Maryland Single-Payer Proposal Would Cost 117,000 Jobs, Shrink Payroll Tax Receipts by $4.89 Billion

Published January 1, 2002

A proposal to implement single-payer health care in Maryland could cost the state as many as 117,000 jobs and as much as $4.89 billion in lost payroll tax receipts, according to a study jointly released last November by The Heritage Foundation and the Maryland Foundation for Research and Economic Education (Maryland FREE).

The report, prepared by analysts at the Boston-based Beacon Hill Institute (BHI), considers the economic implications of four universal health care proposals legislators are expected to consider during the 2002 General Assembly session. “Universal Health Care and the Maryland Economy” relies on the State Tax Analysis Modeling Project (STAMP) computer model developed specifically for Maryland. STAMP measures the effects of public policy changes by applying statistical and econometric methods to data collected specifically for the state or locality being studied.

BHI analysts have applied the STAMP model in 13 other states to identify and measure the consequences of changes in health care policy, tax policy, and other public policy variables.

The report stresses to policymakers the importance of taking into account the economic costs associated with implementation of a universal health care system. Such costs are an “inevitable byproduct of the increases in tax rates or employer costs that [universal health care’s] implementation would necessitate.”

All of the universal health care proposals, according to the analysis, would have “negative economic consequences for the state, including decreases in employment and payroll.” The proposals would decrease employment in the state by between 30,000 and 117,000 jobs, and would require increases in the personal income tax ranging from 13 to 233 percent.

Four Proposals

The study analyzes the economic implications of four proposals for universal health care:

  • Medicaid expansion, which would move in the direction of universal health care by increasing the number of persons reached by Maryland’s existing Medicaid system.
  • Pooling the uninsured, which would aim for full insurance coverage for all uninsured residents of the Old Line State.
  • A multi-payer system (some states call it “play or pay”), which would require employers to offer insurance coverage to their employees or pay into a government-created insurance system.
  • a single-payer system, which would be wholly state-financed and administered and would cover all Marylanders.

Each of the four approaches, note the BHI researchers, would cost the state jobs and payroll and would necessitate an increase in personal income taxes. Expansion of Medicaid is projected to cause the least disruption to the state’s economy, while adoption of a single-payer system would be the most disruptive.

“Huge Losses” Inevitable

Single-payer health care has emerged as a major issue in many states. Proponents not only seek to expand health insurance coverage to all citizens, but to achieve cost savings not realized by the current system.

Too often, however, proponents appear not to have considered the cost side of single-payer proposals.

“Whatever the promised benefits of universal health care, it is impossible to throw out the existing health care system in favor of a massive new entitlement without at the same time inflicting huge losses on the economy,” warns David G. Tuerck, BHI executive director.

“There is no free lunch,” Tuerck adds, “and there is no way to provide universal health care in Maryland without putting many thousands of persons out of work. The euphoria with which its proponents would urge this idea on state policy makers pales in comparison to the economic hardships it would inflict.”

The Beacon Hill Institute for Public Policy Research is headquartered at Suffolk University in Boston. It focuses on federal, state, and local economic policies as they affect citizens and businesses. The institute conducts research and educational programs to provide timely, concise, and readable analyses that help voters, policymakers, and opinion leaders understand today’s leading public policy issues.

For more information . . .

For the full text of “Universal Health Care and the Maryland Economy: An Econometric Analysis Using the Maryland State Tax Analysis Modeling Program,” released in November 2001, contact Rebecca Moryl, director of operations, Beacon Hill Institute, 8 Ashburton Place, Boston, MA 02108, 617/573- 8750. Moryl’s email address is [email protected].