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Monday, June 25, 2007

Fun With Numbers: Wisconsin Health Initiative

The obvious big gripe among those who don't like the Wisconsin Health Initiative (read the 60-page .pdf) is how it's paid for. It's paid for through taxes. Some people don't like taxes. Scratch that--no one really likes taxes. But if the taxes would otherwise be paid in some other form--say, premiums--there is no actual increase in cost.

According to a study last year, Wisconsin health care costs per employee were $9,516. Given that the average worker in Wisconsin was pulling down $36,730 in 2006, you could put the average percentage cost of an employee's health-care at about 26%. Not all of that is paid by the employer, of course; nationally, the average worker pays about 20% of his or her own health care (using this site as a rough guide), so we can maybe peg an employer's average cost at perhaps $7,600, with employees chipping in the other $1,900.

The Wisconsin Health Initiative plans to pay for coverage for every single person in the state by assessing a tax on employers and employees for a total of 14.5%--compare that to the 26% above. Pretty clearly, the WHI will result in savings of some sort here.

The tax is split, with 10.5% paid by employers and 4% paid by the employees, on up to the Social Security wages maximum--$94,200 in 2006. (Gotta stick to the same years, or else someone will accuse me of mixing apples and oranges.) So for an employee who earned $94,200 in 2006, a the cost of the WHI would have been $13,659 ($9,891 from the employer, $3,768 from the employee). In other words, the maximum employer cost under the WHI would be not that much higher--about two grand--than the cost for an average employee right now.

But what is the cost for employers under WHI, using Wisconsin's actual average salary? $3,857.

In other words, the cost for an average employer, if WHI had been in place in 2006, would have been $3,800 less.

Real world, of course, the application of the WHI will not be so cut-and-dried as these examples. Right now, for example, there are a whole lot of employers who don't pay for health care at all (or very much), and any new payroll tax would be a new burden on them, even at less than $4,000 per worker. Many other employers would save millions, since they're paying way above average. There are ramifications at both ends that will need to be sorted out.

There's also what this might do to personal pocketbooks: I can't find easy data on what the average Wisconsin worker pays out-of-pocket toward premiums, but under WHI, the average worker--the $36,700 person--would be paying $1,468--plus copays and deductibles. For some, that will be more, and for some that will be less.

But one of the selling points is property tax savings (because the plan would save money for every state, school, and municipal employee, as well). This would help offset the cost to both employers (who pay property taxes) and many employees, even if the Senate Dems' predictions turn out to be optimistic. There would also be savings in that we'd no longer have to carry the uninsured through Medicare, Medicaid, and Badgercare, and so on. The cost structure of the WHI seems to be such that it encourages preventative care and might result in a healthier Wisconsin--which would also provide savings to state employers.

One last ounce of irony for you: A couple of years back, the Wisconsin Policy Research Group released a study (.pdf) suggesting, almost demanding, that Wisconsin's teachers be moved to the state employees' health care plan, and touting the money taxpayers could save if that happened. Conservatives everywhere--TV, radio, internet, newspaper, even in Madison--loved the idea and campaigned hard to make it a reality.

Here the Senate Democrats have put forward a plan that essentially puts everyone in Wisconsin into the state employees' health plan, and those same conservatives (inlcuding WPRI!) are fighting it tooth and nail.

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