Tag Archives: health care financing

VTDIGGER.ORG: Peter Galbraith: Toward a Health Care Solution

Editor’s note: This commentary is by Peter W. Galbraith, a former Democratic senator from Windham County. He did not seek re-election in November.

Gov. Shumlin’s decision not to proceed with a financing plan is disappointing to the many single payer advocates but should not have been a surprise. And, much more importantly, it should not end the effort to achieve universal coverage in Vermont.

In reality, Vermont could never have a single payer health care system. There were always going to be other payers: Medicare, federal employees, the military, participants in self-insured multistate (ERISA) employer plans, out-of-staters, and people who simply preferred to keep their existing health coverage even as they paid the single payer taxes. Under these circumstances, the per capita savings from a Vermont single payer plan would be less than a national plan, were such a thing ever politically feasible.

Most Vermonters have health care that they like and can afford, in part because someone else — an employer or government — pays most of the cost. Shumlin’s now defunct plan would have taxed the contented majority to address the problem of the uninsured and inadequately insured. By placing so much emphasis on the income tax (or mandatory premiums), the plan would have transferred some of the burden of health care from Vermont’s largest and wealthiest corporations (who provide health care to their employees) to their workers and to small business.

Even if Vermont won’t create single payer health care for everyone, we can still provide quality health care for those who are uninsured or underinsured. Last May, I proposed legislation to create a public option as part of the exchange created by the Affordable Care Act. The public option would establish a benchmark silver plan on the exchange (perhaps using the existing Blue Cross Blue Shield silver plan). Silver plans are the only ones eligible for federal subsidies that help pay premiums, but they only have a 70 percent actuarial value, meaning the plan only picks up 70 percent of the participant’s health care costs. Under my proposal the state would enhance the benchmark plan so that it paid 87 percent of the participant’s costs and would subsidize each participant’s monthly premiums. I proposed a monthly subsidy of $40 a month for an individual and $120 a month for a family.

Under my proposal the state would enhance the benchmark plan so that it paid 87 percent of the participant’s costs and would subsidize each participant’s monthly premiums. I proposed a monthly subsidy of $40 a month for an individual and $120 a month for a family.

Presumably every participant in the exchange would choose the public option since he/she would be getting 87 percent of her/his health care expenses covered for the price of a 70 percent plan and, in addition, would have a subsidy. Since almost everyone would choose the enhanced and subsidized plan, Vermont would end up with many of the same administrative savings that would have occurred under the single payer plan.

Legislative counsel estimated the cost of my proposal at $350 million. I proposed paying for it with a 2.2 percent payroll tax and by eliminating certain income tax deductions that primarily benefit high income Vermonters and which otherwise have no real policy purpose. Since every Vermonter would pay the tax, every Vermonter would receive the subsidy and enhancements, regardless of income. But, no one who is happy with his current health care would be forced into the new system. And, as a practical matter, most well off Vermonters have good insurance paid by their employers and would not be entering the subsidized pool.

Under this proposal, Vermont would not be taking over the state’s health care system but instead building on the existing Affordable Care Act. If the projections on needed revenue are wrong, the state is not locked into tax increases (as it would be under single payer) but can simply adjust the subsidies or benefits. And the public option can be created right now. It does not depend on an uncertain federal waiver.

The cost figures the governor released last week are not substantially different from those contained in a report he submitted to the Legislature in January 2013. In short, the handwriting about the likely fate of the single payer plan has been on the wall for quite some time. Instead of recriminations over what didn’t happen, let’s look to what can still be accomplished.

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Spoiler alert: VT state senator details cost of single-payer health care

By Bruce Parker | Vermont Watchdog / December 5, 2014

For two years, Gov. Peter Shumlin has concealed his plans for financing single-payer health care. His lead consultant, Jonathan Gruber, has admitted to deceptive policymaking and called lack of transparency “a huge political advantage.”

But at least one man knows what Vermonters can expect to pay for Green Mountain Care and isn’t afraid to tell.

Peter Galbraith, a former U.S. ambassador and two-term Democratic state senator from Windham County, holds the distinction of being the only lawmaker to have put forward a plan for financing Act 48, Vermont’s publicly financed health care program.

Read the article in full

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Remarks to the Vermont Senate: Health Care Financing and the Public Option

Senator Peter W. Galbraith

Remarks to the Vermont Senate

Health Care Financing and the Public Option

May 2, 2014

 

Mr. President:

The Senator from Caledonia spoke yesterday about how little time we have spent talking about the two most important issues on our constituents minds: how to pay for education and how to pay for health care. Indeed, this legislature has spent far more time this biennium discussing how just a few people—literally 3 or 4 a year—might die rather than how we to pay for the life-sustaining health care for 600,000 Vermonters.

Many of us were disappointed that our Governor ignored the mandate in Act 48 to present a financing plan for Vermont’s universal publicly financed health care system by January 15 of last year. But, Mr. President, I do not fault the Governor. This is a big step.

If we want the health care system laid out in Act 48, the financing is not complicated. It requires a big tax increase, but not a complicated one. Financing Green Mountain Care will cost $2 billion. If we want a taxpayer to pay for it, the only practical way to do this is through a payroll tax that falls primarily on employers.

Earlier this year, I introduced S. 252 which would have imposed a 11% payroll tax on employers and 2% payroll tax on employees. The Governor explicitly rejected such the 11% payroll tax as far too large. I wondered how it was possible to finance Green Mountain Care without such a tax.

The Governor, however, is not moving to implement the taxpayer financed universal health care system envisioned in Act 48. The Governor has publicly said he would not force the ERISA companies into the new system and, as his own Act 48 report states, it is not practical to include federal employees.  The administration has a plan under discussion, what I will call a notional financing plan. This plan will make it very attractive for the ERISA companies to substitute Green Mountain Care for their own plans.

Under the Administration’s notional plan, most Vermonters would get their health care through Green Mountain Care. But the system will be primarily financed by premiums, not by taxes. The notional plan would raise about $1 billion in premiums. While the premiums will be graduated according to income, they will need to reach 9% of income at around $50,000 a year to raise the necessary money. (Any system would also cap on the total premium payable by any individual.) The other billion would come from a 2% gross receipts tax and a 5% employer payroll tax.

For companies that already provide health care, the administration’s notional plan is very good deal. Since most such companies generally pay far more than 5% for their employees’ health care, they would have a strong incentive to drop that health care and pay the payroll tax. This will make Vermont an attractive place for large—and generally well paying—businesses to locate. I understand why the Governor thinks the ERISA companies will like his plan and why he can say—with good reason—that Vermont’s new health care system is an economic development tool.

Of course, businesses that do not now offer health care will see a 5% increase in labor costs. The plan therefore represents a shift in health care expenditures from larger businesses and from socially responsible businesses to smaller businesses and businesses with lower paid employees. It also represents a cost shift from business to employees. While low wage employees may end up better off—and certainly no worse off—many middle and upper middle-income workers will end up worse off, perhaps much worse off. For example, a professional couple who now have ¾ of their health care costs paid by one spouses’ employer might both end up paying premiums amounting to 9% of their combined income. Depending on the premium structure, this could—for a family making a combined $200,000 a year—take their health care costs from $5000 to $18,000.

While I think there is much to admire in what the Administration is now considering, I have several concerns. I do not think going from our current premium-based system for financing health care to a mandatory premium based system represents the kind of radical change that I had hoped to see through Act 48. While I am confident that the Administration will work to minimize inequities, there are certain to be many. And, if I learned one thing in my four years in the Senate, the voices of those who are unhappy about a piece of legislation always outweigh the silent majority who stand to benefit.

If we aren’t going to have a compulsory financing system for all, we can get as close to a single payer system with incentives as we can with a compulsory system that applies only to some. And we can do so for a fraction of the cost. That is the purpose of this amendment.

The amendment proposes to create a public option, called Vermont Health, to be offered on the Vermont exchange. The public option would offer a gold and silver plan on the exchange.

Only Silver plans are eligible for federal subsidies. However, silver plans only provide a 70% actuarial value while Act 48 says Green Mountain Care should have an 87% actuarial value. This amendment provides every Vermonter enrolled in the Vermont Health Silver Plan with wrap coverage bringing up the actuarial value to 87%. In addition, every Vermonter enrolled in the Vermont Health Silver Plan also receives a premium monthly subsidy. Under current circumstances the subsidy would amount to $40 a month per person and $120 per month for a family of three or more. The wrap coverage and the subsidy will be available to every Vermonter enrolled in the Vermont Health Silver Plan regardless of income.

The subsidies and wrap coverage are paid for by a 2.2% payroll tax and by eliminating the pass through of itemized federal deductions on the Vermont income tax. The amendment raises $350 million dollars through these two taxes.

While no one will be obliged to sign up for Vermont Health, it would be a very attractive option for individuals and companies. By joining Vermont Health, companies and individuals will get the actuarial equivalent of a gold plan for less than the price of a silver.

However, there would be no element of coercion. No one would be obliged to give up health coverage that they like. And, the taxes are relatively low.

The price tag for the public option in this amendment is $350 million, 83% less than the cost of Green Mountain Care—whether financed by taxes or by premiums. Yet, precisely because the public option will be so attractive to companies and individuals, it should get as close to a single payer system as the Administration’s notional plan.

Mr. President, there are no secrets in democracies no matter how hard leaders try to keep them. The information that I have discussed comes to me from someone knowledgeable about the administration’s deliberations. It does not come from anyone in the administration but I have reason to think that this indeed what is now being considered.

Some have suggested that discussions of health care financing are best put off until after the elections. I could not disagree more strongly. Elections are an occasion to have a conversation with the voters and there is no issue more deserving of a conversation this fall than the future of health care in Vermont.

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