The Wisconsin Policy Research Institute today released an analysis of the
most recent version of the health care proposal known as the Wisconsin
Health Plan (WHP). Under the second version of the WHP, released Wednesday,
claims are made that it will provide health care for nearly everyone and at
lower cost. The plan also throws in a tax cut for good measure. “If it
sounds too good to be true – and it does – it probably is,” said Dr. Scott
Niederjohn, an economist who reviewed the plan.
In January of 2007, Niederjohn and Professor Mark Schug performed a detailed
analysis on an earlier version of the WHP. “All of the problems we
identified in the first version of the plan were verified by the analysis
done by the WHP’s own actuary,” said Niederjohn. In fact, this actuarial
report found the original WHP so problematic the report really became an
exercise in inventing a new plan whose budget could be balanced. These
problems include:
· HIGHER COST – The original cost of the WHP was set at $12.7 billion. The
final cost of the original WHP turned out to be $16.3 billion, within 4% of
where Niederjohn and Schug pegged it last January. The higher cost forced
the plan’s authors to increase their recommended payroll tax and to drop the
entire BadgerCare population from the plan.
· GUARANTEED FUTURE TAX INCREASES – The WHP would be funded by a 15.5%
payroll tax on businesses and workers. Businesses would start out being
taxed at 11.55% of payroll. Individuals would be taxed at 3.95% of wages –
nearly double the rate that had been the anticipated tax. It might be worth
pointing out the old tax was graduated starting at 3% for small businesses
and rising with payrolls. This was nearly a quadruple increase for the
smallest Wisconsin businesses. Niederjohn gives the simple explanation of
why those taxes will rise in future years. “The WHP is based on the system
used by state employees and since 1998 costs have increased an average of
9.6% per year. During that same time wages increased an average of 4.2%
annually. The authors of the WHP acknowledge that the tax will go up from
11.55% to 13.5% by 2017. That increase significantly underestimates future
tax increases under this plan,” said Niederjohn.
· LARGER THAN ESTIMATED ADMINISTRATIVE COSTS – At the center of the plan
would be an administrative body consisting of political appointees, and
representatives of organized labor and business. The original estimate of
the cost of this administrative arm was $112 million. The current cost
estimate for this administrative structure has been tripled to $334 million.
· LOWER COST FOR GOVERNMENT BUT HIGHER COST FOR MANY BUSINESSES AND
INDIVIDUALS – The WHP says it will reduce the cost of health care to state
and local government by $1.1 billion, even after adding to their benefits to
make them whole. What they do not say is that this decrease is
counterbalanced by an increase of $1.1 billion to private employers that
currently do not provide coverage to their employees. “This represents an
enormous transfer of wealth from the private sector (small business) economy
to the public sector, even after the proposed tax reductions are imposed.
In other words, Wisconsin small businesses and middle to high-income
families will fund this proposal to offer benefits to the uninsured and
lower the government’s cost of health care. This is bad for Wisconsin’s
economy,” said Niederjohn.
In the second version of the WHP, released this week, the plan’s authors
have tried to make the plan work, in spite of the substantially higher costs
than the first version. However, like other cumbersome government programs,
this plan does nothing to ensure Wisconsin families will receive quality
health care at an affordable cost. Well-intentioned plans in Kentucky and
Tennessee have collapsed under the weight of cost increases and swollen
administrative structures. The WHP represents just one more old-fashioned
variation of a single payer health care system. The WHP still does nothing
to deal with the major drivers of health care cost increases, according to
the WPRI analysis.
A copy of Niederjohn’s analysis can be found at http://www.wpri.org
