Peter Galbraith: Toward a health care solution - VTDigger
 

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.

Comment Policy

VTDigger.org requires that all commenters identify themselves by their authentic first and last names. Initials, pseudonyms or screen names are not permissible.

No personal harrassment, abuse, or hate speech is permitted. Be succinct and to the point. If your comment is over 500 words, consider sending a commentary instead.

We personally review and moderate every comment that is posted here. This takes a lot of time; please consider donating to keep the conversation productive and informative.

The purpose of this policy is to encourage a civil discourse among readers who are willing to stand behind their identities and their comments. VTDigger has created a safe zone for readers who wish to engage in a thoughtful discussion on a range of subjects. We hope you join the conversation. If you have questions or concerns about our commenting platform, please review our Commenting FAQ.

Privacy policy
  • Willem Post

    Peter,

    “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.”

    I think it is better not to have more subsidies than those provided by the federal government.

    Going down that road is a slippery slope into a inefficient, bureaucratic black hole where money is wasted as if it grows on trees. It just invites more state meddling in Vermont’s economy.

    You know well how the state meddling in education caused costs to skyrocket. We cannot afford more such fiascos.

    Medicare has only 80% actuarial value. Supplementary insurance from AARP, etc, covers the other 20%.

    Vermont’s economy is sinking/treading water because of the wet blanket of inefficient and wasteful government spending that has been growing at 5+%, with tax collections growing at 3%, for the past 5 years.

    Pretty soon, with increased taxes, EVERYTHING will be too expensive, as the private sector will croak.

  • chuck gregory

    AARP is a ripoff. Earning $600 million of its $1 billion income from brokering insurance policies, it backed Medicare Part D (which prohibits the government from bargaining on prescription prices) and the “doughnut hole” so that it could make even more money off us trusting seniors (“She’s such a nice AARP representative, I’m sure she has our best interests at heart.”)

    Considering what great good government taxes do for health care in other countries, it seems we are shooting ourselves in the foot by refusing to admit that higher taxes will be better for the health of ourselves and our loved ones. But, the voters are not stupid!

    Finally, we should shoot for health care with an actuarial value as high as the best– 95%– or better. If America is going to be #1, let’s act like it! A 14% payroll tax is palatable (10% is considered the tolerable limit) if it’s flexible. A flexible payroll tax could provide 95% av coverage for the employees of mom and pop stores for as little as $500 a year– the bargain of the century!– and have all of them lined up solidly behind single payer. Senator Claire Ayer’s committee will likely be looking into this.

    • Willem Post

      Chuck,

      Are you “forgetting” the 9.5% single-payer tax on Adjusted Gross Income, IN ADDITION to the single-payer payroll tax.

      That S-P tax is even harsher than the regular state income tax which is a % of the much lesser taxable income.

  • Moshe Braner

    Thanks Peter for the constructive suggestions.

    Can you explain what the “actuarial value” means in practice? I would guess that, e.g., “87%” does not mean that if one goes to the hospital and gets a bill for $100,000 the insurance would only cover $87,000, leaving one with an out-of-pocket cost of $13,000? Rather, I assume “actuarial” means “on the average” – the many with lower costs will pay a higher percentage (but smaller amounts) out of pocket, while those few hit by high-cost events would not pay much more out of pocket?

    If this idea of a “public option” on the exchange were to be enacted, at first only a minority of Vermonters would choose it. But over time, employers who currently provide health insurance for their employees would be likely to drop it, since that way they could give their employees higher wages, more than enough of an increase to pay for the public option premiums. In other words, there would be an incentive to re-think existing health insurance arrangements in order to take advantage of the subsidies. This may be looked at as a problem (more money needs to be raised for subsidies over time, leading to higher tax rates), or as a blessing (a gradual transition in effect to single payer).

    • Peter Galbraith

      Moshe:

      You are right that the 87% Actuarial Value is an average, and not per service. Most policies (including lower AV ones) do cover a very high percentage of a catastrophic medical event such as a $100,000 hospitalization. The lower value usually comes on the more routine services that everyone consumes.

      You are also right that the public option–as I proposed it–can be a way station to single payer. With the subsidies, it would be more attractive for employers to let their employees get subsidized health care rather than providing it themselves. Over time, this brings more Vermonters into one plan and should produce the administrative savings promised by single payer.

      The advantage of the public option is that the state can regulate how fast or slowly it moves to single payer by adjusting the subsidies and taxes. In effect, this system provides for the gradual transition that the defunct Shumlin plan did not.

  • Moshe Braner

    Willem: If the state income tax was shifted from a percentage of federal taxable income to a percentage of some definition of gross income, that means that some tax deductions at the federal level, e.g., home mortgage interest – or the “standard deduction” – would not apply to the state tax. There is still a movement in the legislature to do this (unrelated to Single Payer) for reasons not clear to me. If that were done in a revenue-neutral way (hah!), who would pay more and who would pay less? I wish they were more open about this. Do higher income people have higher percentage deductions, or lower, on the average? Perhaps you have data on this issue? Thanks.

    As an aside, the emphasis on a payroll tax as the biggest funding mechanism for single payer was, in my view, a major reason for its demise. A payroll tax is like an income tax, except that it has no deductions (and a flat rate) for the lower and middle classes – and a major deduction for the wealthy, since they tend to get a lot of their income from sources other than “payroll”, e.g., capital gains. Thus, it is like a very regressive income tax. Not as regressive as the current system of health insurance premiums though.

Thanks for reporting an error with the story, "Peter Galbraith: Toward a health care solution"