Health Care

Galbraith hints at administration’s health care funding plan

One of the hallmarks of this legislative session has been frustration over a proposal that never materialized.

At the beginning of the year, the Shumlin administration was poised to tell lawmakers about plans for financing Green Mountain Care, the state’s universal health care system, which is slated to go into effect in 2017. (The Legislature gave the governor a January 2013 deadline for the tax proposals.)

But about halfway through the session, officials said they would not disclose information about how they planned to rejigger the state’s tax system in order to pay for the nation’s first publicly financed health care program. (New taxes would replace health care insurance premiums.)

Lawmakers have privately wrung their hands and publicly scolded the administration for a lack of transparency, and even sued the governor for records.

Sen. Peter Galbraith, D-Windham. Photo by John Herrick/VTDigger

Sen. Peter Galbraith, D-Windham. Photo by John Herrick/VTDigger

Sen. Peter Galbraith, D-Windham, speculated on what it would take to raise the $2 billion in public taxes necessary to pay for universal health care, based on information he requested from the Joint Fiscal Office, and proposed an 11 percent payroll tax on employers and a 2 percent tax on employees. The provision was originally in the draft of S.252; it was never considered, however, by the Senate. (Harvard economist William Hsiao recommended a 12.5 percent payroll tax for employers and 3 percent for employees in his February 2011 report.)

Friday, Galbraith proposed an amendment to the miscellaneous tax bill on the Senate floor that would create a “public option’” called Vermont Health, that would be offered on the exchange.

He prefaced his remarks with information from a knowledgeable source about the administration’s deliberations on the confidential financing plan.

Galbraith called it the administration’s “notional financing plan,” which he says would primarily be financed through a new premium that would be graduated, according to income, and hit a ceiling of 9 percent for people with incomes of $50,000 or more. The premium would generate about $1 billion, or half of the revenue needed for the plan, according to Galbraith’s calculations.

VTDigger is underwritten by:

The other billion dollars in revenues to fund Green Mountain Care would come from a 2 percent gross receipts tax and a 5 percent employer payroll tax.

“For companies that already provide health care, the administration’s notional plan is very good deal,” Galbraith said. “Since most such companies generally pay far more than 5 percent for their employees’ health care, they would have a strong incentive to drop that health care and pay the payroll tax.”

The plan would shift health care costs from companies to workers, he said, and from large and “socially responsible” employers “to smaller businesses and businesses with lower paid employees.”

Low-wage workers could be better off, Galbraith said, and many middle and upper middle income employees would be “worse off, perhaps much worse off.” For a couple with a household with income of $200,000 a year, health care costs could be $18,000 under the plan, according to his calculations.

Galbraith says self-insured ERISA companies would like the plan because the payroll tax would cost substantially less than health insurance premiums. The governor could “reasonably” say “that Vermont’s new health care system is an economic development tool.”

“While I think there is much to admire in what the administration is now considering, I have several concerns,” Galbraith said. “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.”

After he expounded on what he saw as the merits and flaws of the “notional plan,” Galbraith withdrew his amendment calling for a public option.

Earlier in the session, Galbraith explored other proposals, based on estimates from the Joint Fiscal Office. He broke down the options into four scenarios, each of which would raise $2 billion: an employer payroll tax set at 17 percent; a $7,500 per person “public premium” (if large, self-insured companies are excluded); a 30 percent increase to each tax bracket; or a 23 percent sales tax (and the elimination of the tax exemption on food and clothing). A fifth option would be to raise $500 million, or a quarter of the estimated $2 billion for single payer from each of the aforementioned taxes, in which case the employer payroll tax would go up by 4.25 percent; the public premium would be $1,875 (excluding ERISA companies); 7.5 percent would need to be added to each income tax bracket and the sales tax would go up to 11.75 percent.

CORRECTION: Sen. Galbraith’s original financing plan was not considered by the Senate.

Don't miss a thing. Sign up here to get VTDigger's weekly email on Vermont hospitals, health care trends, insurance and state health care policy.


Anne Galloway

About Anne

Anne Galloway is the founder and editor of VTDigger and the executive director of the Vermont Journalism Trust. Galloway founded VTDigger in 2009 after she was laid off from her position as Sunday editor of the Rutland Herald and Times Argus. VTDigger has grown from a $16,000 a year nonprofit with no employees to a $2 million nonprofit daily news operation with a staff of 25. In 2017, Galloway was a finalist for the Ancil Payne Award for Ethics, the Al Neuharth Innovation in Investigative Journalism Award and the Investigative Reporters and Editors FOIA Award for her investigation into allegations of foreign investor fraud at Jay Peak Resort.

Email: [email protected]

Follow Anne on Twitter @GallowayVTD

Reader Footnotes

VTDigger will no longer be publishing Reader Footnotes. We welcome your feedback on this decision; please write to [email protected]. Readers who have a substantive opinion may submit a commentary. See our guidelines. We also encourage readers to use our 'Tip Drop' and 'Report an Error' forms found at the end of every article.


Recent Stories

Thanks for reporting an error with the story, "Galbraith hints at administration’s health care funding plan"