Report: Single-payer health coverage could save New York billions of dollars

March 11, 2015

Mar 10, 2015, 11:00am EDT UPDATED: Mar 10, 2015, 2:28pm EDT

health insurance

Aleksandar Stojanov

David Robinson

Reporter- Albany Business Review

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New York would reduce health care spending nearly $45 billion by shifting to a single-payer coverage model, but the cost to some people and businesses would be similar to what led Vermont to abandon its version of the plan.

That is according to a report released Tuesday on New York’s proposal for state-government-run health care – think Medicare for everyone rather than just those age 65 and up.

Gerald Friedman, the economics department chair at the University of Massachusetts at Amherst, wrote the 59-page report that urges New York to become the first state with a single-payer model for universal health insurance.

See Also

·         Why Dr. John Bennett believes a single-payer model is too costly

·         New York debates universal ‘single-payer’ health coverage

His conclusion sums up the report’s support for the legislation: “Better health care, found money and fairness.”

The report based the $45 billion in potential health care savings on the premise that New York’s single-payer legislation would reduce burdensome billing expenses, administrative waste in the insurance industry, monopolistic pricing of drugs and medical devices, and fraud.

Still, the report insufficiently addresses key factors that have drawn criticism from opponents of single-payer models, including many health insurers in New York that contend the legislation would threaten thousands of jobs in their industry.

For example, the report assumes New York would gain waivers from federal regulators to use money tied to Medicare and Medicaid, the existing government programs covering millions of elderly, disabled and low-income people in New York.

Health insurers contend that would be a tough sell to federal officials, especially considering the Affordable Care Act and related reforms are in the midst of reshaping the health care landscape.

Additionally, the report outlines new taxes on business and people to finance the single-payer model in New York. The rates at which people would be taxed vary by income, but some of the percentages for higher earners and businesses are similar to those that prompted Vermont to drop its single-payer plan.

The funding plan is proposed seeking to generate nearly $92 billion in revenue from new taxes.

Still, the report says many people – especially low- to middle-income income families – would be spending less than they currently do on health insurance.

The payroll tax would apply to earnings above $25,000.

From $25,000 to $50,000, there would be an assessment of 9 percent.

The payroll tax on the income of an employee earning $75,0000 would be 6.7 percent.

For an income of $125,000, the tax rate would be at 9.4 percent.

Rates on higher income brackets would rise to 16 percent for the portion of earnings above $200,000, the report shows.

The payroll tax tied to single-payer models was part of why Vermont Gov. Peter Shumlin, a Democrat, abandoned his plan for universal health care in that state.

“The cost of that plan turned out to be enormous,” Shumlin wrote when he killed the legislation.

That enormous cost in Vermont included an 11.5 percent payroll tax on all Vermont businesses, and a public premium assessment of up to 9.5 percent of individual Vermonters’ income.

In New York, the report released today says part of the reason it supports this state’s version is that it would have progressive tax structure.

“Unlike the fixed premiums of traditional health insurance, payroll assessment rates under the New York Health Act will vary with income,” the report says.

The payroll tax in New York would be split with employers paying 80 percent of the assessment and employees 20 percent, the report shows.

There is also a proposed tax on income from dividends, interest and capital gains based on the New York plan.

Rates for this assessment on taxable non-payroll income according to the report:

Under $25,000 would be exempt.

$25,000 to $50,000 would be 9 percent.

$50,000 to $75,000 would be 11 percent.

$75,000 to $100,000 would be 12 percent.

$100,000 to $200,000 would be 14 percent.

$200,000 or more would be 16 percent.

The report today follows public hearings in recent months on the single-payer legislation in New York. The next chapter in the debate will move to committees in the state Assembly and Senate.

Here is an Albany Business Review story on the single-payer public hearing in January.

Here is a story about why Dr. John Bennett, president and CEO of CDPHP, an Albany-based insurer with 450,000 members, says the single-payer model is unaffordable.

Read Friedman’s full report here.



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