Governor’s Health Finance Report Calls for $1.6 Billion Tax Increase

Observers of Governor Shumlin’s Budget Address may have been disappointed at the lack of attention given to health care finance. Indeed, only about two minutes of the speech were devoted to health care and no specifics were offered. But the long-awaited and 9-day overdue report from the University ofMassachusetts Center for Health Law and Economics and Wakely Consulting was released later in the day. The report lacked a great deal but contained a key number: The state must raise $1.611 billion a year to finance single payer health care.

$1.6 billion is over two and one half times what Vermonters pay in income taxes, and nearly five times what the state collects in sales and use taxes.

The report, which the state paid $300,000 to produce, contains surprisingly little information within its 91 pages. There is no multi-year budget or projection, and the Act 48-required recommendation for a funding source is completely absent.

“At first blush the report raises more questions than it answers. But one thing is very clear; Governor Shumlin is avoiding the question of funding single payer as though it were the Political Grim Reaper. And now we know why,” said Jeff Wennberg, executive director of Vermonters for Health Care Freedom.

Wennberg pointed out that the bottom line of $1.6 billion is not significantly different from an analysis conducted by Rutland City Treasurer Wendy Wilton in 2011, which showed a need for $1.8 billion in new taxes. “The report goes to great length to show how single payer will use federal dollars to reduce costs to Vermonters and Vermont businesses. Some of these assumptions, such as the assumption that the federal government will increase Medicaid support by $249 million as a result of single payer, are questionable,” Wennberg said. “But even so, a $1.6 billion tax increase has got to come from somewhere. Any claim of savings should be withheld until we have an answer to that question.”

Vermonters for Health Care Freedom will perform an in-depth analysis of the report, including a review of the Health Benefits Exchange funding plan which is not addressed here.

Editor’s Note: Even the $1.6 billion figure may be an underestimate of what we will end up paying. See the following from the report:

Overall, GMC is estimated to save $281 million over the first three years, even with these enhancements to coverage, elimination of the uninsured, and a reduction in out-of-pocket costs for Vermonters. GMC is estimated to cost approximately $3.5 billion, but only $1.61 billion would need to be financed due to federal contributions for the remaining amount. In 2013, individuals and employers will contribute approximately $3 billion between private insurance costs and out-of-pocket costs, so overall the costs to Vermonters are reduced under Green Mountain Care.

What if we do not get as much in federal contributions as anticipated? It would not be the first time that Governor Shumlin was a bit over optimistic about getting federal funding.  The report was not very specific about where the $1.6 billion in new taxes would come from, but did have some suggestions.  In a section entitled “Beyond current revenue sources,” the following suggestions were offered:

Vermont should consider other revenue sources and systems used by the federal government and other states. Other jurisdictions use gross receipts taxes, the taxation of a broader range of services, business enterprise taxes or other types of corporate taxation, and payroll taxes to raise revenue. Each new revenue mechanism would need to be defined and estimated prior to being analyzed and considered by policymakers.

Given all the fuss that was made by Democrats when Vermonters First suggested that they were looking to expand the sales tax to include services, is it any wonder that Shumlin is roaring: “pay not attention to that man behind the curtain” in response to this report?  Governor Shumlin argues that he needs more time to consider this mother of all tax increases, but more time will not make the number any more politically popular.



One thought on “Governor’s Health Finance Report Calls for $1.6 Billion Tax Increase

  1. I am in the Health Ins business and have been for many years and understand more than the average Vermonter covered by Ins and I can tell you that none of the people involved understand what they are talking about. We have no real figures to work with and making estimates of what we are going to save is simply not feasible to do.

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