| by John Franco
I. THE HIDDEN TAX INCREASE OF EXPLODING HEALTH
CARE COSTS.
What would happen if our tax bills had gone up by $1 billion
since 1999 and were going to go up by another $1 billion
by 2007? There would be a revolt among the voters, and a
quick call by the politicians to put an end to it.
Yet the same thing is happening in Vermont
with the explosion in the cost of health care, and we are
hardly hearing a peep from the Douglas Administration.This
year Vermont will spend $3 billion on health care. This
is up from $2 billion in 1999 and $1 billion in 1990. By
2007 that spending will hit $4 billion. The annual rates
of growth experienced in the last two years were the highest
rates of growth reported since tracking of data began in
1992. Health care spending consumed 13% of the Vermont economy
in 2001. This will rise to 16% in 2006. This means that
net personal income in Vermont available after health care
is declining. By contrast, according to Health Canada’s
website, health care spending dropped from 10% of GDP in
the late ‘90’s to 9% currently. This belies
the excuse that these rates of growth are due to the unavoidable
demands of an aging population.
II. THAT EXTRA $1 BILLION HAS BOUGHT US 13
THOUSAND MORE UNINSURED VERMONTERS.
At the same time the ranks of the uninsured have grown from
50 to 63 thousand Vermonters.
The principal way the Douglas Administration foresees to
slow this explosion in health care costs is more of the
same: "(A)n increase in the number of people without
health insurance, and increased consumer cost sharing."
III. THIS HIDDEN TAX OF HEALTH CARE SPENDING
IS THE BIGGEST SINGLE IMPEDIMENT TO JOB CREATION IN VERMONT.
Health care spending is taking an ever growing bite of household
income and employer payroll. Many Vermont businesses are
seeing their health insurance premiums excess 15% of their
total payroll. When the 51% portion of worker’s compensation
insurance which goes to pay for medical care is added in,
the share now approaches 20%.
Most of the uninsured and under insured work
in small firms with less than 10 employees. This group of
small employers accounts for 27.4% of all workers. Only
55% offered any health insurance, and of that only 50% of
coverage was paid by the employer.The cost of health care
is not only the most significant cost factor facing business,
it is one which Vermont has the greatest ability to control.
The greater efficiency, opportunities for effective cost
containment strategies, along with an intelligent premium
financing system, can serve as a significant economic development
tool which will allow Vermont to
significantly cut the overall health care
burden on businesses that are currently providing coverage,
reduce the overall burden on all business,
making coverage affordable to small business,
and
eliminate the current substantial inequity
in burden between businesses which do and do not provide
coverage.
IV. A VERMONT UNIVERSAL HEALTH CARE PLAN PIE
IN THE SKY OR SMALL POTATOES?
Many people who would like to support universal comprehensive
health care reform are afraid that it is too tall an order
for a small state like Vermont. Or they fear that reform
will result in a huge, impersonal bureaucracy.The truth
is that to establish the first system of universal health
insurance coverage in the United States of America, Vermont
only needs to come up with a plan equal in size to the second
smallest Blue Cross plan in New England. It would require
establishment of a plan which covers the 423 thousand Vermonters
not insured by the federally-supported health insurance
programs. This plan would be smaller than the Blue Cross
plans in Maine (470 thousand members), Rhode Island (600
thousand), and Massachusetts (2.4 million members), and
comparable in size to North Dakota Blue Cross (440 thousand
members).
V. WITH ONLY MODEST ADMINISTRATIVE SAVINGS,
UNIVERSAL COVERAGE CAN BE FINANCED WITHOUT ANY ADDITIONAL
COST.
A comprehensive plan will allow us to streamline the costs
of administering the health care system. The plan needs
to trim no more than 3-4% of HCE to pay for the additional
cost of insuring the uninsured and underinsured.
The additional cost of providing insurance
to the uninsured would add just a little more than 1% to
what we spend in health care. This is because the care the
uninsured are currently getting is paid through cost shifting,
and the uninsured tend to be younger and healthier than
the overall population. The additional cost of providing
adequate coverage to the underinsured will cost an additional
2% of what we currently are spending.
Fortunately, elimination of waste and better
use of the resources we already have can cover those Vermonters
without insurance, as well as those without adequate coverage,
while reducing total spending. According to the most recent
study from Harvard, the level of administrative overhead
in our health care system has grown from 24% to 31% of total
health spending. Applied to Vermont that means this year
we are spending nearly $1 billion in health care administration
in Vermont - almost the same size as the Vermont General
Fund budget. This is an obvious resource to expand coverage
to everyone without expanding spending.
The challenge is to identify the trade-offs
between reaping these administrative savings and other considerations.
This leaves a lot of leeway for creativity in crafting a
plan based on Vermont values and experience.
Moreover, the only way that health insurance
is going to be affordable to the smallest of Vermont firms
is with a graduated contribution. Flat insurance premiums
priced as a flat rate per employee, or even as a flat percentage
of payroll, are catastrophic for small employers. This was
the problem that the Dean administration’s employer
mandate plan ran into. The Douglas administration’s
proposal to use tax credits to make coverage more affordable
to small business -- though not remotely large enough to
begin to address the problem --implicitly recognizes this
by attempting to use tax credits and other subsidies as
a back door way of achieving a graduated contribution.
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