Single-Payer Financing 'Concepts' To Arrive By Spring

Jan 17, 2014

The man in charge of developing the financing mechanism for Gov. Peter Shumlin’s single-payer health care plan made his first appearance of the year before the Legislature Friday.

That man is Michael Costa, a lawyer whose title in the Shumlin Administration is deputy director of health care reform.

But Costa isn’t tipping the administration’s hand about what taxes will be used to pay for the new system.

Shumlin has told lawmakers he’ll roll out his financing plan for single-payer about a year from now. But that timeline doesn’t work for Sen. Peter Galbraith, D-Windham. And to press the issue, Galbraith has introduced a bill designed to fast-track the debate.

“If we are going to implement Green Mountain Care, that is to say a publicly financed health care system, open to all Vermonters on Jan. 1 2017, we need to decide how to pay for it now, so that we can then address the next set of questions, which is: Is it financially sustainable? And can we do it economically as a state?” Galbraith said Friday

Galbraith’s bill calls for an 11 percent payroll tax on employers and a 2 percent payroll tax on workers. Revenues from those taxes, combined with some assessments on non-wage earnings, like capital gains, would raise the $1.6 billion per year that administration officials say will be needed in public funding for the new system.

The Senate Finance Committee convened a hearing Friday to begin vetting Galbraith’s plan, and called on top administration officials to weigh in. An overflow crowd descended on the room, and the hearing was delayed briefly while the committee relocated to a larger conference room.

Most were there to hear Costa, the administration’s single-payer financing czar, who was making his first appearance this year in front of a legislative committee. But Costa said it’s premature to discuss the issue of single-payer taxes.

“The payroll tax is a reasonable place to start, because many people receive their insurance coverage from their employer right now and pay, or have monies paid on their behalf through the payroll system. But it’s not the only way,” Costa said.

Robin Lunge is the director of health care reform for the Democratic governor. She told the committee she appreciates the intent of Galbraith’s bill.

“I think the purpose of getting the discussion going is terrific … With that said I do think we are putting the cart before the horse,” Lunge said.

Costa said he’ll deliver a final proposal in January of 2015. But he says he’ll return to the committee before the end of the session with some conceptual financing options for lawmakers to consider.

"I'm guessing that the concept they'll come back with is the (payroll tax) that's contained in this bill, not because I'm such a clever fellow, but because there really isn't any other choice." - Sen. Peter Galbraith

“I think what the governor said in his testimony before the joint meeting of the health care committees (last week) was that at a certain point later in the session, in the spring, that we’d have a broad discussion about several difference concepts – ways that you could pay for Green Mountain Care,” Costa told lawmakers. “And that’s be the beginning of a conversation about ways in which you could raise the revenues necessary to care for all Vermonters.”

Lunge said the administration will have to work closely with the Legislature on the financing plan in order to craft a funding bill that will pass both the House and Senate in 2015.

To that end, the administration and the Legislature’s Joint Fiscal Office are working now to develop a consensus estimate for the cost of the publicly financed system. A report issued last year pegged the cost at $1.6 billion. But critics say that’s well short of the actual amount that will be needed.

Lunge said the administration will also soon present the Legislature with an analysis of the financing structure of the current health care system. Vermonters need to understand the Byzantine manner in which health care is funded today, Lunge said, in order to make a good case for the wisdom of public financing.

“Who pays what now, and how do they do that? How much does it cost? How do you raise that money?” Lunge said. “And then what’s the economic impact? Which is, how does this affect Vermont’s businesses and individuals, and then also the state’s economy generally?”

A provision in a law passed in 2011 says that lawmakers must be able to demonstrate that the public financing plan won’t have a negative impact on Vermont’s economy.

Galbraith, who said he’s a strong proponent of moving to a publicly financed, universal system, said the conversation about which tax to use ought to be a short one, since the payroll tax, he said, is the only viable revenue mechanism. Galbraith said raising the necessary fund via the income tax would require rates of more than 15 percent for lower- and middle-income Vermonters and more than 24 percent for higher earners. If Vermont wanted to raise $1.6 billion through the sales tax, then Galbraith said Vermont would have to remove sales tax exemptions on food, clothing and professional services, and ramp the rate up to 19 percent.

“I’m guessing that the concept they’ll come back with is the (payroll tax) that’s contained in this bill,” Galbraith said. “Not because I’m such a clever fellow, but because there really isn’t any other choice.”