Commentary: Paying $2 billion for “health care reform” (November, 2013)

by Wendy WiltonWendy Rotator Card

Last week Vermonters learned that the  Avalere Health Group’s independent report, financed by Vermont Partners for Health Care Reform,  concluded that implementing Green Mountain Care in 2017 would likely require $2 billion or more in new taxes on Vermonters – far more than the $1.6 billion admitted to by the Shumlin Administration.

According to media reports, this came as a huge surprise to the Shumlin administration and legislative leadership. It came as no surprise to me. For the past two years I have built, refined, and improved a model projecting GMC costs. Its 2013 update was completed after the Shumlin administration released the $300,000 UMass report. The Avalere report completely confirms my February 2013 projection.

An unforeseen – by the Shumlin administration – $400 million annual shortfall would be devastating for the finances of our small state and would do severe damage to our health care system.  Unfortunately the legislature, by enacting Act 48 of 2011, has put in place all of the machinery needed to launch Green Mountain Care. The implementation of that government-run taxpayer-financed single payer system is now less than three years away.

Supporters of a single payer system, including the majority of the legislature and Governor Shumlin, largely dismissed my findings and calls for realism. In the fall of 2011 I mailed a letter to Governor Shumlin, Lt. Governor Scott and each legislator urging the general assembly to undertake an independent study that would prove or disprove my conclusions about the cost of single payer, and to explore the economic impact of the sweeping health care “reform” act they had just passed into law.

They weren’t interested, because they did not want to give credibility to any analysis that punctured their unrealistic pipe dream of “health care is a human right, vast savings from administrative efficiency, better health outcomes for everybody, and sound financing (courtesy of the tooth fairy)”. The findings of the Avalere Health report reinforce my earlier conclusions, and will hopefully make this administration finally get serious about the path they are so eagerly following.

Avalere Health concluded that the hoped-for administrative savings are unlikely to be realized. They concluded that planned reductions in reimbursement rates will have a deleterious effect on the health care system and put severe cost pressure on providers, including physicians and hospitals. I agree.

I also estimate that the federal subsidies slated to come into the single payer system from the Exchange will be lower than the Shumlin administration expects.  Altogether, the real risk lies in the revenue sources—including the savings (if any), the available federal grants, and our own tax capacity.  I remain convinced that implementation of single payer Green Mountain Care will put the state’s finances at risk due to revenues falling far  short of this mega-system’s expenses.

At this magnitude, errors or wishful thinking regarding projected costs or revenues could quickly wipe out Vermont’s fund balance.  Without a substantial fund balance Vermont will be unable to provide the basic services of government, such as roads, education and social services. If the state borrows to cover its GMC deficit spending, our bond rating will plummet.

Governor Shumlin recently alluded to an 18% payroll tax as a possible way of funding Green Mountain Care.  What he didn’t say was that this tax is likely to be progressive, with high wage earners paying at a higher rate and low wage earners paying less.

The economic impact of this tax burden on employers and employees would be enormous.  It represents flawed thinking about how to create economic vitality, and will reduce future tax revenues to the state by putting greater pressure on already tapped out taxpayers.

I would hope there might be other less costly and less disruptive options to solve our health care challenge to cover everyone in some way, and keep our state solvent while doing so.

Wendy Wilton has served as Treasurer of the City of Rutland since 2007, and was a candidate for state Treasurer in 2012. Wilton is the recipient of the 2012 Vermont Municipal Clerks and Treasurers’ Treasurer of the Year Award for her advocacy on issues relating to Vermont municipal government.  She is a board member of the Ethan Allen Institute.

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