By Governor Peter Shumlin
Earlier this week, I made one of the most difficult decisions of my public life when I announced that I cannot support a move to a publicly-financed health care system in Vermont at this time. I have advocated for such a system for much of my public life, but over the past two weeks it has become clear to me that the risks and economic shocks of moving forward at this time are too great.
To understand why I came to that conclusion, it’s important that Vermonters understand the plan we put together to replace private insurance premiums with a system of public financing. I asked my analysts to create a proposal based on the following principles: every Vermonter should have coverage and all should pay according to ability; business should be out of health care decision-making but should continue to contribute to health care costs; employers that do not currently offer health care should be phased into the financing plan over a number of years; and out-of-pocket expenses should not exceed what most Vermonters currently pay.
The cost of that plan turned out to be enormous, requiring an 11.5% payroll tax on all Vermont businesses and a public premium assessment of up to 9.5% of individual Vermonters’ income. Further, the phase-in for smaller businesses and those that do not currently offer insurance would add an additional $500 million to the system. These are tax rates that I cannot responsibly support or urge the Legislature to pass. In my judgment, the potential economic disruption and risks would be too great to small businesses, working families and the state’s economy.
After receiving those numbers, I asked my team to reevaluate assumptions and consider policy choices to make the system more affordable, such as eliminating the phase-in for businesses and shifting more of the financing burden to out-of-pocket costs. Both choices had serious problems. The former would cause massive economic pain for many small businesses, likely leading some to close or lay off workers. The latter would require many Vermonters to pay more in out-of-pocket costs than they do now, leaving them with less disposable income. In the end, those choices are not only unacceptable to me; they also only slightly reduce the cost of the financing plan overall.
This is incredibly discouraging news. I know Vermonters will wonder why we did not know this six months ago or two years ago. Here is what has changed.
Although our economy is still growing, that growth is slower than expected and we have faced two revenue downgrades. Given this new reality, every percent of tax raises fewer dollars than we had anticipated, requiring higher tax rates than we had hoped to fund this system. In the last several months, we have also learned that the amount of federal funds available to Vermont for this transition is over $150 million less than we had anticipated. Additionally, the slow recovery from the Great Recession has tightened our state budget and caused us to not meet the goals we had set forth for increases in Medicaid provider payments, adding more than $150 million to the amount we would need to raise through public financing. Taken together, these issues and others added hundreds of millions to the bottom line and required tax rates that I cannot in good conscience ask Vermonters to pay.
I know this is a huge disappointment to many Vermonters. I know because I am one of those Vermonters who has fought for this to succeed. While the time is not right today, we must not give up on health care reform. We are doing transformational things in Vermont when it comes to the way we deliver health care. We must continue to pursue the goals of reducing the number of uninsured Vermonters and supporting primary care for all Vermonters. We must double down on health care reform by strengthening the Green Mountain Care Board so that we have better shot at long-term cost containment, pursuing a federal All Payer waiver so that we can be the first state in America to pay for quality not quantity, reducing the cost-shift to private payers, and bringing oversight of our statewide Health Information Technology program to the GMCB to better support integrated, unified health care delivery in Vermont.
Those reforms can and must continue, and our success will lay the groundwork for future efforts to implement a publicly-financed health care system. While now is not the right time for Vermont to take such a step, the time will come.