Calculations of cost and payroll deduction are based on current 20% Medicaid population. If the Federal government hardens enrollment criteria to reduce the Medicaid enrollee population, those no longer qualifying for Medicaid would now be covered by Medistate, increasing Medistate costs by the cost of care for this low income and low payroll deduction population and drive higher payroll deduction rates.
The 3% overhead limit must be rigorously defended in the charter. This control is essential to insure Medistate does not morph into a state sponsored government jobs program with ever increasing payroll deductions driven by the costs of an expanding overhead bureaucracy, not health care.
Medistate is a government run, single payer Healthcare system. It is unknown if Northeast State Republicans can ever swallow that pill. Michael Steel, former spokesman for ex-House Speaker John Boehner said after defeat of Republican sponsored Health Care Bill, “Opposition to government run health care has been a foundation of the Republican party for three or four generations now, so it is difficult to see House Republicans walk away from efforts to protect the American people from this awful law.” Conversely, noted conservative columnist Charles Krauthammer in his Daily News column “Single-Payer, here we come” of 3/31/2017 said, “A broad national consensus is developing that health care is indeed a right…It suggests that we may be heading inexorably to a government-run, single payer system”. Perhaps the stars are aligned for Medistate. It may not last. We should not miss this opportunity.
“Read my lips, NO NEW TAXES!!!” Everyone hates taxes, and opponents may be expected to characterize the Medistate payroll deduction as just another “liberal tax and spend program”. The counterargument is that Medistate is just a different way of paying for health care for which people are already overpaying insurance companies, but at a much lower out of pocket cost for low and middle class taxpayers. Added bonus is that, as a state payroll tax, it is also likely to be deductible on federal income tax returns outside of the 10% threshold requirement for health related expenses.
Low income, Medicaid ineligible people from states who are not members of Medistate might surge into Medistate coverage states driven by healthcare coverage benefits. Provisions must be included in the charter to discourage health care driven interstate migration, i.e., residency time requirements, state income tax returns, buy-in payment for out of state residents, etc. Likewise, very high income residents may be driven out of state. A high income cap for Medistate deduction may be required to get legislation passed.
“How is this possible? How can we pay so little for health care when we are paying doctors and hospitals the same rate Medicare currently pays? There is nothing new in this plan to lower health care payments to doctors and hospitals. Where is the money coming from?”
Here is the answer:
- The insurance companies operate at a 20% overhead rate on collected premiums. Medicare operates at a 2-3% overhead rate. This means that most of the premium money currently spent by insurance companies in overhead will be available to Medistate for health care. We know it is possible for Medistate to perform at a 3% overhead rate because Medicare is doing better than that now.
- Medistate is non-profit. Insurance companies profit approximately 3-5% on collected premiums. Under Medistate this profit is redirected to health care.
- As Medistate is a payroll tax, every employee and employer and the self- employed pay their fair share. This means healthy, young people who do not buy insurance will now contribute. This means businesses that have avoided contributing to health insurance for their employees will now contribute. The only exceptions are Medicaid and Medicare enrollees and employees “off the books”. The government could ease small business impact by excluding very small employers from the matching mandate, reducing their contribution, or replacing some small employer lost revenues with general state revenues.
- Medistate pays Medicare rates, which are generally lower than what insurance companies pay. This somewhat reduces the direct cost of doctors and hospitals.
- Medicare’s annual deductible for 2017 is $183. Medistate could adjust this deductible upwards or downwards as expenses dictate to help support the 8% payroll deduction. To reduce the payroll deduction Medistate could also introduce a Part B premium similar to Medicare but that would dictate an optional Part B and a departure from the core proposition; philosophically and fundamentally changing the way Medistate is conceived and funded.
The overhead paid by doctors and hospitals in medical billing will be dramatically reduced in the Medistate single payer system. Providers will no longer have to play the billing game with multiple insurance companies, each with their own billing algorithms. Over time Medicare will probably catch up to this windfall and lower the PFS rates accordingly. Medistate will benefit as well.
Opponents are likely to point to probable job losses at insurance companies shut out of the health insurance market as a result of Medistate. Job loss at insurance companies will be somewhat counterbalanced by job growth at MAC (Medicare Administrative Contractor) companies who currently process Medicare claims and are likely to be contracted to process Medistate claims. This growth will be driven by processing claims for 67% of the population as opposed to the current 13%. Furthermore, the new market created for insurance companies in the Medistate Advantage Plans and State Medigap plans market will further mitigate job loss. Finally, most of this job churning will take place outside of New York and will have little impact on New York State employment.
Issues will emerge regarding how to fold in government employee health insurance and large union insurance plans with the implementation of Medistate. Government employees, union members and employers paying dues and/or contributions for health insurance provided for in union contracts should not concurrently pay for both the health insurance and the Medistate payroll deductions. Union contracts will have to be renegotiated. State, local and federal government will have to adjust its employees benefit plans. Resistance may come from the federal government in refusing to participate or withhold Medistate from federal employees pay. State may have to resort to courts to enforce its right to tax. It would be unfortunate if state citizens employed by the federal government had to be excluded from Medistate.
Byproduct of Medistate is that employers might seek to retain or even recruit older Medicare eligible employees to avoid paying Medistate payroll matching contributions creating an employment advantage for older workers.