by J. Thomas
In December, Vermont Governor Peter Shumlin (D) shockingly announced a delay in implementation of one of his most public, long-term political promises: guaranteeing health insurance for all Vermonters under a universal, publicly funded system. Governor Shumlin ran on this platform for many years, including during his reelection in November so it was extremely disappointing to see this policy turnaround.
Four years ago, the legislature passed a historic bill calling on the governor to develop a financing mechanism for universal health care for Vermont.
The governor’s preliminary plan contained an 11.5 percent across-the-board payroll tax in addition to a graduated 9.5 percent income tax, with the highest rates beginning at 400 percent of the poverty line and capped at $27,500 per year. Another 4 percent payroll tax and a 50 percent graduated income tax increase would be required for transition costs over the first few years of the program, for a total of $2.6 billion in new revenue.
Effectively, Vermonters’ taxes would have been doubled. Furthermore, funding for the system would have to be front-loaded and offsets would be delayed because it takes years to see the cost benefits of better health.
Vermont is a part of a national movement to establish commonsense health care. America spends more money on health care as a percentage of its gross domestic product (GDP) than any other country in the world – rich or poor. A Harvard study estimated that 45,000 Americans die every year because they don’t have health insurance. A publicly-funded universal health care system in Vermont is estimated to save 25 percent of total health care costs over the course of the first decade. The financial estimates for the first five years are detailed in an article from the New England Journal of Medicine.
Given Vermont’s small population – roughly 650,000 people – and taking 2019 as an example year, these savings represent roughly $1,000 per person each year, including additional money used to cover everyone. By extrapolation, comparable savings for New York, for example, would be $20 billion, or about 2 percent of a state’s GDP. In the long run, universal health care saves money.
It’s not the cost of the program that caused the problem: It’s the upfront taxes. It will always be challenging to front-load tax increases and investments two years before a plan starts and perhaps many years before the majority of Vermonters would see lasting economic benefits. Though the plan would pay for itself quickly and improve Vermonters’ quality of life, it’s also fair to say implementing single-payer in the way the governor proposed would have caused significant economic hurdles, at least in the short term.
There are alternative methods for financing universal health care out there, other sources for financial support (some of which may still be taxes, it should be pointed out). If the initial investment is covered, then taxes can be spread out over a much longer time.
There are lots of ways to get to $2.6 billion. Taxes, bonds and other government funding sources could all contribute. Moreover, some have suggested that philanthropists and non-corporate foundations could have a role to play since many top American foundations make large investments in health care, year after year.
Regardless of the specific financial catalyst, universal health care advocates must collaborate to lessen the sticker shock of upfront funding.
J. Thomas is a health policy fellow for Public Citizen’s Congress Watch division.