The following letter was sent by Rutland City Treasurer, Wendy Wilton to all the members of the Vermont legislature, Governor Shumlin, Lt.Governor Scott and members of the Green Mountain Care Board.
I am the Rutland City Treasurer and since February of this year, I have used the financial skills I developed over a professional
lifetime to evaluate the financial impact of Vermont’s planned transition to Green Mountain Care through the health care exchange beginning in 2014. The enclosed analysis is the first complete picture of this program you have seen that shows both revenues and expenses.
I wish this careful, professional analysis was wrong, but it reveals clearly that creating a state public health care plan will result in a $300+ million annual shortfall in the fund, culminating in a $2 billion cumulative deficit in five years.
That projected deficit is pretty shocking, but there is sufficient information available in state reports, administration memos, and other public sources for any financially adept person to develop a similarly complete projection model and maybe they can come up with a different conclusion.
Unfortunately, when the legislature convenes on November 10, 2011 to receive a briefing on primarily fiscal issues, you are probably scheduled to be presented only a partial financial model pertaining only to expenses (and possible savings) but not revenues. This is an incomplete picture and insufficient for the extremely serious decision-making at hand. I urge you to request from the administration a complete financial projection to be developed almost immediately, including revenues and expenses, actuarial analysis and serious independent economic studies to support the assumptions of the projections in order to ensure due diligence is done.
Revenue projections are particularly important because the new state health care fund, with over $3 billion in annual expenses, will be larger than the Education Fund, General Fund and the Transportation Fund combined. No other piece of legislation that has come out of Montpelier-not even Act 60-will have the far reaching impacts of Act 48 on our economy, our state treasury, our well-being and quality of life, and the future of Vermont. Before we go any further with the Governor’s health care plan, the administration simply must demonstrate that revenues will be sufficient to prevent anything like the $2 billion cumulative deficit that the enclosed projections show occurring in five years. The Governor
may not agree that these projections are correct but they present a challenge to the administration (and to you!) to explore the financial issues more completely than has been done so far.
In fact, the legislature should set specific benchmarks that, if unmet, will halt program activity. The language in the current bill is insufficient to ensure the control over fiscal matters by the legislative branch that the Vermont Constitution demands.
Here is a summary of the key issues:
- The creation of Green Mountain Care will result in the largest tax increase in the history of Vermont.
- The model demonstrates that a payroll tax must be the prime funding option, as no other tax has the ability to produce the $1.5 billion or more that is needed to support the fund. Other taxes, such as income tax or a broad-based tax may be needed to supplement the payroll tax to fill a projected shortfall.
- It is important to consider the impact of a significant payroll tax on our economy. High wage employers and self-employed individuals may consider leaving the state. Low wage employers and those who lack access to health care from other states will be encouraged to relocate in the state.
- In this projection I have included likely savings from the proposal generated by Dr. William Hsaio. But Rep. George Till (D-Jericho), himself a physician, disclosed the following in a recent interview with the VT Medical Society: “I have been clear in my opinion, and every bit of Vermont specific data I’ve seen suggests, overestimated administrative savings in the Hsaio report.” Therefore, I have modified the savings in the enclosed projection, as well.
- I have assumed the current Medicaid global commitment continues, but additional Medicaid funding through PPACA may not be available due to issues relating to the federal budget.
- All of the financial risk will be a liability of the state, in addition to damage costs from Irene, structural state deficits, and long term pension and OPEB liabilities.
Wendy L. Wilton