W^H? The Holmes Murphy Blog

  • ColoradoCare Part 3: “Why it will Fail”

    Combine the technology rollout of the Affordable Care Act (ACA) website, the customer service of the Internal Revenue Service (IRS), the healthcare wait times of the VA hospitals, and the actuarial wizardry of the ACA-created healthcare co-ops and you get a picture of what some believe would happen to healthcare in Colorado if ColoradoCare (Amendment 69) were to pass.

    Healthcare in Colorado is expensive, and the requested rate increases in the individual marketplace are about to get even more expensive. In spite of the current high cost and uncertainty over future increases, many in Colorado believe that a government takeover of healthcare financing would make the situation in the state worse.

    There are three primary concerns that will drive voters to vote “No” on ColoradoCare. (P.S. To view my first two blogs on the topic, visit “ColoradoCare Part 1: The Basics” and “ColoradoCare Part 2: Why it will Pass.”)

    The “T” Word – Taxes

    In politics this unspeakable, foul word is “taxes.” ColoradoCare is funded by a 10 percent income tax. Companies fund 6.67 percent, and employees fund 3.33 percent. In addition, other income is also taxed at 10 percent, which effectively increases the capital gains tax in the U.S. by 50 percent for those living in Colorado.

    The wording on the ballot is problematic for supporters. It begins, “State taxes shall be increased $25 billion annually in the first full fiscal year.” The current budget for the State of Colorado, including its healthcare programs, is only slightly larger than the proposed increase in taxes to fund ColoradoCare. Taxes are popular when someone else pays them, but this tax will apply to everyone who earns an income.

    The final blow on taxes is related to taxing authority. The state of Colorado cannot increase taxes without voter approval. ColoradoCare is exempt from this restriction. The 21-person board governing ColoradoCare would have taxing authority to fund the state’s health insurance program.

    Immigration and Emigration

    Colorado doesn’t border Mexico, Canada, or Syria and yet immigration is a concern. With its no deductible promise, ColoradoCare could become a destination spot for individuals with high expense, chronic medical conditions. The fixed cost at 3.33 percent of income for premiums with no deductibles could provide much-needed relief for individuals struggling to fund high premiums and high out-of-pocket limits in other states.

    While movement into the state is a concern, emigration from the state is also an issue. ColoradoCare doesn’t address how medical providers will be paid. If costs run high, the state could move provider reimbursements to lower levels to save money to avoid increasing taxes. The other emigration fear is from the investment class who largely live off capital gains. The federal capital gains tax rate is 20 percent. ColoradoCare effectively doubles the tax rate for a group of people who are highly mobile. Federal income tax payments are dominated by the wealthy. The top 1 percent paid 45.7 percent of all federal income taxes in 2014 according the non-partisan Tax Policy Center. A 50 percent effective increase in the capital gains creates some emigration risk for this small percentage who pay such a significant portion of all income taxes.

    You Don’t Know What You Don’t Know

    Amendment 69 is 11 pages and 2 lines long. It’s a mere legislative wisp compared to the 2,700 ACA or its associated 20,000 pages of regulations. The amendment doesn’t address key elements such as:

    • How will medical providers be compensated for services?
    • Who makes care decisions?
    • What is the plan design?
    • How much are the out-of-pocket expenses?
    • How is care delivered outside the state of Colorado covered?
    • How is access to medical services determined?
    • How are dependents who live outside the state covered?
    • What happens if the cost exceeds the tax revenue?

    The lack of details seems to be one of the amendment’s greatest points of pain for those who oppose it.

    Tax increases, immigration, and uncertainty are not typically characteristics of winning political campaigns. Will the weight of these concerns be too much for ColoradoCare to overcome in November? Stay tuned next week as we candidly uncover the unmentionable item in Colorado healthcare — discrimination.

    Published on: 08.29.16