Fact checker: Would Single-Payer Health Care Result in the Largest Tax Increase in Vermont History?

With the 2012 campaign season in full swing, Seven Days has teamed up with VTDigger.org to create a fact-checker feature to test the “truthiness” of claims made by the candidates who want your vote this November. This week’s Fact Checker was written by Anne Galloway.

CLAIM: “Montpelier is keeping a $5 billion secret. Why? Because the truth will result in the largest single tax increase in state history.”
— Television commercial from conservative super PAC Vermonters First

FACTS: So what’s the secret? The super PAC Vermonters First is referring to the state’s current annual health care expenditures, including private insurance and federally funded programs, which total $5 billion. If Vermont moves ahead with a publicly financed universal health care system, residents would pay taxes instead of insurance premiums to cover the cost.

No one knows, however, just what state taxes will be raised or on whom. That’s because the Shumlin administration is keeping the financing plan under wraps until after the election.
William Hsiao, the Harvard professor who created the blueprint for Vermont’s single-payer system, proposed funding it by raising state payroll taxes by 10.9 percent on employers and by 3.6 percent on workers. The business community reeled at Hsiao’s suggestion, and the Shumlin administration went mum, leaving the financing mechanism unresolved.

Act 48, the single-payer law passed in 2011, does spell out that funding will come from a combination of federal and state taxes. The Shumlin administration is counting on several hundred million in subsidies through the federal Affordable Care Act — aka Obamacare. It’s also seeking waivers to roll Medicaid and Medicare funding into the new system, which together in 2010 amounted to more than $2 billion. The Shumlin administration hopes to save $400 million to $700 million a year by eliminating administrative costs, fraud and abuse, and by improving chronic care and tackling malpractice reform.

Vermonters paid $1.86 billion in 2010 for private insurance. Under single payer, those expenditures would be covered by state tax revenues — specifically “adjustments to the income tax, a payroll tax, consumption taxes, provider assessments, employer assessments” or other revenue sources, according to Act 48 language.

SCORE: As currently envisioned, single-payer health care would in fact result in the largest tax hike in state history. Not even the creation of a statewide property tax under Act 60 was as much. What’s missing from the television ad is context. Vermonters may begin paying for health care through taxes rather than insurance premiums, but that doesn’t mean they’ll pay more overall. The exact amount won’t be known until Shumlin releases his rate plan next year. Still, it would represent the largest new tax and, for that reason, we rate the claim “True.”

Follow Anne on Twitter @GallowayVTD

Comments

  1. Jason Farrell :

    When I purchased my home ten years ago, that purchase and resulting mortgage immediately became the single largest investment I’d made in my lifetime, bar none. If I had worried only about that side of the ledger, I never could have fathomed a way to have made such an investment. How could I possibly add such a huge expense to all of my existing expenses? However, I was savvy enough to reconcile that by investing in homeownership, the single largest investment I had made would not only be an expense, it would also replace my previous largest investment I had at the time – RENT. What I’ve discovered in the interim is that not only could I afford homeownership, over time homeownership has become less costly then the rent I would have had to pay for comparable housing, with the added bonus that I now own my home.

    While I can see how it possible to consider Vermonters First ad technically “true”, I’d rate it as “extremely silly” because the success of this ad relies on the ignorance of those who haven’t (or refuse to) acknowledged that such an increase in spending on healthcare through taxation will necessarily affect both sides of the ledger.

  2. Omitting the context constitutes a misrepresentation of the facts. Higher taxes, yes. Probable lower costs to “taxpayers” — aka Vermonters — also yes.
    The ad intends to generate hysteria by obfuscating the context, and it succeeds. VTD is helping that along.

    This piece also suggests that the administration is trying to hide something. First of all, as it says later, there’s a lot up in the air — esp. whether Obamacare will survive.

    Anyhow, how revenue is raised is not up to the Shumlin administration. The gov puts forth his budget and the Legislature comes up with its. Then they work it out. Taxes — how much, what kind, what rates — are legislated.

  3. Al Salzman :

    As my dad wisely used to say: “Figures don’t lie, but liars figure!” You can disprove just about any proposition by manipulating the facts in the short term without any regard for future, long term results. It is the difference between productive deficit spending i.e. infrastructure, health care, education, all of which pay back ten-fold to the well-being of our society at some time in the future- and pouring money down a rat-hole i.e. Afghanistan, Iraq, military spending, subsidies for big oil etc. The most dramatic examples are the G.I. Bill after WWII and the interstate highway system initiated by President Eisenhower. The Vermonter’s First claim is a prime example of short-term tunnel vision whose purpose is to maintain the corporate status quo in health care. I regret that Fact Checker played right into their hands by not giving a more complete picture of how single-payer ‘productive spending’ will save huge costs in eliminating redundancy, unbridled profits and most importantly the cost-shifting to pay for the indigent, and the astronomical costs of treating those with chronic conditions caused by non-access to early, preventive care. Please be wary of the purveyors of half-truths. It serves no good purpose to play their game. I regret to say that most readers of Vtdigger, will only remember the headline, which is deceptive, if the wider context is made clear.

  4. Eric Bradford :

    The issue is that Shumlin et. al. clearly have no idea how this will be funded, or if it can be funded without disastrous follow-on consequences. It’s hard to force that conversation, because admitting it is painful, but this simple, factual statement is a good start.

  5. Paula Schramm :

    What irked me the most about the Vermonters First ads ( in both the written mailing & the TV ad ) was that “Montpelier” was hiding a $5billion SECRET. This was the fake context they were offering to scare the pants off Vermonters. The mailing actually declares :” the program will cost a staggering $5 billion”, as if this was a whole new expense, rather than what we already are paying for our health care now. This creates confusion and constitutes mis-information to the extent that it is worthy of a “fact-checking” judgement on its own.

    There has been no secret about it. Act 48 lays out the timeline that the funding mechanism will be worked out and presented in Jan.- Feb. 2013 for the legislature to begin considering. All GMC Board discussions of funding are open to the public. A SECRET implies that the funding decisions were long ago determined and set in stone, and are being guarded against all eyes in a dark vault. THERE IS NO SECRET .

    PLEASE ! Apply your fact checker not to the tax increase statement, which cannot be understood correctly in that context, but to the statement that comes before it and qualifies it so falsely :” Montpelier is keeping a $5 billion secret”.

  6. Gary Stahl :

    Rating this claim “true” — with nothing more — simply enables Vermonter First, and similar organizations, to be misleading. It also gives Vermonters First a measure of credibility that it plainly does not deserve. The television commercial was clearly not intended to inform; if that were the case, Vermonters First would’ve also advised its viewers that the tax increase would take the place of the insurance premiums paid to unaccountable insurance companies. Instead, the Vermonters First commercial was intended to scare. And calling the spot “true” amounts to an abdication of responsibility that results in a less-informed public — which is what most super PACs love to see.

  7. Carl LaShomb :

    I have two big concerns with this scheme:
    1) in general, there is a large reliance on savings from “anticipated” efficiencies. In my experience with a LOT of “cost savings” programs, the actualized savings are never as big as the projected savings were to sell the project initially.
    2) What is the impact to those VT’ers who already have good (or decent) healthcare insurance through their non-vermont employers (those of us who work in a different state, or have employers providing insurance to all of their employees on a national basis).

    • Eric Bradford :

      Both good points.

      There are a lot of people who will pay the tax but will not see the benefits of any potential reduced/eliminated premiums. The implication by those decrying a true statement being called true that all employers will pass along any savings in premiums is utterly laughable.

  8. Bill Gardyne :

    There are a LOT of Vermonters who presently have employer-provided health insurance that either is fully paid for by that employer or the employee may contribute a percentage towards the premium. In THIS process, if that employee earns a decent income which causes them to exceed the maximum for getting a premium-reducing Tax Credit funded by the Feds(maybe), there will be BIG negative change in their family budget. What about the small businesses that don’t provide health insurance to their employees now?? They will be getting a BIG increase by having to subtract a potential 10%+ payroll tax to their bottom line. IMO, the VT proponents of turning health insurance into a government program have approached this all backwards. Rather than invest the MILLIONS of dollars they have so far in planning and creating a quickly growing GMC infrastructure geared to a Single Payer conclusion, they should have worked on the “funding mechanism” first. Simply assume the $1.6 billion we now give to insurance companies as a baseline and work on HOW that will paid, by whom and how much. As I’ve stated in another thread, “that’s where the rubber will meet the road” in this exercise. Shumlin has already promised that he’ll abandon this whole thing if a funding mechanism that won’t cause a financial disaster can’t be agreed upon. Save a lot of time and money and do that first….

  9. walter carpenter :

    “Vermonters paid $1.86 billion in 2010 for private insurance.”

    Were the deductibles part of this figure or just the premiums? This would make a huge difference since, in addition to the premiums, Vermonters are generally also slammed with thousands of dollars in deductibles that, if not included, would make this figure much higher.

  10. Kirby Dunn :

    I have to say that while I don’t support this ad, the concept must be discussed…what will this cost and how will this cost be shared? I have three concerns. First, it will be income adjusted. Although I work for a non-profit and don’t earn a huge salary, i am an older worker and have been there for many years so i will pay more for more health insurance that other workers. Older workers paying more than younger workers-we have lost the inherent fairness of the current system where all pay the same regardless of health issues. Second, the assumption is that employers will stop offering insurance and give employees a “raise” to help cover these costs. That is new taxable income for the government. A huge windfall to the state,for increased income taxes to be paid by the individual, not the employer. Third, if you have ever tried to help someone on Medicare figure out what plan to purchase, and they have to do it every year and it changes every year…it is mindboggling. Consumer Choice is not always the best option.
    Just a few thoughts.

    • Paula Schramm :

      Kirby Dunn, I hope I don’t add to the confusion, but it seems to me the questions you raise have to do with buying insurance in the exchanges that are being set up for 2014. This is an unavoidable extra step that is a mandate of the national Affordable Care Act, and is different from where Vermont is ultimately heading with Green Mountain Care.

      Some of the problems you wonder about will no longer be issues after GMC is fully implemented in 2017. The exchanges in this context are almost a complicating factor, but must be accomodated.

  11. Jane Stein :

    Wow, Anne, major fail. This ad was intended to be deceptive and it is deceptive. To call an intentionally deceptive ad “true” is journalistic malpractice.

    Suggestion: Instead of narrowly evaluating claims, how about evaluating the ads as a whole?

    I’m really surprised to see VTDigger falling down the same rabbit hole as the big-time media “fact-checkers.”

  12. Bill Gardyne :

    Just today, Team Shumlin announced that cost and funding mechanism proposals for GMC WILL NOT be appearing this coming session as promised and won’t be put out for public discussion until 2015!!! Is is so bad that he’s afraid of massive negative public reactions, even after the election??

  13. Charles Merriman :

    My family and I will be hit hard by the tax increase. My thoughts on Shumlin’s plan? Great! Tax the bejesus out of me for this laudable goal. Much better than buying drones.

  14. rosemarie jackowski :

    Eliminate the cost of insurance, eliminate Insurance company CEO salaries, eliminate Wall Street profiteering, cap hospital adminstrative pay, eliminate unnecessary ‘paper churning’ and inefficiency, control the price of pharmaceuticals and other medical aids – this will be more than enough to provide universal comprehensive Single Payer – including dental, vision, and long term care for every Vermonter. This is NOT an economic problem. It is a political problem.

    Are there any democrat/republican leaders currently speaking in support of Single Payer? We do not need a complicated 2000 page plan. We need a simple commitment that all medically necessary care will be provided. No need to re-invent the wheel. Cuba, Costa Rica and most other industrialized nations have figured this out.

    • Lance Hagen :

      Ms. Jackowski, please show us, or point to the study that determines or claims that the “Eliminate the cost of insurance, eliminate Insurance company CEO salaries, eliminate Wall Street profiteering, cap hospital administrative pay, eliminate unnecessary ‘paper churning’ and inefficiency, control the price of pharmaceuticals and other medical aids – this will be more than enough to provide universal comprehensive Single Payer – including dental, vision, and long term care for every Vermonter”.

      As far as I know, no such study exists making these claims for universal healthcare in the state of Vermont. Even Dr. Hsiao’s plan required a payroll tax of 10.9 percent on employers and 3.6 percent on workers.

      At best, your statement is pure speculation and more than likely, inaccurate.

      • rosemarie jackowski :

        Lance…Thanks for the comment. I assumed that US citizens are as smart at designing a health care system as the citizens in Cuba, CostaRica, and most other industrialized nations. Maybe I have too much confidence in the critical thinking ability of USers.

        Yes, taxes would increase, but that would be offset by the total elimination of premiums, co-pays, and other out of pocket expences. Single Payer would save money and lives.

        • Lance Hagen :

          Ms. Jackowski, you are kidding yourself if you believe that the eliminated insurance premiums will offset the funds needed for the program. Remember we will need to add the uninsured and Medicaid recipients (and Medicaid recipients represent 23% of the Vermont population) and these are people that are not presently paying premiums.

          So the state is going to need additional $ to cover these added people. At one point in the plan the state was counting on $500 million in ‘administrative’ save to cover this added cost, but that appears to be waning. And it was never clear to me, how these ‘administrative’ savings ever flowed to the State. Seems to me, that only the ‘claims processors’ (existing insurance companies) and ‘claims submitters’ (service providers), will see any administrative saving. How these $ will ever flow to the state is unclear.

  15. John Franco :

    Seven Days and VTD should get an “F” for this rating.

    Alf Landon ran against Franklin Roosevelt in 1936 on precisely the same argument (correctly) that Social Security was the largest tax increase in US history. How’d that turn out?

    The very first question which should be answered in this “how much will it cost” debate is how much we are currently spending in private health insurance premiums. In 2010 Vermont employers spent about $1.3 billion on private health insurance for their employees. That does not include workers compensation insurance. That is more than the the total amount of state taxes raised for the Vermont General Fund. Their average payroll contribution was 14% of payroll. That is double their Social Security/Medicare tax contribution.

    The largest tax increase is the double digit health insurance premium increases we are seeing each and every year for the most expensive system in the world that ranks about 40th in the world in outcomes and still doesn’t cover everyone.

    Largest tax increase, indeed.

    • Eric Bradford :

      Fixing this problem sounds so simple! Odd that it’s going to take until 2015 to generate a first draft of the specifics.

  16. rosemarie jackowski :

    This is what happens to those without access to health care.
    Please pass it on to those who say: “No one goes without care. They just go to the ER.”

    http://warisacrime.org/node/46563

  17. NICOLE LEBLANC :

    No It would Not !!! Single Payer will lower Healthcare Cost for all People and eliminate pr-existing conditoons so that those with can have access to affordable healthcare without being denied!! Its time for Society to Make Healthcare a public good! Healthcare Should Not be attached to Employment!!!

    Dont BELIEVE THE REPUBLICAN SCARE Tactics!!! They are Wrong!!! Liberals Know Best!!!

  18. Hilton Dier :

    Somehow the Europeans and Canadians manage to provide better health care outcomes than we do for about half the money per person.

    The savings come from eliminating insurance company profits and their legalized fraud, along with the administrative costs of dealing with them and the cost of delayed care, as well as drug company profiteering.

    However they do it, they do it. We can too.

  19. Gina Johnson :

    If I can’t get Canadian citizenship, I’m going to move to Vermont to avoid being robbed every month by health insurance companies. I am sick of paying middlemen thousand of dollars a year just so my life isn’t ruined if my appendix acts up, or I break a leg. It’s paying off a gangster not to shoot you, that’s what it comes down to, and the fact that so many people still tolerate this state of affairs says volumes about the terminal passivity of the American people.

  20. Denise lambert :

    It doesn’t matter whether we have healthcare through Obamacare or single payer the fact remains that you will languish key wait to see an oncoligist ,cardiologist or any other kind of doctor. 136,000 people in Great Britain are prematurely euthanized to save the government 20 billion dollars. You are all so worried about costs, rightfully so, but at the expense
    or a shorter and poorer quality of life! he United States was number one in response time— that is quickest access to needed medical care but that will be over in 2014.

    Many Americans will either die waiting in line to have surgery or die at the hands of a bureaucracy. The former happens in Canada and the latter happens in Great Britain and the numbers are far greater than the number of deaths in the US due to being uninsured. It will be toughest on older Americans who will one day only have memories of the greatest healthcare, although not perfect, that use to be the envy of the world.

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