Proposed Health Plan Too Costly
Earlier this month, New York legislators began discussing a bill that's been floating around for some time: Assemblyman Richard Gottfried's "New York Health Program," which would establish a single-payer health care system in New York modeled after high-cost public employee health packages.
The impetus for single-payer is especially strong now — the federal Affordable Care Act allows states to apply for block grant-like waivers for federal funding that blue states (like New York) would love to use for single-payer.
As it stands, Gottfried's bill doesn't appear to be viable. Even if it makes it out of committee, it's likely that state Senate Republicans, who just won a majority, would shut it down. Still, that such a bill has made it to committee shows that New York's policymakers simply aren't paying enough attention to the national landscape. In particular, Vermont's single-payer failure should serve as a humbling lesson.
Vermont's single-payer experiment began in 2011 with a bill that sought to establish a single managed care program covering all Vermonters, except those on Medicare or Tricare, a program for the military. While support for the plan was split among Vermonters, polls have found that a plurality wanted to see it move forward.
But in a surprise decision, Gov. Peter Shumlin just announced that the Green Mountain State is giving up on its single-payer experiment.
What happened? As the saying goes, there are only two certainties in life — death and taxes. It's the latter that killed single-payer in Vermont and should serve as a lesson to New York's legislators.
From the get-go, financing for the plan was highly uncertain. An early estimate pegged the total cost of the program at $5.9 billion with a funding gap of $1.6 billion, even with federal funding tied to the ACA. The state's share was more recently estimated at around $2 billion.
How Vermont would pay for this was never clear — with about $2.7 billion in total tax revenue, the state would have needed to increase revenue collection by nearly 75 percent. Vermont's residents would have had to pay an additional 8 percent in payroll taxes to fund the program. The rest of the gap would be covered by "income-based health care fees" — better known as premiums.
This was already turning into a trek — it would represent a massive tax increase that would likely have a notable effect on the economy and Vermonters' wallets. But the nail in the coffin came on December 17, when Green Mountain Care, the organization expected to provide coverage, revealed that ACA-related funding would bring in less than half of what was expected, state Medicaid funding would be lower, and administrative savings were unlikely to materialize early in the process.
Funding the plan in 2017 would require an extra $700 million dollars (above and beyond the original $2 billion). Instead of 8 percent, the payroll tax hike would need to be a whopping 11.5 percent. Even then, the program would start hemorrhaging money by 2020.
Realizing the impossible economics of this gambit, the governor simply said "enough."
New York's legislators should see Vermont as a cautionary tale. Single-payer may be a well-intentioned dream for progressives who don't trust markets in health care to work, but the problem will always come down to funding this dream. In Vermont's case at least, the numbers simply didn't add up.
Could New York turn out differently? Perhaps. But the risks of failure are clearly significant. Rather than waste time (as Vermont did) trying to fund a pipedream, New York's politicians should instead focus on reducing regulations and giving markets a chance to work.
This piece originally appeared in Albany Times Union
This piece originally appeared in Albany Times Union