Editor’s note: John McClaughry is vice president of the Ethan Allen Institute. www.ethanallen.org.
In just over a month the 2013 Legislature will convene, and a large question will as usual be “Where will we get the money to pay for all this?”
Administration Secretary Jeb Spaulding has tasked the agency secretaries to submit General Fund budget requests that maintain “current services,” and add on any new initiatives separately. Unlike, say, rebuilding the Champlain Bridge, General Fund expenditures just keep rolling on year after year, growing with more people, depreciated dollars, new political demands, and governors thinking up new things to spend tax dollars on. Those agency requests are likely to produce a FY2014 “budget gap” of $50-70 million.
Five years ago Senate President Peter Shumlin, already marching toward the governorship, repeatedly declared, “We are spending too much, and have used up our tax capacity. … There is no more money in the bank. … We are tapped out.”
Since that time Shumlin has nonetheless discovered all sorts of General Fund tax capacity, and proposed or enacted all sorts of new taxes. Here’s a partial list: Higher taxes on hospitals, nursing homes, and visiting nurse services; tobacco; electric bills (Efficiency Vermont); health insurance claims; and the $21 million pilfered from the CVPS ratepayers to finance his favorite renewable energy subsidy programs, notably the Clean Energy Development Fund.
This list does not include the $27.5 million “penalty tax” on the Education Fund, because local voters failed to heed the governor’s urging to restrain their school budgets. Nor does it include the two cent increase in both school property taxes, to raise the education money to compensate for the penalty tax.
Also urged by Senate President Shumlin, but rejected, were a new “thermal efficiency” heating fuel tax, a “gas guzzler” tax on SUVs and pickups, a tax on milk distributors, a novel “unanticipated profits” tax on Vermont Yankee, and a state cap-and-trade energy tax program.
So the tight fisted Senate leader of 2007 has since found lots more tax capacity, and numerous new ways to spend it, if he can get the bills passed by his hitherto largely compliant Legislature.
There is plenty of pressure to accelerate General Fund spending. The entire Vermont labor movement and their many allies, chanting “Put People First,” are vocally demanding that state government spend lots more to meet “every person’s need for health, housing, dignified work, education, food, Social Security and healthy environment.”
There is plenty of pressure to accelerate General Fund spending. The entire Vermont labor movement and their many allies, chanting “Put People First,” are vocally demanding that state government spend lots more to meet “every person’s need for health, housing, dignified work, education, food, Social Security and healthy environment.”
This is clearly impossible, but Shumlin himself has committed to single payer Green Mountain Care in 2017. This will require $3 billion from somewhere, and his hoped-for new federal funds will surely fall far short of that amount. He also knows well that Vermont’s two state-managed retirement funds show an alarming $3 billion gap between promised benefits and expected revenues.
Reducing state spending, aside from completed Tropical Storm Irene repairs, is not an acceptable option for a liberal majority. So where can Governor “No More Tax Capacity” go to find the money to fuel all the state’s obligations and his ambitions?
Raising income taxes “on the rich” is not a good bet. The Tax Foundation reported last month that Vermont in 2010 had the 13th highest state and local tax burden, a finding that the Shumlin administration concedes is pretty close to the truth. Taxing the incomes of people who make a lot of money is an obvious stimulus for them to make and spend it somewhere else. Also, Shumlin himself has boasted of reducing income tax rates in 1999 and 2009 (in both cases disproportionately benefiting high income taxpayers, although he never mentions that).
The short list of potential new taxes comes down to some form of carbon tax on fossil fuel energy (proposed by Shumlin in 2008), extending the sales and use tax to services (offered earlier this year by Speaker Shap Smith, who is now backing off), and a General Fund “penalty tax” of up to $276 million on the Education Fund, that translates into higher school property taxes. Green Mountain Care, if and when it happens, will almost certainly require stiff new payroll taxes, so that source can’t be tapped now to meet other demands.
Of course the Shumlin administration, staring the facts in the face, could relieve a lot of people by telling them and the union red shirts that 2013 will be the year of “Putting Solvency First.” That thought brings to mind that popular Buddy Holly song of 1958, “That’ll Be the Day” …
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“Taxing the incomes of people who make a lot of money is an obvious stimulus for them to make and spend it somewhere else.”
Does being eternally wrong about this Randian fantasy ever make you rethink it?
If it were true, California would not have a single rich person left. Instead it is the wealthiest state in the nation.
For that matter, those third world cesspools like Haiti, Somalia, Uganda, the Congo and Sierra Leone would have attracted every wealthy person on the planet with their virtually non-existant taxes and regulations.
Your could easily relieve yourself by staring these facts in the face, but as you say, “That’ll by the day…”.
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Are you seriously comparing California to Vermont? Or suggesting that leaving Vermont for any one of a number of other easily accessible states is comparable to leaving the US for Somalia?
As a friend recently said after putting his house on the market, “there are a lot of ‘nice places to live’ out there.”
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Mr. McClaughry’s tired rant about pensions is akin to saying anyone with a mortgage or a car loan is fiscally irresponsible.
Here’s a partial solution: Start taxing “non-profit” organizations.
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Mr. Bellini: I work for a statewide non-profit and bvelieve me we pay our fair share of State & Federal taxes. However, I cannot understand why churches ccan’t pay taxes.
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Mr. McClaughry said, “Green Mountain Care…will require $3 billion from somewhere.”
Is there no end to the misinformation? First, I do not think the figure is anywhere near $3 billion. If you have data to support that statement, please provide it.
Second, you know full well that the necesary funds are already being spent by families and businesses that pay premiums so it’s not new money.
You also said that, “The Tax Foundation reported last month that Vermont in 2010 had the 13th highest state and local tax burden.”
How many times must we debunk this baloney before you and others stop repeating it?
Shame on you for continuing to pollute the discourse.
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http://taxfoundation.org/article/vermonts-state-and-local-tax-burden-1977-2010
“Debunking” and “disagreeing with aspects of the basic premise” are two different things.
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Doug, I’m one of those who will be asked to vote on a new health care system and frankly I’m not interested in political spin or rhetoric. I’d like some simple facts upon which I can make my decision. You’ve chastised the author of this piece with two comments. First, you state clearly that a new system will not cost 3 billion. Secondly, you state that the money to support this new system is already being paid for by folks paying premiums.
If memory serves William Hsiao, the expert hired to analyze the state’s health care system, noted Vermont was currently paying approximately 5 billion for health care. He went on to predict savings of approximately one half billion if Vermont instituted a single payer, universal system. His predicted savings were predicated on the state following his specific recommendations regarding a benefit package and that all Vermonters had to be in the contributory pool.
We’ve abandoned Hsiao’s benefit package recommendations and are now attempting to add more benefits. Logic would suggest this means the package will cost more. We’ve also eliminated segments of the population from the contributory pool. Logic would suggest that this means there will be less money coming in to support more services than were recommended.
You campaigned with the slogan, “I’m a numbers guy.” Fair enough. I’m not, so I can use some help here. I’d appreciate answers to the following:
1. How much will this new system cost? Evidently you believe it will be far less than Hsiao’s number and less than what McClaughry (and Wendy Wilton) predicted. Fair enough, what is your number?
2. You imply that the money needed to pay for this new system is already being paid for by individuals and businesses through premiums. I am assuming you are not counting those premiums that will continue to be paid by people who will not be utilizing this new system. It would be most helpful for me as a legislator to know the exact number of AVAILABLE dollars that people and businesses are spending for premiums in this state. What are those numbers?
3. If AVAILABLE premium money that can be transferred to funding this new system does not fully cover what is necessary to run it, where would you propose additional money comes from and how much would you expect would be needed?
Please understand I am not trying to pin you into a corner. We legislators will need to have answers to these questions before we embark on a new system. Vermonters also have a right to know those answers. You are a numbers guy and I am not, so I’m seriously interested in your take on these questions. Thanks.
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Sen. Benning, I am a ‘numbers guys’ and though I don’t buy into Mr. McClaughry number of $3 billion, I have a hard time believing the numbers used by the proponents of the single payer system. Mr. Hoffer claims in one of his posts that “Existing premiums pay for wasteful administrative costs (up to 30%)” and Dr. Hsiao claims that 25% saving of total healthcare spending is needed to cover the uninsured.
If these saving, as Dr. Hsiao requires, are to come from the “wasteful administrative costs” that means this new system needs to be administered with only 5% (30%-25% savings) of the healthcare $. I find this hard to believe that the state can administer a healthcare system with 17% (5/30) of the resources used by private insurance companies. Now I suspect I will heard the argument that private insurance companies need to spend administrative $ on items not required by the state (advertising, marketing), but I can’t believe that this accounts for 83% (5/6 ) of the administrative spending.
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Joe – I will attempt to answer your questions as best I can.
1. Single payer will cover everyone except those already covered by Medicare, Medicaid, and the VA (plus federal employees & families). That’s about 400,000 people (355,000 insured + 47,000 uninsured).
2. The 2008 Vermont Health Expenditure Analysis Report (used by Hsiao) estimated the cost of “the current total health expenditure for the non-elderly privately insured and uninsured…at about $1.7 billion in 2009.” This figure has grown since then but should still be less than $2 billion.
3. As I mentioned before, Lewin, Thorpe & Hsiao all predicted substantial savings from a single payer system. More recently, JFO estimated savings from administration, clinical & payment reforms, etc. It is these savings that should allow us to cover the uninsured with the same amount we’re spending today.
BTW – You referred to “premiums that will continue to be paid by people who will not be utilizing this new system.” I’m not sure what you mean by this. Everyone except those on Medicare, Medicaid, or the VA will be part of a single payer system. So who are you referring to?
4. In any case, it’s my understanding that if the system can’t succeed without additional funds, the state won’t proceed. Therefore, I need not answer your last question.
I hope this is helpful.
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Doug, I do appreciate the response. I’m adding it to the collection of other opinions I’m receiving, and no doubt will continue to receive, as we approach legislation. Since I see this effort as the biggest thing Vermont has attempted to do in the last century or so, I believe it is critical for people to maintain civil discourse while we try understand exactly what we are getting into. So thanks for that.
To answer your question about premiums paid by others that will not be available, I remain concerned about political promises being made to certain large corporations that are self-insured. If those on Medicare, Medicaid and the VA plans are not required to contribute, we’ve already narrowed the pool of resources. Further narrowing that contributory pool would only undermine the state’s ability to provide a realistic benefit package that can be sustained.
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“Mr. McClaughry said, “Green Mountain Care…will require $3 billion from somewhere.”
Thanks, Doug. What McClaughry does not say here is that we already spend $5 billion, with thousands of Vermonters still uninsured and so pathetically underinsured that they cannot use their insurance if they need it. And where did he come up with the $3 billion?
Every year the premiums and deductibles go up, obliging families to pay more of both. Imagine, paying $10,000 or so (in many cases much more than this) in premiums and deductibles before you can use the insurance. So the money is already there. GMC and single-payer will drop this $5 billion with better results for the money and not leave Vermonters with tens of thousands in deductibles.
Congrats on your victory, Doug. I voted for you.
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“Is there no end to the misinformation?”
He uses what he has. He has so little. Misinformation can be generated at will, and repeated indefinitely, so, no.
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How anyone can believe that in adding the presently uninsured or under insured to the healthcare system and have the cost of these additions be covered by existing premiums, is just ludicrous. This is what Mr. Hoffer and Mr. Carpenter would have you believe.
Talk about ‘misinformation’.
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Because it is exactly what has happened in every country in the civilized world that has done so.
But never let facts get in the way of right wing talking points. Facts, after all, have a left wing bias.
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“every country in the civilized world”
So… secession is a precursor to this plan? You do realize that Vermont is not technically a country, right?
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Lance asked how covering the un/underinusred can be covered by existing premiums.
I answered because this is what has happened every other time is has been done. This is the reason most of us believe it will happen for single payer in this state, no secession required.
As for secession as a goal, have the decency not to confuse me with a Republican.
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“I answered because this is what has happened every other time is has been done.”
That a healthcare funding system has succeeded elsewhere on a national basis has absolutely nothing to do with whether it can succeed for a single state in the US. My secession comment gave you credit for understanding this fairly obvious point.
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Is it your contention that covering the uninsured will cost $3 billion? Absurd.
The intent is to achieve significant administrative savings to help cover the uninsured. That has been part of the equation for more than a decade and has been a critical assumption in all three major studies of the issue for the state (Lewin, Thorpe & Hsiao).
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Existing premiums pay for wasteful administrative costs (up to 30%). All three major studies of the issue have assumed that the savings will be sufficient to cover the uninsured (Lewin, Thorpe & Hsiao).
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Because, Lance, the uninsured already have access to healthcare … it’s called the Emergency Room. Guess who pays for it? People who are insured properly.
The trouble is that it costs WAY more than the healthcare that insured people get and the outcomes are WAY worse!
The uninsured & underinsured are just shoving their healthcare costs off on the rest of us. Continuing down this road is certainly ludicrous.
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Let’s just think about this statement a bit.
How many uninsured does Vt have? 20/25% like Texas? Nope, about 7%! Some of these are young health people and some are old and sick and currently getting “free” care at dr. and hospital expense. This being the case the medical provider community is footing the bill for some of these “uninsured”. The medical provider community includes these “free” services in their costs as much as they can….so those of us who have insurance to pay them get to pay a bit higher rates to cover this “free” coverage. yep Surprise we are paying now!
Now with Obama care aka Romney care the private insurance companies have to provide insurance to everyone. those who can not pay themselves will get to have the Government pay the insurance companies for them. this will alow them to get health care earlier when it is cheaper and will save in total costs. This means the insurance companies will get a lot more new business with all these previously un insured people now paying for insurance. The insurance companies have said this new business will make them more efficient and allow them to lower rates. We will have to see if they really do it. we also hope the doctors and hospitals lower their rates too since they will be paid for ALL patient now. Again we will have to see.
So you see both Mr Hoffer and Mr. carpenter pretty much have it right.
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Ludicrous? Ask Lewin, Thorpe & Hsiao. All three consultants over ten years have told us that administrative savings will be sufficient to cover the uninsured.
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Mr. Hoffer your comments just made my case. The existing premiums, paid by the existing insured, will not cover the cost of the additional uninsured or under insured.
As you point out, significant administrative savings will be required to cover the uninsured. Using premiums alone will not be sufficient.
According to the Hsiao report, the savings required in 2015, will need to be $530-$580 million, which represents 24% to 25% of total healthcare spending.
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“How anyone can believe that in adding the presently uninsured or under insured to the healthcare system and have the cost of these additions be covered by existing premiums, is just ludicrous.”
Well, Lance, in every other nation with whatever form of single-payer that they have, their costs are far less than ours and everyone has health insurance. As Mr. Zeliff so accurately pointed out, the insured do not get stuck providing for the uninsured, which raises the costs. Also, as Doug pointed out the admin costs for the existing private health insurance is around 30%; with Medicare (a publicly-funded health care program) it is about 6% of total costs. So, Mr. Hoffer and I are not peddling misinformation:)
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Eric: “That a healthcare funding system has succeeded elsewhere on a national basis has absolutely nothing to do with whether it can succeed for a single state in the US.”
As opposed to the Canadian healthcare system, which was set up in a single province by Tommy Douglas, and provided better, less expensive care so well that the entire country demanded the same.
Therefore, their is evidence that single payer healthcare can succeed in a single state as well as the federal level.
Nice try, but those evil, evil facts just keep getting in the way of right wing fantasy land.
You secession comment just demonstrated that you don’t know much about the history of healthcare in our friendly neighbor Canada.
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Saskatchewan is to Canada as the entire northeast, including New York, is to the US. Look at a map.
Beyond that, the “Canadian healthcare system” as it exists today bears little relation to Tommy Douglas’ system in Saskatchewan. Doctors could set their own rates, comprehensive private insurance existed alongside the program, and it was 50% funded by the national government from day one. There’s a reason he’s called “the father of medicare” and not “the father of single payer.”
Care to try again?
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Mr. Bradford,
New England Population – 14,444,865
New York State’s Population – 8,244,910
New England + New York Total = 22,689,775
US Population – 311,591,917
NE + NY as % of US Population – 7.3%
New England Land Mass – 71,991.8 sq. miles
New York State’s Land Mass – 54,,556 sq. miles
New England + New York Total – 126,547.8 sq. miles
US Land Mass Total – 3,794,083 sq. miles
NE + NY as % of US Land Mass – 3.3%
Saskatchewan Population – 1,079,958
Canada’s Population – 34,482,779
Saskatchewan as % of Canada’s Population – 3.1%
Saskatchewan Land Mass – 651,921 sq. miles
Canada’s Land Mass Total – 9,984,670 sq. miles
Saskatchewan as a % of Canada’s Land Mass – 6.5%
Your claim that, “Saskatchewan is to Canada as the entire northeast, including New York, is to the US” is factually innacuate whether you compare geography or population density.
Care to try again?
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“NE + NY as % of US Land Mass – 3.3%
Saskatchewan as % of Canada’s Population – 3.1%”
OK, so make it the entire east coast of the US. Happy? I’m not sure what your point is.
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“Saskatchewan is to Canada as the entire northeast, including New York, is to the US. Look at a map.”
As you suggested, I looked at a map. And, it’s clear that the claim you’ve made “Saskatchewan is to Canada as the entire northeast, including New York, is to the US” is simply not true.
As the facts that I posted indicate, Saskatchewan is much bigger than New England + New York both in terms of land mass, and as a percentage of the land mass within their respective nations.
I thought you possibly may have been referring to population density rather than land mass with your erroneous claim, so I ran those numbers, too. Unfortunately, your analogy doesn’t hold up there, either, as their populations aren’t analogous.
Saying that “Saskatchewan is to Canada as the entire northeast, including New York, is to the US.” is demonstrably false, no matter which way you look at it on a map.
That was my point.
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Well, so far I’ve disproven every point you have made, which leads you to continue by changing the argument.
As I said, government run healthcare has provided better outcomes at lower costs when done at both the state and federal level.
Since you clearly cannot find any meaningful rebuttal, it seems you are the one who needs to try again.
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What?!? Your only response was a clearly false analogy that I easily dismantled. How is that changing the argument?
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The only thing you dismantled was the illusion that you had anything valid to begin with.
I started off by explaining why most of us believe government run healthcare will provide everyone with better, less costly healthcare. Namely, that this has been the case every time it has been tried worldwide.
You proceeded to claim this has only been true of federal programs, I pointed out you were wrong. You also added some inane nonesense about secession, which I was just bizarre.
It seems you are now claiming that unless a state the same size with the same demographics as Vermont must be demonstrated to have instituted the same exact plan in order for anyone to believe it will work?
You might want to stick with the crazy secession talk.
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Contrast this blog thread to that of Ms. Scheuermann
I think reading Ms. Scheuermann commentary on the Vermont Republican party and reading Mr McClaughry shows explicitly the gap between the false information and hyperbole of McClaughry and the reasoned constructive alternatives that Ms. Scheuermann suggests.
In this past election I think most would conclude that Mcclaughry’s style of miss information sponsored by the Superpacs do NOT provide good results for Vermont and sets the Republican Party further from the mainstream Vermonters
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Jason:
“Saying that “Saskatchewan is to Canada as the entire northeast, including New York, is to the US.” is demonstrably false, no matter which way you look at it on a map.”
Yes, and saying that Saskatchewan is physically LARGER than the entire northeast, including New York, strengthens my point. Which I’m not sure you bothered to try to understand. But thanks for the support anyway, I guess.
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Michael:
“state the same size with the same demographics as Vermont must be demonstrated to have instituted the same exact plan in order for anyone to believe it will work?”
You got that about 10% right. The point is that quality medical professionals, businesses, and citizens who are ill served by a new single payer health plan can easily leave Vermont – there are very attractive alternatives close by in all directions. The same was not true of Saskatchewan in the 60′s.
More to the point, medical professionals had no real incentive to leave, because they could still charge whatever they wanted. That would not be the case in VT. This alone completely invalidates the analogy. Parallel comprehensive health insurance and 50% national funding really makes it apples and oranges. Douglas’ plan was a precursor to Medicare, not the current Canadian health system.
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“The point is that quality medical professionals, businesses, and citizens who are ill served by a new single payer health plan can easily leave Vermont ”
Flip that to, the people who are better served by single payer will come to Vermont and you’d have it 100% right, instead of 100% wrong.
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Same goes for professionals and businesses.
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I’m not sure how my statement is “100% wrong.” There is absolutely no question that it’s easy to leave Vermont. If your assumption is that more doctors, businesses and citizens will come here to take advantage of single payer than would leave because of it – there’s no way to know, so it’s a gamble. A very, very big gamble.
I’m not sure why doctors would want to relocate to an area where their pay for the same work would be dramatically less, unless they couldn’t find work elsewhere. “Quantity not quality” is not typically considered a good thing when it comes to medical professionals.
I’ve heard Shumlin address the pending doctor exodus exactly once. He said something to the effect of, “doctors are leaving Vermont already, so that’s not a new problem,” then insisted that the interviewer move on.
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Mr. McLaughry, being Mr. McLaughry, claims that “The entire Vermont labor movement and their many allies” are “vocally demanding that state government spend lots more” to meet “every person’s need for health, housing, dignified work, education, food, Social Security and healthy environment.”
Really, Mr. McLaughry, that’s what we’re vocally demanding? Where and when? I assume you are referring to the principle that everyone has a right to health care, housing, etc.” The part about demanding that we “spend lots more” comes from you, not the Put People First campaign.
Who knows what meeting the needs would cost? I don’t, you don’t and the state doesn’t. That’s because the state currently develops its budget without making any concerted effort to ascertain what the actual needs of its citizens are.
How in the world is that a sensible approach? It’s like a family deciding how to spend its income without ever trying to calculate what its needs are. You don’t decide to put $2,000 into landscaping without figuring out how long it will be before the kids need major dental work, or the car needs a new engine.
That’s basic common sense. Once we ascertain the actual needs of everyone–yes, all of us including poor, middle, wealthy, Republican, Democrat, apolitical, tall, short–how can we decide how the funds we have should be allocated whether the funds are adequate for the needs?
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[hope this isn't a double post--something odd happened the first time]
Mr. McLaughry, being Mr. McLaughry, claims that “The entire Vermont labor movement and their many allies” are “vocally demanding that state government spend lots more” to meet “every person’s need for health, housing, dignified work, education, food, Social Security and healthy environment.”
Really, Mr. McLaughry, that’s what we’re vocally demanding? Where and when? I assume you are referring to the principle that everyone has a right to health care, housing, etc.” The part about demanding that we “spend lots more” comes from you, not the Put People First campaign.
Who knows what meeting the needs would cost? I don’t, you don’t and the state doesn’t. That’s because the state currently develops its budget without making any concerted effort to ascertain what the actual needs of its citizens are.
How in the world is that a sensible approach? It’s like a family deciding how to spend its income without ever trying to calculate what its needs are. You don’t decide to put $2,000 into landscaping without figuring out how long it will be before the kids need major dental work, or the car needs a new engine.
That’s basic common sense. Once we ascertain the actual needs of everyone–yes, all of us including poor, middle, wealthy, Republican, Democrat, apolitical, tall, short–how can we decide how the funds we have should be allocated or, possibly, that we need to increase the funds available?