-cost Los Angeles litigation practices statewide have brought the system to a critical juncture.
Into this volatile environment, every leading Democratic gubernatorial candidate has injected a promise of single-payer, a system that would eliminate distinctions among private insurance, Medicare, Medi-Cal, and employer-sponsored coverage under a single unified state financing structure. The political logic is clear: a 2026 California Nurses Association poll found that 86% of California Democrats and 58% of all voters support single-payer. The legal and actuarial logic for workers’ compensation is far more complicated.
The legislative infrastructure is already in motion. Governor Newsom signed SB 770 in October 2023, directing the California Health and Human Services Agency to pursue federal Medicare and Medicaid waivers necessary to fund a unified system. Assemblymember Ash Kalra (D-San Jose) introduced AB 1900, the latest iteration of CalCare, in February 2026 with sponsorship from the California Nurses Association. AB 1900 failed to advance out of committee in April 2026, but the political pressure from the governor’s race ensures it will return.
II. The Federal Dimension: Why This Is a Federalization Story
The architects of California’s single-payer movement understand what workers’ compensation attorneys have long known: you cannot build a state-only universal health system without federal money. Medicare and Medicaid together cover more than 20 million Californians. Under SB 770, California must obtain federal waivers, specifically from the Centers for Medicare and Medicaid Services, to redirect those funds into a unified state pool. Without Washington’s cooperation, the $731.4 billion price tag is simply unfundable.
That federal dependency is precisely what makes this a workers’ compensation federalization event, not merely a state health policy debate. The Medicare Secondary Payer Act (42 U.S.C. § 1395y(b)) already governs how workers’ compensation settlements must account for Medicare’s interest. Workers’ Compensation Medicare Set-Aside Arrangements (WCMSAs) are built on the premise that Medicare exists as a distinct federal program that must be protected from cost-shifting. A California unified system that subsumes Medicare would obliterate the statutory predicate for MSAs within the state’s jurisdiction, a seismic shift in settlement practice.
The current federal political environment adds another layer of complexity. The Trump administration has shown no appetite for granting California’s requested waivers. Meanwhile, Congress’s so-called “One Big Beautiful Bill” cut nearly $1 trillion in Medicaid funding in 2025, eliminating approximately $30 billion per year from California’s Medi-Cal program. Paradoxically, these federal cuts are strengthening the political case for California going its own way, and intensifying pressure on the next governor to act.
III. Direct Impacts on Workers’ Compensation Claims
The workers’ compensation implications of a California single-payer system are profound. Here are the key areas practitioners must watch:
1. Elimination of the Medicare Offset and MSA Requirements. Under a unified California health system, Medicare, as a separate federal payer, would cease to exist within the state, at least in theory. That would eliminate the legal basis for WCMSAs in California workers’ compensation settlements. Carriers and claimants alike would need to renegotiate every settlement protocol built around 42 U.S.C. § 1395y(b). Whether federal MSP law could survive state preemption would be a threshold constitutional question.
2. Workers’ Compensation Medical Treatment and the OMFS. California’s Official Medical Fee Schedule (OMFS) is already pegged to Medicare rates by Labor Code § 5307.1. A unified state system using a single payment schedule could render the OMFS redundant or create irreconcilable conflicts between workers’ compensation medical payments and the single-payer reimbursement structure. The Division of Workers’ Compensation would face a fundamental question about whether the employer’s obligation to provide “reasonably required” medical treatment survives in a universal-coverage environment.
3. The Exclusive Remedy Doctrine. California Labor Code § 3600 et seq. establishes workers’ compensation as the exclusive remedy for workplace injuries. If all Californians receive comprehensive medical coverage through a single-payer system regardless of how their injury occurred, injured workers may have less financial incentive to pursue workers’ compensation claims for medical benefits alone, but the indemnity, disability, and vocational rehabilitation components of the system would remain independently significant. The exclusive remedy bar could face new pressure as injured workers argue that single-payer coverage entitles them to dual-track benefits.
4. Subrogation and Lien Rights. Under current law, when a workers’ compensation carrier pays medical expenses, it acquires subrogation rights against third parties (Labor Code § 3852). In a single-payer system in which the state pays all medical costs, the state would become the presumptive lienholder, transforming third-party liability practice in every workplace injury case involving a concurrent tortfeasor.
5. Employer Premium and Assessment Costs. The 2026 California Workers’ Compensation Industry Assessment has already been set at approximately 5.191% of insured premiums. A transition to single-payer would require massive new employer-side payroll taxes or assessments to fund the system. The interaction between those new taxes and existing workers’ compensation premium obligations would require legislative coordination to avoid double-funding of medical benefits already covered by the state system.
6. Cumulative Trauma and Psychiatric Claims. Cumulative trauma claims now account for nearly one-quarter of all California indemnity claims, an all-time high. A single-payer system that comprehensively covers mental and behavioral health could generate a new wave of psychiatric workers’ compensation claims, as injured workers seek to establish occupational causation for conditions that would otherwise be covered without a causation requirement under the unified system.
IV. The Becerra Paradox
Among the gubernatorial candidates, the most instructive figure for workers’ compensation observers is Xavier Becerra. As a decades-long congressional supporter of single-payer and as President Biden’s Secretary of Health and Human Services, the official who would have negotiated California’s federal waivers under SB 770, Becerra is uniquely positioned on the issue. Yet after securing an endorsement from the California Medical Association (a historic opponent of single-payer legislation), Becerra has modulated his position, telling voters that “Californians don’t care what you call it, so long as they get coverage.”
That rhetorical pivot matters for workers’ compensation. The California Medical Association’s long-standing opposition to single-payer has always been grounded in reimbursement rates and physician autonomy, the same issues that drive utilization review disputes, independent medical review appeals, and fee schedule litigation in workers’ compensation courts. A governor who moderates single-payer in deference to the CMA is a governor who may leave the workers’ compensation medical delivery system substantially intact, even if broader health coverage expands.
V. The Path to Federalization Continues
Whether or not California achieves single-payer under its next governor, the political and legislative pressure generated by this race is already advancing the federal agenda. Every debate over a $731.4 billion state program that requires federal Medicare and Medicaid waivers is a debate about whether state workers’ compensation systems can survive in their current form alongside a restructured federal health architecture.
As I wrote in 2017 in “The Rise and Fall of Workers’ Compensation, The Path to Federalization,” the history of this system is one of incremental federal encroachment driven by the failures of state programs to adequately protect injured workers. The California single-payer debate is not an interruption of that history. It is its latest chapter.
The workers’ compensation practitioner who ignores California’s 2026 gubernatorial race does so at their client’s peril. What begins as a California litmus test often becomes national policy.
About the Author
Jon L. Gelman of Wayne, NJ, is the author of 38-39A N.J. Prac., Workers’ Compensation Law (3d ed., Thomson Reuters/West) and co-author of Modern Workers’ Compensation Law (Thomson Reuters). For over five decades, the Law Offices of Jon L. Gelman • 1.973.696.7900 • jon@gelmans.com have represented injured workers and their families. This post continues the author’s long-running series, “The Path to Federalization.”
Related Articles:
2. Wikipedia. “CalCare.” (AB 1400 / AB 1690 / AB 2200 / AB 1900 legislative history)
3. LegalClarity. “What Is CalCare? California’s Single-Payer Health Plan.” (AB 1900, Feb. 2026)
10. Employees First Labor Law. “California Workers’ Comp System Funding Increase in 2026.” Jan. 2026.
12. Healthy California Now. SB 770 Fact Sheet.
15. Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b).
16. California Labor Code § 5307.1 (OMFS / Medicare rate-pegging).
17. California Labor Code § 3600 (Exclusive Remedy Doctrine).
18. California Labor Code § 3852 (Subrogation).
© 2026 Jon L Gelman. All rights reserved.
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