by Hamilton E. Davis
With three weeks still to go to the official launch date, the Shumlin administration has begun to lose its already-tenuous grip on the narrative around its single payer health care initiative. One of the most sensitive issues involved—the payroll tax for Vermont businesses—leaked out to the press last week, with no comment or explanation from the administration.
That led to an ad hoc exchange on Vermont Public Radio about what the tax would mean to big, self-insured companies that enjoy federal ERISA protections from state action. In the wake of that, National Life, a large central Vermont employer, expressed concern about the effect of the payroll tax.
Both of these reports were necessarily incomplete and raised more questions than they answered. And both are certain to turn into major battles once the whole Shumlin plan goes to the legislature in January. Their importance lay in the fact that the Shumlin team really couldn’t defend or explain them because the financing plan isn’t yet complete.
Moreover, the administration’s hunkered-down posture means that it has not been able to make the positive case for its plan as a whole. There definitely is a case for the plan, but the opponents have gotten another month to hammer away, with no response. They surely appreciate it.
The payroll tax issue was cracked open by Morgan True of VTDigger, who reported that a business group had been told by the administration that the tax would be set at eight percent, which could be a difficult burden, especially for small firms. There are thousands of small companies that do not provide health insurance now, so the payroll tax could pose a threat to their survival.
The designer of Shumlin’s financing plan is Michael Costa, who has been working at it for two years. There are lots of ways that the eight percent could be applied: there could be protections for marginal small firms, for example, and there will be small firms that do provide health insurance that will save money at eight percent.
But no one can get a full grip on the issue until the administration turns Costa loose to explain it. Neither Costa nor anyone else in on the Shumlin team has made the broader case in the last several weeks for rebuilding health insurance financing. Instead every business owner in the state is simply multiplying his payroll by .08 and some of them, perhaps many of them, are freaking out, before the Shumlin plan has been put on the table.
As for the ERISA company question, Administration Secretary Jeb Spaulding left some misimpressions about how the payroll tax would affect big companies. Spaulding told VPR’s Bob Kinzel that he hoped the ERISA companies would sign up for Green Mountain Care.
In fact, no ERISA company can “sign up” for Green Mountain Care, as the Shumlin project envisions it. The payroll tax is a tax, which means that big companies would have to pay it. What they did about their own insurance plans would be up to them. They could shut them down, at least for their Vermont-resident workers, or they might pay for better benefits than the state would provide. But nobody is going to ask them to sign up for anything.
If the Shumlin payroll tax were to pass, the biggest question surrounding ERISA companies is whether they would attack the tax in court as an infringement on their rights under federal law to operate a health plan without state interference. No one can say what the outcome of that would be. But it would be a legal question, and then a political one—could they be talked out of a legal challenge.
In any event, you almost certainly won’t be hearing about any of this in the next several weeks. Nor will you be hearing any substantive defense of the Shumlin plan in broader terms.
In bits and pieces over the last few years some of those broader issues have emerged.
Single payer proponents, in and out of government, have argued, for example, that going to public-based financing would give Vermonters more security, because their insurance coverage would not depend on their job.
They have argued that we need a much fairer system, since people in pretty much identical circumstances now pay dramatically different amounts for coverage. A group of Harvard students recently put a video on YouTube, comparing two Vermont women with identical jobs in different companies, identical salaries and identical insurance coverage. One paid $1,200 a year; her employer offers health insurance. The other pays $6,000 a year; her employer doesn’t offer health insurance.
Probably the strongest arguments in favor of the Shumlin plan is that it will rein in health care costs, after more than four decades of trying. The Green Mountain Care Board, a major component of the single payer project, has already cut the inflation rate in Vermont hospitals to a third of its historic trend.
I mention all of this not because it means that the Shumlin plan should be adopted, but rather to point out that the partial information that leaked out will be used at maximum decibel level by single payer opponents leading up the launch. That may not be fatal, but it certainly isn’t helpful.