MONTPELIER – February 9, 2015 – (RealEstateRama) — Gov. Peter Shumlin’s plan to address the Medicaid cost shift could save Vermont schools nearly $3 million per year, helping to reduce the burden of property taxes for Vermonters. The plan could also save municipal governments around the state up to $900,000 per year.
“Schools and municipalities spend a lot of money to insure their employees,” Gov. Shumlin said. “Under our plan, they will be asked to pay a small payroll tax but will see that amount and more returned to them in reduced private insurance costs. That will save schools and municipalities money, helping to ease the burden of rising property taxes on Vermonters and allowing municipal governments to use money they would have spent on health care costs to make their cities and towns even better.”
The Governor’s plan will use money that would be spent anyway to draw down hundreds of millions in federal funding to shore up Medicaid rates and lower private insurance costs right away. Under the plan, employers will pay a seven tenths of one percent payroll tax (0.7%), which will raise $90 million a year. For the majority of Vermont employers, this will equal less than $1,000 per year. And since state Medicaid investments are matched by the federal government, Vermont will draw down an additional $100 million in federal money to match the $90 million raised with the payroll tax. Of that $190 million, about $140 million will be dedicated to shore up Medicaid payments and immediately drive down private insurance rates, which is expected to result in a 5 percent reduction in private insurance costs to individuals and businesses. The rest of the funds will be invested in strengthening the overall health care system to ensure better outcomes at a lower cost.
Analysis of payroll and health care spending by Vermont schools and municipalities shows that both would save money under Gov. Shumlin’s proposal. Schools are expected to have a payroll of $931.8 million next year and spend $190.3 million on health care costs. Under the Governor’s proposal, schools would pay about $6.5 million in the payroll tax but would see their health care costs reduced by about $9.5 million if the 5 percent premium reduction called for under the Governor’s plan is achieved. That would result in a savings of almost $3 million overall.
Municipalities are expected to have a payroll of $309.4 million next year and spend $61.3 million in health care costs. Under the Governor’s plan, municipalities would pay $2.2 million in the payroll tax but would see health care costs reduced $3.1 million, resulting in a savings of around $900,000 overall.
The analysis is attached and uses data from the Vermont Department of Labor, Tax Department, Agency of Education, and Wakely Consulting.