There are a lot of bloggers taking whacks at the pinata of a plan the Senate ‘Rats spewed forth into the budget (too many to link to here; just search the Cheddarsphere). With a big tip of the hat to the Wisconsin Taxpayers Alliance and their presentation at the July 11th Center-Right Coalition, here’s a couple more whacks:
– First, the alleged $15.2 billion cost for FY2009 is a willful underestimation. “Healthy” (ADDtET) Wisconsin (henceforth refered to as CubaCare Wisconsin because it is shorter) uses the existing health plan as its base (with certain additions and no deletions). The state currently spends somewhere north of $7,000 per participant; yet CubaCare Wisconsin assumes that it would pay just over $4,000 per participant. I know there’s such a thing as volume discounts; however, the state is pretty close to maxed out on that benefit.
Oh, and I didn’t touch on the fact that those teachers insured through WEA Health will keep their level of coverage while “paying” the same amount as everybody else. Guess I just did, and the reason why I put “paying” in quotes is because they and other public employees, and only that group can have their employer (specifically government) pay the 4% that is supposed to be the employees’ contribution without either a decrease in take-home pay or an increase in gross pay (and thus an increase in income taxes). Guess CubaCare Wisconsin isn’t going to come in under budget.
– Second, this is a time bomb waiting to happen. Do note that, as of the end of June, there had not been any analysis by the Legislative Fiscal Bureau, which is required of any item that spends state money. The AARP-funded study by the Lewin Group, which assumed that $15.2 billion initial cost would hold, estimated that health-care costs would go up by 6.5% annually, which is actually less than the 8% annual increase of the cost of the state employee plan. Meanwhile, according to the Department of Revenue, wages, and thus the increase in revenues from the taxes intended to pay for this monster, are expected to go up only by 4.6% annually.
Let’s run the numbers, and remember that, while the rate on employees is a total of 14% (10% from the private employers, 4% from the employee except for government employees and 14% from government-paid wages), since the rate on the self-employed is 10%, and that income not subject to the Social Security tax is captured to the tune of 10%, the revenue is “just” a ballpark number (probably a bit high based on the likelyhood that the ‘Rats wouldn’t be bright enough to create a temporary surplus and the certainty that the bipartisan P-I-G wouldn’t have enough self-restraint to keep their mitts off said temporary surplus):
(Numbers in $billion) Taxes Cost Cost Year SS Wages @14% +6.5% +8.0% ---- -------- ------- ----- ----- 2009 115.0 16.1 15.2 15.2 2010 120.8 16.8 16.2 16.4 2011 126.1 17.6 17.2 17.7 2012 131.8 18.4 18.4 19.1 2013 137.9 19.2 19.6 20.7 2014 144.2 20.1 20.8 22.3 2015 150.8 21.0 22.2 24.1 2016 157.6 22.0 23.6 26.1 2017 164.8 23.0 25.2 28.1
Assuming the “lower” 6.5% increase in health care costs, and assuming that the “ballpark” revenue isn’t high, the program flips into a yearly deficit by 2013 and an overall deficit by 2015. Bump up the increase to the recent history of the state employee health care, and the yearly deficits begin in 2011 and the overall deficit happens in 2012. Since the ‘Rats are starting to take heat for robbing bus systems across the state to pay for the Kenosha-to-Milwaukee choo-choo, I doubt they’ll take the lower-spending route to balance the budget.