How much will it cost? (Part two of a multi-part series)

I really didn’t mean to take so long between part one of this series and part two, but because the second item on the Ben Jealous for Governor issue list is health care – and there’s a claim out there that his plan will cost Maryland a staggering $24 billion a year, according to analysts at the state’s Department of Legislative Services – I was hoping to see the actual evidence before I wrote the next part. But my trips to the DLS website have been fruitless, leading me to believe that there were a couple cowboys at the DLS who chose to leak this to the Sun.

So before I say this will cost $24 billion a year, I suppose the best thing to know is how we would pay for this program called “Medicare-for-All.” Here’s how Jealous explains the key benefit for the majority of us who are under employer-sponsored plans:

This system will end premiums for participants, reducing costs to most employees and employers. It will be important to create a system that ensures covered employees also see the benefit of this change. MD-Care will explore creating safeguards to ensure that employer savings are passed down to the workers in increased wages, and guarantee that workers see real savings instead of having all of the gains captured by employers no longer paying premiums. (Emphasis mine.)

It’s worth pointing out that health insurance as a employer fringe benefit is a relatively new phenomenon, one that began when wages were frozen during World War II. Since workers (generally those belonging to unions) could not receive wage increases, the measure to circumvent this prohibition was the inclusion of health insurance – with the added bonus of employer-paid premiums being non-taxable income.

Basically what Jealous wants to do is enforce a raise to workers who currently receive these benefits, whether deserved or not. That seems to me a good way to kill jobs in the state.

And stop me if you’ve heard this one before:

Those who want to keep their existing Medicare program will be able to.

Bear in mind, of course, that Medicare is not free. Those of us who work for a living see that little category on our pay stubs – mine actually calls this “Medicare Employee” – and every couple weeks a few dozen dollars added to that total. I guess that’s the down payment on what we have to pay when we get to the age where we can presumably sign up and collect on Medicare, which isn’t really free but has a bewildering array of premiums, deductibles, and co-insurance payments. So to say Medicare-for-All is “free health care” or “single-payer” is clearly a misnomer because there are three payment sources: your pocket, the generosity of those who pay the taxes but don’t use the service, and (in the case of the federal government) a massive amount of IOUs.

Jealous then cites a Kaiser Family Foundation estimate that health care in Maryland costs $51 billion a year (at least it did in 2014) and proclaims:

This is simply unsustainable, and MD-Care offers an opportunity to finally get costs under control. Administrative savings could quickly add up to billions of dollars in Maryland and fully expanding the All-Payer model would finally allow us to bend the “cost curve” in medical spending. In addition, by ensuring the plan is designed properly to reduce costs and maximize federal dollars, we can further reduce the healthcare burden on Maryland taxpayers.

So wait a second: this is Maryland’s plan, but we’re expecting everyone else to pony up and pay more for it? Yeah, that will fly like a lead balloon.

And I’m not sure where “administrative savings” (if administration is 8% of health care cost, that’s $4 billion for Maryland) comes from when people who work for those eeeeeevil insurance companies (mainly paid for with private-sector dollars) are repurposed as government employees who are paid from the public till, to wit:

This plan and the Maryland All-Payer Model Progression Plan call for widespread use of emerging new titles in healthcare such as coordinators and community health workers to ensure that high risk populations are being treated properly (and at lower cost). This offers an opportunity to minimize the net disruption to employment by ensuring job retraining and preferences for those who previously worked at private insurance companies. Instead of thousands of workers in Maryland being paid to deny access to care, they can now be paid to provide healthcare.

In addition, there is going to be a need for administrative employees to ensure that Maryland is complying with all federal law so we can continue to draw down dollars for Medicare, Medicaid, CHIP, and the ACA.

So much for saving on administration; in fact, given the lavish government payroll that seems to be a cost increase.

Speaking of cost increases, here’s where it gets important:

There is no question that any plan will have significant cost savings compared to current healthcare spending, while also moving most healthcare dollars away from the insurance companies and into the plan. These variables will determine the final cost of the plan and the revenue requirements. Among other revenue options the advisory panel will consider:

  • Income Based Premium Paid by Employers

This premium would be a deductible business expense, meaning this plan will have the same tax advantage status as employer provided healthcare. However, it is unknown how businesses will react to this, and significant input from the Maryland business community will be needed. Businesses would have predictable health insurance costs instead of double-digit increases with no end in sight.

  • Sales Tax

Having some portion of the plan paid for by a sales tax would have several advantages, including capturing revenue from non-Marylanders. It would also reduce the amount of revenue needed on the payroll side, thus reducing the taxation burden on new employment. At the same time, a sales tax is regressive by nature, so any tax increase on working Marylanders would have to be measured against the net benefits received from this plan.

  • Non-Payroll Income Premium

A non-payroll income premium would ensure that the most financially successful in Maryland pay their fair share of taxes. The advisory panel will need to study the tax sensitivity of these higher earners to ensure that any increase doesn’t result in significant population shifts in the region to avoid any changes to the Maryland income tax system.

I can tell you exactly how business will react to the first one, Ben: they will close their doors and/or leave. Those that have to stay will be hiring fewer people, and they have the perfect incentive:

We will also look at ways to ensure that small businesses and new companies succeed under this plan. This could mean exempting small businesses and start-ups from additional taxes associated with MDCare depending on revenue or firm age. The advisory panel will work with the small business community to design an exemption that makes the most sense.

One surefire way to cut revenue to fit under the limit: close a few locations, let go a few workers, and fold the business into a newly-formed holding company.

Because of that possibility, my thinking on this is that Jealous would go with a blending of options two and three: perhaps an increase in the sales tax from 6% to 8% and a reprisal of the infamous “millionaire’s tax” that will cause capital to flow out of the state.

Assuming that the roughly $4.6 billion collected by the state in sales taxes in FY2017 is a valid figure, a sales tax increase to 8% would cost taxpayers roughly $1.1 billion a year, and $5.5 billion over five years. A millionaire’s tax would be perhaps a $500 million cost to taxpayers over 5 years.

But that won’t begin to cover this program – not when spending is $51 billion a year now, and probably $70 billion when it’s “free.” (That is if you can find a provider – only 7 of 10 providers accept new Medicare patients.)

The most truthful statement made from Ben on the subject is this one, a throwaway line on his “Path to Medicare for All“:

When the ACA was written, Democrats were overly concerned with the optics and not enough with the actual mechanics of the bill.

Yes, we had to pass it to know what was in it. Likewise, we have no idea if that $24 billion cost is anywhere close to reality but it is likely that state revenues will take a significant hit as private-sector businesses throw in the towel.

Next up in this series will be Criminal Justice, a platform that likely has more holes in it than Swiss cheese.

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