Vermont’s Single-Payer Cause of Death

Published December 31, 2014

I’ve reported before on Vermont Governor Peter Shumlin’s decision to pull the plug on a single-payer plan due to the astonishing levels of taxation that would be required to fund it (see: Vermont Governor Abandons Single Payer Plan). Yesterday Shumlin’s administration released a more detailed report on the seemingly-dead single-payer plan. There’s a lot of language in the report that makes it clear most of it was written before they understood what the numbers were and what the Governor’s decision would be, but one item jumped out at me more than any other: the individual tax that would have been levied, essentially an income tax dedicated to health care.

From page 39 of the report:

In order to account for ability to pay, and meet federal affordability requirements, the tax would be calculated on a sliding scale based on FPL up to 400% FPL. The minimum premium is 2.5% of AGI at 138% of FPL , starting where Medicaid eligibility ends. The ramp begins to climb after 150% FPL and moves in a straight line from 2.5% of AGI at 150% FPL to 9.5% of AGI at 400% FPL. 400% FPL was selected as the end of the ramp to ensure that all Vermonters were below the affordability threshold set forth by the ACA.

This probably reads like gibberish to normal people who haven’t spent a good chunk of the last several years focused on the arcane workings of Obamacare, but the key takeaway is this: Obamacare set a price ceiling for people regarding what percentage of their income they could be required to pay before getting any subsidies to buy coverage, and Vermont planned to convert that ceiling into a price floor, requiring people to pay at least that amount.

Interesting how in the process of saving Vermonters all that money single-payer is supposed to save, a price ceiling somehow converted to a price floor.

Even politicians understand that price floors are toxic with voters (while ceilings are popular, at least among those who slept through their high school economics classes), and it isn’t difficult to see how Shumlin saw that this along with an 11.5 percent payroll tax was simply not feasible – either he could kill single-payer, or he could kill Vermont’s economy and his own political career by pushing this through. Fortunately for residents of the Green Mountain State, Shumlin chose to kill single-payer.