Irreconcilable differences in Single Payer

Three years after the passage of Act 48, the law that is supposed to bring single payer healthcare to Vermont, nobody knows exactly what we're getting ourselves into. Promises have been made to different parties with different interests that, now that the rubber is nearing the road, appear to be irreconcilable.

Perhaps the most significant promise made in regard to Green Mountain Care (GMC), as the single payer system will be known, is that it will save money - or, at least "bend the cost curve" from where we are now - through greater efficiency.

For businesses, Governor Shum lin has promised repeatedly that enacting single payer will be a positive economic driver for Vermont. It will achieve this by "tak[ing] the burden of providing health insurance off the backs of small businesses," allowing them to instead "invest in job growth and innovation." Senior citizens, veterans and federal employees have been promised that their Medicare, Tricare and government insurance will remain unchanged. Teachers and state employees are adamant that their coverage won't be diminished.

Single payer activists, "true believers," have been promised that Green Mountain Care will be a clean, government-run single payer system marking a time when healthcare becomes a "human right" - which many take to mean unfettered and unlimited access to any and all medical care. But "free" unlimited access to care, benefits packages on par with teachers and state employees, and bending the curve of healthcare spending to spur economic growth are promises at tension with one another. So are the concepts of a true (and theoretically more cost effective) single payer system with one that leaves in place Medicare, Tricare, ERISA and other federal plans, not to mention the need to service non-Vermont-resident private insurance, and resident-owned supplemental insurance policies.

So, what is the real deal? Senator Peter Galbraith put forward a funding proposal for GMC that would raise $1.6 billion through an 11 percent payroll tax on employers, a 2 percent payroll tax on employees, and a 10 percent tax on non-wage income, all subject to income level caps the same as those that currently apply to Social Security taxes. If the cost of GMC turns out to be higher than expected (two independent studies say it will cost between $1.9 and $2.2 billion, and the Administration has already upped its cost projections to between $1.78 billion and $2.18 billion). Galbraith says we can just ratchet up the rate.

But, a 13 percent payroll tax breaks the promise to businesses that GMC will take the burden healthcare off of their backs. This is Galbraith's intention. "For those companies, it's a cost transfer," he says. "That is to say they no longer pay the premiums but they pay the payroll tax." In practice, a payroll tax would more firmly affix the burden of providing healthcare onto the backs of businesses as a tax is less flexible than a premium. You can't decide to drop a tax, or choose a different tax plan, and tax laws come with criminal penalties.

As for bending the cost curve, the governor stated back in 2012, "My own view is that the current system that requires employers to pay 10, 11 or 12 percent payroll to cover rising cost of health insurance is too high for business." (VPR, 7/16/12) Well, 13 percent is even higher than that, and 13 percent represents the best-case scenario for businesses. If the new taxes needed to pay for GMC come to $2.2 billion, the payroll tax would be around 16.25 percent.

And economic growth and jobs creation? Senate Finance Committee chairman, Tim Ashe, high lighted another problem, "The majority of small businesses in Vermont currently pay nothing for healthcare, because they don't offer it."

Well, if you tell the majority of small businesses in Vermont that they're going to go from zero percent of payroll to thirteen percent overnight, I think there might be dramatic implications throughout the economy." (Mark Johnson Show, 1/24/14) Those dramatic implications are not likely to be the promised economic boom.

Another facet of Galbraith's funding plan is a 10 percent tax on non-wage income-dividends, interest, capital gains, etc. This breaks the promise to senior citizens. Seniors' Medicare plans may remain unchanged (though Act 48 requires that the state try to fold Medicare into GMC), but they will be paying a new 10 percent tax on the first $117,000 of their social security and any nest-egg income they may have to pay for GMC. That's a significant change for folks on fixed incomes.

It's clear why many advocates of GMC in the State House want to put off deciding how to pay for it until after the 2014 election. It's also clear why the public should not let them.

Rob Roper is president of the Ethan Allen Institute. He lives in Stowe.


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