Moffit Responds

The recently resurrected single payer model is the latest health policy fashion. It is seemingly simple and cost-efficient. In the case of the proposed New York Health Act, as Rep. Richard Gottfried observes, the bill would cover every New Yorker without annoying deductibles, copays, and provider networks. Care would be “free” at the point of service, and savings would emerge from reduced administrative costs, economies of scale, and the “negotiation” (“fixing”) of provider prices. As Rep. Gottfried points out, the New York Health Act would rely on a graduated employer-based tax, with employers nominally bearing 80% of the tax. Also, the New York plan would be funded by special taxes on capital gains, interest, and dividends. “Specific brackets and rates,” Gottfried tells us, “would be set during an implementation period.” Details matter. The recent single payer efforts collapsed for substantive reasons, indicating that the reality is different from the expectations.

COLLAPSED SINGLE PAYER ATTEMPTS

In Vermont, anticipated tax burdens undercut the single payer plan of Vermont’s progressive politicians.

Colorado’s $25 billion single payer plan, a proposed doubling of the state’s budget, was supposed to reap big savings. In fact, the Colorado Health Institute found that, even with federal Medicaid matching funds, the proposed program would have run a $253 million deficit in its first year of operation.¹ More than three out of four Colorado voters refused to back the proposal containing a 10% payroll tax.

In California, as Rep. Gottfried rightly observes, sponsors of the aborted “The Healthy California Act” didn’t specify their funding. It wouldn’t have changed much if they did. The California legislative analysts estimated the bill’s cost at $400 billion annually, more than twice the size of the entire state budget. They estimated further that the sponsors would have to raise $200 billion in revenue, most likely through a 15% payroll tax.² If such a tax were enacted—on top of the 15.3% federal payroll tax—California residents would have been severely punished. Like New Yorkers, Californians already have one of the highest marginal tax rates in the country.

In these three cases, collapse was not attributable to badly designed tax rates, inferior public relations, or insufficient campaign spending. Citizens in those three states would have faced unprecedented taxes, and the true costs would likely have outrun projected revenues.

LOSS OF PERSONAL FREEDOM

Another drawback of single payer is that citizens who like their private health plans, including their employer coverage, would not be able to keep them. It would be illegal for insurers to offer competitive benefit packages, and doctors and other medical professionals would, as Gottfried says, be barred “from seeking or accepting any additional payment for any New York health service.” In short, people would not be able to enter into a private contract with a doctor and spend their own money for a “covered” medical service.

STATE EXPERIMENTS

Despite decades of power centralization in Washington, the Constitution gives states the power to experiment with public policy. If “blue” states like New York wish to enact a single payer system, they are free to do so. If Congress liberalizes current law, “red” states should also be able to experiment in health policy. One caveat should apply to both: federal taxpayers should not be forced to bail out failure.