My committee (House Health Care) passed a major bill this
week, so this is a bonus week update for those interested in reading a very
in-depth report on this multi-piece bill.
We also passed a bill that represents a change in policy and
very good news for individuals who have been forced to enroll for health
insurance on the dysfunctional Vermont Health Connect system even when they
were not applying for subsidies.
The big bill included the sugar-added beverage tax. I
received a number of responses to my request for feedback on that issue, and not
surprisingly, there were a wide range of opinions. All of them, however, had productive
thoughts or insights that helped broaden how the issue might affect Vermonters
– whether positively or negatively.
I did not support the bill, but it is also important to know
that the context included other parts of the bill and alternatives that were
discussed.
The New Spending
First, the bill is focused on $47 million annually in new
spending for a list of specific health care initiatives. When combined with
federal matching funds, this brings the total budget of new expenditures to $91
million, annualized. The governor’s health care proposal this year was to impose
a .7 percent payroll tax for a list of similar initiatives. Our bill includes
two revenue sources: the two-cent-per-ounce sugar tax, and a .3 percent payroll
tax. In effect, our committee bill substituted part of the payroll tax for the
sugar tax.
There are two other changes from the original budget
proposal from the governor. The committee bill repeals the current “employer
assessment” levied against employers who do not provide health insurance.
Some people have felt that the payroll tax would mean “double
dipping” from these employers. This is because, at least in theory, the payroll
tax on employers who do currently offer
insurance will be returned to them through lower health insurance premiums
because Medicaid will be reimbursed at a higher level, reducing the amount
private insurance carries part of Medicaid costs (the “cost shift.”) They will
be “held harmless” from the impact of the new tax. The payroll tax on employers
who do not currently offer insurance will not benefit them through lower insurance
rates (since they don’t offer insurance.) Thus, also maintaining the assessment
would doubly penalize them for not providing coverage.
Repealing the payroll tax, which would have raised $18.3
million, means that the addition of $47.2 million in new spending over a full
year requires raising at least $65.5 million in total revenue to create a
balanced package. The new payroll tax would raise $39.7 million, and the
beverage tax is projected to raise $30.9 million.
Those are the figures when rolled out for a full year. Since
it most pieces would not begin until next January, covering the half year in
the upcoming budget requires $29.8 million in new state spending ($56.6 in new
initiatives, with the federal funds added.) The tax projections are $17.8 million
from the payroll tax and $17.8 from the beverage tax, minus $4.4 million from
the elimination of the employee assessment in the fourth quarter.
Moving the Medicaid
Cost Increases
The other change from the governor’s original proposal with
the .7 percent payroll tax is that our committee bill does not include the cost
of the $16 million increase in existing increased Medicaid expenses, which
really does belong in the existing budget, not a budget for new initiatives. The
administration now agrees with that perspective.
However it is important to realize that this $16 million increases
the amount of new revenue or cuts that other committees will have to identify beyond the governor’s proposed cuts and
revenues, since it was originally proposed to be funded as part of the payroll
tax. The other addition to the gap beyond the governor’s original proposal is
the $18 million in revenue shortfall reported in January, thus $34 million in
total.
On to the vote:
Our chair allowed for recognizing committee members’
positions on the significant separate issues through straw polls.
We first voted on the policy directions of initiatives in
the bill. It further supports the Blueprint for Health costs for coordinating
care for chronic health conditions; reduces the price disparities between state
payments for health care (Medicaid) and private insurance payments; increases
subsidies for low income individuals buying insurance on the Exchange; focuses
on specific support for enhancing universal access to primary care; provides
the resources for increased oversight responsibilities of the Green Mountain
Care Board; and provides an inflationary increase to health care service
providers not covered by the Medicaid increase.
Some of these initiatives do not have consensus support, in
part because they would help support a future single payer financing structure
for health care. They are initiatives that I do support – they are investments
in better health care and less spending over time -- and to the question, “if
resources were not an issue, how would you vote?” I voted, “yes.”
We then voted on the use of the two-cent-per-ounce sugared
beverage tax as a revenue source for the bill. Note that this did not use any
of the revenue to fund other programs that have been suggested as linking to
the tax purpose, such as making fruits and vegetables more affordable. It also
includes no funding for a public education campaign.
I told the committee that I would be ready to seriously
consider this tax if it was proposed after first having an aggressive education
campaign about the health risks of significant added sugars. It’s what we did,
for example, with nicotine – and still do, as a combined education and tax
effort. To spring it on consumers without doing that first, I think, is unfair
and counterproductive. Given our budget shortfall, I would even support a small
beverage tax in order to fund such a campaign. That approach did not receive
committee support.
The other issue of particular concern is the impact of any
really major tax differential between Vermont and our surrounding states. That
is counterproductive to our critical need for economic development – something
essential to addressing our structural budget deficit. So I voted “no” on this
straw vote.
The same issue rings true if we were to become the first
state to impose a state payroll tax, regardless of good motives or policy
efforts. We do not stand in isolation, and what might be otherwise argued as
good policy is bad policy if it puts us in a significant economic disadvantage
compared to other states. I voted no on that component as well, and thus no in
the formal vote on the bill as a whole as well.
Many More Steps to Go
Note that this is only a first step in a long process. I
think our committee has set itself up to have wasted all of the time we spent
in developing this bill, given the realities of our bigger budget picture.
This bill will next travel to the House Ways and Means
Committee to assess the tax proposals. Will some survive? There is a question
as to whether there is much support there for either the sugar tax or the
payroll tax. At the same time, that committee will without doubt be assessing
some new revenue sources as a part of the existing $34 million gap (or $112
million, if you do not start by assuming the governor’s revenue proposals will
be accepted.)
Ways and Means will also have to look at sustainability. The
sugared-beverage tax revenue amount is only a rough estimate, and will raise
less over time if it succeeds in its purpose of reducing consumption. So we
will have started new programs that will grow in cost, and they will require
other, additional sources of new revenue to keep them going in the future.
After Ways and Means, it goes to House Appropriations.
That’s the committee already “spilling blood” (in one committee member’s words)
in terms of cuts to balance the budget even assuming some new tax revenues.
Will Appropriations embrace the $30 million in additional state budget spending for the half year
that would be covered in the fy 2016 budget? (And then a commitment to $47
million to continue in the following year?)
Every penny of that $30 million, along with the existing $34
million gap, must be filled by other, even deeper cuts, or through proposed
additional new taxes, or both, just to get through the current year. I think
that my committee was irresponsible to even suggest to our colleagues that a
$30 million combined spend and tax-to-pay-for-it package be added to the
current fiscal crisis.
Whatever the House ultimately passes, all goes to the Senate
for scrutiny.
So you have not heard the last word on the spending or the
taxes – sugar and otherwise – that left my committee on Friday afternoon.
****
Direct Enrollment
I referenced some good news at the very start of this
update: last week we also passed a bill that will permit individuals to enroll
for health insurance directly from the insurance carriers, instead of from the
broken “Vermont Health Connect,” as long as they are not applying for
subsidies. (Federal law requires that enrollment for subsidies go through the
computer exchanges.)
The insurance products will the same as those on the
Exchange. This will take effect beginning with the next open enrollment period
next fall. This is the same process that we allowed for small business last
year, but we were forcing individual purchasers to continue to enroll through
the Exchange.
This is a reversal of a policy the state and legislature had
insisted upon from the beginning of the Exchange.
Just a few weeks ago, my committee debated this issue. The
governor’s office opposed it, insisting the Exchange would be working soon. The
three Republicans tried to push back, but the best we could get at that time
was agreement to allow direct enrollment for this fall only, and only if the
system was still not working by mid-summer.
Under the onslaught of bad publicity and pressure over the
ongoing level of dysfunction, the administration had a change of heart, and our
committee chair and other committee members immediately followed suit.
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