Single-payer would require up to $2.18B in taxes

February 07, 2014

By Neal P. Goswami
Vermont Press Bureau
MONTPELIER — Taxpayers will need to raise between $1.77 billion and $2.18 billion to cover the costs of Gov. Peter Shumlin’s proposed single-payer health care system, according to a consensus cost estimate revealed Thursday.

The consensus figures fall between the estimates of two earlier reports. An analysis by the University of Massachusetts for the Shumlin administration pegged the cost at about $1.6 billion.

A report by Avalere Health on behalf of a group of stakeholders including hospitals, doctors and business interests estimated the cost to be as high as $2.2 billion.

Administration Secretary Jeb Spaulding, Deputy Director of Health Reform Michael Costa and Stephen Klein, chief fiscal officer with the Joint Fiscal Office, presented the latest estimate for the planned Green Mountain Care system to two House committees Thursday afternoon.

Costa said the consensus numbers are built upon assumptions in the UMass report. A number of issues need further review, however, leading to the wide range, he said.

The UMass report and the consensus cost both include an assumption that providers would be paid 105 percent of Medicare rates. Detractors say that number will have to be significantly higher or the state could lose doctors. The consensus cost will rise if lawmakers choose to pay providers more.

Meanwhile, Klein said it remains unclear whether an existing tax on medical providers will continue under the proposed single-payer system. If not, the state faces a $157 million loss of money currently relied upon. The loss of revenue from the provider tax is “considered a low to moderate risk,” according to a document distributed to lawmakers Thursday.

Other major factors include a reserve fund for the health care system and the costs for implementation and transitioning to the new system.

Klein told the House Health Care and House Ways and Means committees on Thursday that “there’s an open question of whether the system would need reserves.”

If the state needs a 5 percent reserve of nonfederal costs, an additional $125 million will need to be raised.

The UMass report estimated a need for $50 million in implementation and transition funding. The consensus cost puts that as high as $150 million, however.

“Where we have the most uncertainty is the implementation, start-up and transition,” Klein said. “Does this all just appear in 2017 or is it a multiyear transition?”

Klein warned the estimates could also change significantly based on policy decisions that must be made by lawmakers.

“As you do so, the costs could go higher or could go lower,” Klein said. “As you change policy levers the range will change dramatically.”

Among the pending decisions are the setting of provider reimbursement rates, determination of the populations to be covered under the plan, benefit changes and whether workers’ compensation will be merged into the plan.

“I would love it as you take testimony on this to start filling in these boxes,” Klein said.

The total cost of the single-payer plan under the consensus figures is nearly $5.92 billion. The lion’s share would be covered by federal funding, however.

About $1.6 billion would come from Medicare and $1.2 billion from Medicaid funds. The state would have to gain a waiver from the federal government to secure those funds. About $267 million currently slated for tax breaks and subsidies under the federal Affordable Care Act would be absorbed into the system along with $209 million in other federal funding.

Spaulding, responding to a request from Rep. Mary Morrissey, R-Bennington, for a multiyear budget plan for the proposed system, said lawmakers can do that when they consider a financing plan next year.

“We should not be looking at one year,” Spaulding said. “When and if, and hopefully when the General Assembly votes on a financing plan, it should be based on a three-to-five-year plan.”

He also urged lawmakers to remember the estimated cost will change as legislators make changes to the administration’s proposals.

“What’s important here is that this range is not static,” Spaulding said. “We should expect it to go down, go up and change and hopefully get narrower as we go through the process together.”