TABLE OF CONTENTS

• I. Introduction
• II. Summary of the Single-Payer PlanIII. The Cost to Employer
• IV. The Cost to Individuals
• V. Co-Payments
• VI. The Cost to Cover Government Employees: A 75% Increase
• VII. Conclusion

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The Ten Billion Dollar Entitlement Assessing the Cost of Single-Payer Health Care

by Paul Guppy, Vice President for Research
November 2000

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Ballot Title: “Initiative measure 245 concerns the creation of a health benefits system. This measure would create a state agency to develop and administer a single health benefits package for state residents, funded by mandatory premiums, employer assessments, existing taxes and co-payments. Shall this measure be enacted into law?”[1]

I. Introduction

Several proposals have been made in recent years to improve the affordability and availability of health care for all people in Washington. One such plan is single-payer health care, proposed as Initiative 245, to make the government the primary bill-payer and financer in one, all-inclusive health care system.

Much of the public debate over single-payer health care is focused on the effort to bring coverage to the uninsured population. Single-payer advocates seek to provide health coverage for the uninsured by placing all state residents into a consolidated health care financing system. The single-payer proposal is founded on the idea that the current level of regulation is not enough and that comprehensive government control of medical financing is needed to resolve what they believe is wrong with the current system.

There is no dispute about the quality of health care in Washington -- everyone agrees we have one of the finest medical systems in the world; but high quality health care, like quality everywhere, is expensive. There are serious questions, however, about whether a taxpayer-funded, universal system is the best way to provide broad access to high quality health care. The challenge single-payer advocates must address is to demonstrate that their proposal is workable and affordable, and will provide a better standard of care over the long run.

The people of Washington, directly or through their elected representatives, will soon face a major decision on the future of health care in our state.[2] Concerns over financing, personal choice, medical privacy and upholding the quality of care are at the center of the public debate over any proposed changes to our health care system.

A general overview of Initiative 245 is given in our recent Policy Brief, “The Single-Payer Health Care Proposal, A Guide to Initiative 245,” which can be found on our website.[3] The present study, the second in a series, presents a financial analysis of Initiative 245 and assesses its financial impact on the general economy. In particular, this study provides an in-depth examination of the cost of single-payer health care to employers, employees and individuals. Future studies will examine maintaining the quality of health care services and other aspects of a single-payer system.

II. Summary of the Single-Payer Plan

The single-payer health care plan proposed in Initiative 245 would fundamentally alter how Washington’s health care system is managed and financed. The plan seeks to replace private insurance with a publicly-funded, government-managed system, in which the state would assume the responsibility of paying for a basic package of benefits for all Washington residents.

While the provision of health care by doctors, hospitals and clinics would remain private, it would become more heavily regulated. An appointed, seven-member board called the Health Security Trust would set the level of benefits, determine the financial rules and regulations for the health care sector, maintain a central database of medical records, manage all public revenues and spending for the program, and review the fees doctors and other health care providers would receive.

Our research shows this new entitlement program would cost about $10 billion a year. The Health Security Trust Board would manage this budget independently of the legislature’s usual oversight and appropriations process. In addition, the governor would play no role in managing the program beyond appointing Board members to six year terms, and, like the legislature, would exercise no review of the Board’s revenues, spending or policy decisions.

The system is sometimes described as voluntary. What is voluntary is the acceptance of benefits; funding the system is mandatory. Under Initiative 245 Washington residents would still be able to make other arrangements for their health care. Private health insurance would not be outlawed, but all residents and businesses would have to pay into the public system in addition to any private coverage they might buy

The single-payer plan is complex, and numerous claims and counter-claims are being made about how well it might work. The proposal would add 34 new sections to the Revised Code of Washington and would be financed by individual co-payments, plus a new employer payroll tax and a monthly head tax on each resident.

Proponents say the plan would save money because employers and individuals would no longer have to pay for private insurance, and that the government-run plan would be more efficient than the private sector. Opponents argue that creating a state monopoly in health care financing will only create greater waste and inefficiency because, like other monopolies, a single-payer system would eliminate the drive for efficiency and experimentation that competition provides in the free economy.

Opponents also point out that previous government health programs have vastly outrun their original cost estimates. They say that making health services feel “free” to consumers will prompt an unquenchable demand for health care and fuel run-away costs. Another factor driving cost would be irresistible political pressures to force an ever-expanding set of entitlements and benefits. In turn, opponents say, the Health Security Trust Board will be forced to adopt price controls, waiting lists, rationed care, or some combination of the three. The only alternative would be imposing higher taxes to cover expanded services.

In weighing these competing claims, informed citizens and policymakers need to know how much the single-payer system would cost and from where the money would come. That is the purpose of the following sections, which assess the potential impacts on Washington residents.

III. The Cost to Employer

Initiative 245 would create two new tax structures, in addition to co-payments, as the primary means of funding the system: a new payroll tax on employers and a monthly tax on individuals

Large Firms Subsidize Small Ones

The initiative refers to the tax on employers as a “health security assessment.” It is paid quarterly and is based on gross payroll. The initiative’s authors avoided the term “tax” in naming these levies, but they fit the legal description of the term as used in the law.[4] The earlier version of the plan (filed as Initiative 725) levied a flat 9.75% of gross annual payroll on all employers regardless of company size. The revised version (Initiative 245) bases the charge per employee on the size of the firm, as shown in Table 1 below.

The payroll tax is meant to work like an insurance premium, a regular payment a company makes in exchange for health coverage for its employees. But unlike normal insurance underwriting, in which the amount of the premium is determined by the risk of loss, the amount of payroll tax an employer pays is completely unrelated to potential risk.

For example, the largest firms would pay the tax at twice the rate of small ones, yet there is no data to show that employees of large firms are more likely to be sick or need care than those of small firms. The progressive nature of the health care payroll tax is intended to lighten the burden on small firms, so it operates as a subsidy of small businesses at the expense of large employers.

How Much Businesses Would Pay

Washington has more than 165,000 businesses that employ over 2.5 million people, and range in size from a single entrepreneur with a helper to international companies mustering workers in the tens of thousands. Table 2 below shows the amount in health care payroll taxes that would be paid by each category of firm.

Under this tax system the average rate paid by firms (that is, the total amount of tax as a proportion of the total amount of wages) works out to be 9.74%, very close to the flat 9.75% provided for in the first version of the single-payer plan filed earlier this year. The similarity of this figure with the overall rate in Initiative 245 demonstrates that the change in rate structure was designed to produce the same revenue, while shifting the relative burden from small firms to larger firms.

The heavier burden placed on larger businesses is founded on the reasoning that they have a greater ability to pay. The flaw in this assumption, however, is that a larger company may actually have no more ability to pay per employee than a smaller firm. Large firms operating on tight margins could actually experience greater difficulty in paying the new payroll tax than small companies. In that case, the higher payroll cost would place them at a serious financial disadvantage to their smaller competitors. The result of unequal payroll tax treatment is that government policy would favor small firms as economic units over large ones, a policy choice that may drive large employers operating on slim profit margins out of the state or out of business.

The Tax Penalty Against Economic Growth

In the same way, the policy creates a strong disincentive for firms of any size under 1000 employees to grow any larger. For companies with 19, 49, 499 or 999 workers the marginal cost of adding one more employee to the payroll would be severe. By pushing the entire firm into a higher tax bracket, adding one more employee increases the payroll tax rate on all workers, not just those added over a certain numerical limit. Faced with such strong tax penalties against growth, some firms may decide to relocate outside Washington, or find sites in other states for any planned expansion of their business.

To illustrate this point, consider a firm with 19 workers. Using the average manufacturing wage in Washington of about $31,000 per worker, such a firm would pay 6% of gross payroll, or $35,340, a year in health care tax.[6] By adding just one employee, this firm’s total payroll would increase by $31,000, while the payroll tax rate it pays on all employees would rise to 7.5%. The annual amount it would pay into the Health Security Trust would thus increase by $11,160. This amounts to a 36% tax on the salary of the 20th employee, creating a considerable disincentive to hiring that person in the first place.

The higher barrier to employment created by the tax would fall disproportionately on low-wage and unskilled workers, many of whom belong to Washington’s minority and immigrant communities. The payroll tax would make it less likely employers could afford to offer such workers entry-level jobs, because the economic value these workers bring to a business might not justify the marginally greater cost of hiring them.

Initiative 245 acknowledges the difficult burden the payroll tax would place on some businesses. Subject to approval from the Board, employers may receive a temporary waiver for firms that show they face “financial hardship” in paying the new tax. Any waivers granted, however, would be available only for the first five years of the program and would expire on May 15, 2008.[7]

Tax Restrictions on the Self-Employed

An additional 47,775 firms consist of one person and have annual wages of $304,437,832.[8] These firms would pay no payroll tax under the single-payer plan, although self-employed people would still pay the monthly tax levied on individuals. While these business owners would be relieved of over $18 million in new taxes each year, they would face a sharp payroll tax increase, rising from zero to 6%, if they choose to expand their operation by even one person.[9] Also, by adding one person, the self-employed entrepreneur would have to start paying a 6% payroll tax on his own compensation as well.

This aspect of Initiative 245 is in contrast to federal benefit programs, like Social Security and Medicare, in which self-employed individuals pay both the employer and employee portion of the payroll tax.

A $10 Billion Entitlement Program

The payroll tax would raise about $9.8 billion in the first year for the program. Combined with the additional taxes described in the following sections, total revenue would be close to the $9.6 billion to $10.3 billion cited by Initiative 245 supporters as their estimate of the annual cost of the program.[10] To get a sense of the sheer size of such a program, the entire state General Fund is spending about $10.4 billion in 2000.[11]

Almost half of the revenue raised from the health care payroll tax would come from the 465 firms with 500 or more employees, representing only a quarter of the total workforce. More than a third of the revenue would come from the 179 largest companies, which make up just one tenth of one percent of all the firms in the state.

These estimates of the cost of single-payer health care are based on a static economic environment and, contrary to real-world experience, assume the plan’s taxes would not cut job growth or reduce total payroll. But government fiscal policy has a tremendous effect on the economy. Businesses respond to higher costs by slowing hiring, trimming wage increases or moving to greater use of automation in an effort to hold payroll costs down. They also contract more work with companies out of state, or shift a higher level of their production overseas.

A dynamic analysis of the impact of the health care payroll tax would take these economic and behavioral factors into account. It is reasonable to assume that as businesses and individuals alter their behavior to reduce or avoid the health care tax, a certain amount of the revenue estimated in Table 2 would fail to materialize.

Is the Funding Enough to Pay for the Program?

Proponents say single-payer health care will cost no more than the current system, because costs will simply be shifted from the private to the public sector, with no overall increase. Although there is incomplete data on business health care costs, as discussed later on, some comparisons can be made with current health expenses. The one sector where reliable health coverage data are available is in government. This allows an apples-to-apples comparison to test the proposition that a single-payer system would involve no greater costs than the current system.

As employers the state, local governments and K-12 school districts paid $960 million in fiscal 1999 to provide health coverage for their employees (see “Estimated Health Benefits” in Table 5). Under a single-payer system, these public employers would see their costs increase to over $1.6 billion to provide health coverage for the same employees (see “Total I-245 Cost” in Table 6). This example reveals an increase of 75% in health coverage costs through moving to a single-payer system. Because governments are not businesses and would not pay Initiative 245’s payroll tax, much of the cost of public employee health coverage would be shifted to private employers. Further details of this analysis are discussed in the section on covering government employees.

The Double Tax on Employers

Initiative 245 provides “start-up” funding for the single-payer system by levying an extra tax of 3.2% of gross payroll on all employers for a single quarter. This tax would begin on January 1, 2003 and end on April 30 of the same year, and would be payable directly to the Health Security Trust. Two weeks later the multi-bracket payroll tax structure described above would begin.

The health benefits of the single-payer system would not be available until May 15, 2003. Thus, for the first 134 days of the plan employers would be paying into the Health Security Trust while receiving no coverage for their employees in return. During this time employers would have to continue to pay for private health insurance in order to provide their workers with coverage, so the policy acts as a double tax on employers.

The three-month, 3.2% payroll tax would raise about $3.2 billion for the Health Security Trust. During that time the system would have no liabilities, so all these funds would go to pay for administration or be placed in reserve accounts. The full cost of the tax and how it would fall on firms of different sizes is shown in Table 3.

Initiative 245 provides that after two years employers may apply to receive some or all of these initial funds back, but only if the Board determines that the Trust holds “sufficient surpluses” in its budget.[13] Rising demand for state-funded health care services would seem to make an eventual refund unlikely. Even if the funds were paid back, they would amount to a mandatory, interest-free loan from Washington’s private employers to the state government.

Comparison with Current Insurance Costs

Data on private sector health insurance costs are incomplete, so comparisons with the cost of a government single-payer system are difficult. Some figures on private health coverage are available for larger firms, and this information is helpful in assessing whether a single-payer plan, assuming it operates effectively, would be a “good deal” for most companies.

Firms with more than 500 employees had health insurance costs in 1998 amounting to about 8.8% of total payroll, or $3,893 per year for each active employee.[14] While figures for firms smaller than 500 employees are not available in the state, it is reasonable to assume that the national rate for all firms applies roughly in Washington. Nationally, spending by all private employers for health care benefits was about 5.4% of total wages in 1998, down from a high of 6.7% in 1994.[15] Based on these comparisons, the payroll taxes proposed by Initiative 245 would be higher for most private employers than what they are currently paying for health insurance coverage.

The cost of health insurance to private employers cited here naturally applies only to employers who already offer coverage to their employees. Reflecting the national average, only about half of all firms in Washington state buy health insurance for their employees. The figure in Seattle, for example, is 52%.[16] For these firms the current cost of health insurance is zero, and the single-payer payroll tax would be a wholly new burden for them. They would have no savings to gain from ending their private coverage in order to partially offset the cost of the new tax.

Ending Company Self-Insurance Plans

Companies that provide and pay for their own health plans are not included in government survey data. About one-third of all employees work for companies that self-insure. A primary example of such a company is Boeing, which covers 86,000 employees plus dependents.[17] Small firms are far less likely to self-insure than larger ones, but among large companies about half of them self-insure. Enactment of a single-payer plan would mean the end of these company-financed plans, because no firm, even the largest, could afford to pay 12% of gross payroll to the state while at the same time maintaining a company-based plan for its own workers.

Comparing Administrative Costs

Administrative costs for health plans in Washington in 1997 were 15%, up from 8.9% in 1989. Initiative 245 would limit the administrative costs in a state-run plan to 11%. Private health plans report administrative costs in different ways, however. The cost of nursing personnel who assign patients to doctors, for example, is listed by some plans as direct care, while other plans report this as an administrative expense. Although absolute comparisons are not possible, in general holding administrative costs to 11% would compare equally or favorably to the rate commonly seen in the private sector.

Many Employers are Exempt from the Payroll Tax

Non-business employers would be entirely exempt from the health care payroll tax. The definition of “employer” given in the initiative states that the term means “any person, partnership, corporation, association, joint venture, or public or private entity operating a business in Washington state.”[18]

The rules of statutory construction used by the courts require that words in the law carry their normal, everyday meaning. The dictionary defines the word “business” as “an occupation, profession, or trade for the purchase and sale of goods in an attempt to make a profit” and as “a person, partnership or corporation engaged in commerce, manufacturing or a service; a profit-seeking enterprise or concern.”[19] Washington state law defines “business” under the Business and Occupation Tax as “all activities engaged in the object of gain, benefit or advantage...”[20]

The common thread in the meaning of “business” is it denotes operations that are involved in making a profit. This definition excludes non-profit entities which are not businesses. There are thousands of such entities across the state. As drafted, the section of Initiative 245 that imposes the payroll tax would not apply to them. Examples of employers that would not pay the tax are listed below.

Examples of Employers Which are Exempt from the Single-Payer Health Care Tax:

• A public school, college, or university.

• A community food bank.

• A shelter for the homeless.

• A church running its religious program.

• A local fire or police department.

• A city council, county council or other governing body.

• A port, water, or other junior taxing district.

• The governor’s office or any mayor’s office.

Given the selective way the tax is applied a large proportion of the state workforce would be excused from helping to finance the overall system. Many non-business, wage-paying entities, such as the state and many local governments, have well over 1,000 employees. These workers would be fully eligible for benefits, with the cost of their health care coverage being carried by the private employers and by individuals who are not public employees.

Taft-Hartley Trusts Exempt

Similarly, employers would be exempt from paying the tax for workers who are part of Taft-Hartley trusts. These trusts provide benefits under provisions of federal law and could not be made subject to a state health program until the necessary waivers are obtained from the federal government.

IV. The Cost to Individuals

The Monthly Premium

The second proposed tax is on individuals and is called a monthly “premium.” Unlike an actual insurance premium, however, the amount each person pays would not be based on an assessment of risk or of future cost, but on pre-set policy factors determined by Initiative 245. Here, as with employer taxes, the “premium” is not subject to the normal risk-based underwriting principles. To the contrary, some individuals, such as the elderly at all income levels, would pay less, even though their medical needs may be greater.

The tax rate would be set at $75 per month for all Washington residents age 18 or older who do not receive Medicare and have incomes over 150% of the federal poverty level. Residents on Medicare with incomes over 150% of the poverty level would pay $50 per month.

All tax rates for individuals would be indexed to inflation, so they would go up automatically each year as the cost of living rises. Residents with incomes below 150% of the poverty level would pay no tax, but they would still receive full coverage. A subsidy would be provided to residents with incomes of less than 250% of the poverty level.

The tax on individuals creates four new tax brackets based on age and income status. The table below shows the amount each age and income group would pay in the first year of the program. A typical family of four would pay $1,800 the first year, plus any required co-payments, as discussed below. Inflation and possible premium increases would cause these amounts to increase in successive years.

Transition from Federal Programs

Initiative 245 requires that at least a dozen waivers be obtained from the federal government before the single-payer program can be fully operational in Washington state. The initiative envisions that Washington residents who are now covered by federal benefits through programs like Medicare, Medicaid, veterans health care, migrant health clinics or Indian health services, will ultimately become part of the state system. Several years could pass, however, before the needed federal waivers are obtained. In the meantime these state residents would continue to receive care through the applicable federal program. Initiative 245 makes clear that coverage through the single-payer system is secondary to other forms of coverage, whether public or private. This provision means that residents receiving federal health assistance would be paying into the Washington system through individual and payroll taxes while receiving no benefits in return

The Inflation Index

The text of Initiative 245 makes reference to inflation in two sections. It places a limit on the growth of the annual health care budget, “...each annual budget shall not exceed the budget for the preceding year by more than the Washington state consumer price index.”[22] It also provides, as mentioned, for automatic increases in the tax on individuals, “all premiums shall be adjusted annually by the Office of Financial Management to reflect changes in the Washington state consumer price index.”[23]

In both instances, however, the measure of inflation required by the initiative cannot be used. The Office of Financial Management points out that, “There are no inflation indexes for the state of Washington.”[24] There is a national Consumer Price Index, and the U.S. Bureau of Labor Statistics issues a monthly price index for four regions of the country. There are also urban indexes for large metropolitan areas, like Seattle, but these are considered unreliable when applied on a statewide basis.

Even if an appropriate measure of the Consumer Price Index for Washington could be identified, it should be noted that the CPI presents a higher estimate of inflation than other inflation ratings used by economists. The Implicit Price Deflator, for example, is considered a more accurate measure and is consistently about half-a-percent lower than the CPI in any given year.[25] The effect of choosing a higher rating of inflation for Initiative 245 is that it would build “bracket creep” into the single-payer program. Taxes and spending under the program would increase at a faster pace than inflation in the general economy. This imbalance would be compounded with each passing year and would create an ingrained mechanism for ratcheting up the cost of the program.

Should Initiative 245 become law, the legislature would have to amend the measure (after waiting the required two years) to clarify the sections that refer to inflation. The legislature’s task would be to first identify an accurate measure of inflation to apply across the state, and second to determine whether the Consumer Price Index is the most accurate inflation measure for this program.

V. Co-Payments

In addition to the tax on individuals, some residents would pay co-payments when receiving certain medical services. The initiative requires that co-payments be paid for “outpatient visits, emergency room visits, and prescription drugs.”[26] The exact amount is to be determined by the Health Security Trust Board, but in no case can co-payments exceed $500 dollars per family in a year. Families with incomes below 150% of the federal poverty level would be exempt. About 18.6%, or slightly over one million of Washington’s 5.7 million people, have incomes under 150% of the poverty level.

VI. The Cost to Cover Government Employees: A 75% Increase

Health insurance premiums are paid by government, and thus by taxpayers, to provide health insurance benefit for public employees. Under Imitative 245, all state residents, including public employees, will be covered by the single-payer system. How will that cost impact government budgets and taxpayers’ pocketbooks?

The two tables below summarize health care coverage costs for state employees, K-12 education employees and other local government employees. Table 5 shows the cost to the taxpayer of the current system, which is $960 million a year (based on data for FY 1999) or $3,263 per full-time equivalent employee.

Table 6 shows how much it would cost to provide the same level of health care coverage to the same number of state and local public employees under a single-payer system. The total cost under Initiative 245 to provide public employee coverage would be about $1.6 billion a year, or at least $722 million more than taxpayers are currently paying to provide this coverage.

Comparing the figures in these two tables shows that covering the employees of state and local governments under Initiative 245 would cost 75% more than what these public entities currently pay to provide health coverage for their employees.

As noted earlier, Initiative 245 as presently worded does not require government entities to pay the single-payer payroll tax because this tax would only fall on employers that are “businesses.” The “Payroll Tax” column in Table 6 shows how much state and local governments would pay if this tax applied to them. It also illustrates how much Initiative 245 proponents estimate it would cost to provide health coverage for public employees, since these employees can be expected to have a rate of illness comparable to that of private sector employees.

Public Employees’ Health Coverage Is Cross-Subsidized by Other Taxpayers
Thus, government as a whole may experience no actual increase in health insurance premiums under Initiative 245, though the impact will vary from government to government. The state government clearly will have an added $227 million cost, while schools will save $98 million over their 1999 level. But all government employees remain covered and will experience their share of claims against the system. Therefore, to the extent that governments are relieved from paying premiums, perhaps as much as $1 billion,[28] those costs will be shifted to residents who do not work for the government.

Yet if the employers of public workers are not paying the tax, public employee health costs must be covered in some way. In policy terms, this discrepancy can only be resolved in only one of two ways. Either Initiative 245 would have to be amended so that state and local governments are required to pay tax into the Health Security Trust just as businesses do, or businesses would have to increase their contributions into the system to cover the health care costs of public employees. In either case, Initiative 245 is structured so that the entire cost of health coverage for public employees at the state and local level is cross-subsidized by other Washington residents, through either direct taxation or through business revenues.

VII. Conclusion

The cost of Initiative 245 is one of the central questions that surrounds the possible adoption of a single-payer health care system in Washington. Based on available data, the annual cost of such a program can be conservatively estimated, as shown here, to be at least $10 billion a year.

The added tax burden to businesses, especially large firms, self-insured companies and companies that are not now paying for health coverage, would be significant. In addition, the cost to many individuals would be higher than what they are paying now, especially if their employer is currently covering all their health expenses. There is also considerable cost-shifting built into the structure of the program; from small firms to large firms, from non-profit organizations to profit-making enterprises, and from middle- and upper-income individuals to those living at or below 250% of the federal poverty level.

Important questions remain about the effectiveness and benefits of a single-payer system. It is not clear that Initiative 245 would provide better-quality health care, especially since the current level of care in Washington is already one of the best in the world. A single-payer system would likely involve trade-offs, by reducing the quality of care in order to gain guaranteed universal coverage (Initiative 245’s impact on health care quality will be examined in the next study in this series). For many individuals and businesses, a single-payer system would not offer a better deal than what they are getting under the current, privately-run system.

For the people of Washington, therefore, ending private insurance and self-insurance to provide coverage for the small minority of residents who are presently uninsured may not justify the higher costs and a decline in quality of service.

About the Author

Click here to read more about the author Paul Guppy.

Jeff Ford and Brett Wilson served as the primary research assistants for this study as part of the Washington Institute’s Internship Program. Their professional work and overall contribution is greatly appreciated.

Additional Revenue Sources

Estimates of funding from existing public health programs.

Federal funds Washington receives through veterans health, Medicare and Medicaid.

The impact of federal waivers, number of residents outside the state system.

Payroll taxes on residents who are ineligible to receive benefits.

See I-245 provision that “other insurance comes before state coverage.

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footnote. while most gov’t employees are in large organizations, For the purpose of assuming they pay 12%, many will pay at lower rates.

[1] This is the official ballot title. The full text of Initiative 245 is available from the Office of the Secretary of State in Olympia and at www.secstate.wa.gov/initits/.

[2] Sponsors of Initiative 245 recently decided to discontinue their effort to obtain enough signatures by the December 29 deadline to present the initiative to the legislature, but they say they will seek to have its provisions introduced as a regular bill in January. If the legislature does not act on the bill, they intend to place the measure, under a new initiative number, before voters on the November 2001 ballot. See “I-245 Shuts Down,” Seattle Times, October 29, 2000 and Office of the Secretary of State, Initiatives to the Legislature, 2000, www.secstate.wa.gov/inits/leg2000/htm.

[3] This Policy Brief is available at our website at www.wips.org.

[4] See for example the Attorney General’s brief on the text of Initiative 695, “Scope of the Term ‘Tax’ Under Initiative 695,” Office of the Attorney General, December 22, 1999.

[5] Labor Market Analysis, Washington State Employment Security Department, Olympia, Washington, October 26, 2000. Figures are for all ownerships, including multiple establishments, and are based on reports for the first quarter, 2000.

[6] Based on the 1998 estimate of the average annual salary for a manufacturing worker in Washington state, Department of Employment Security and Department of Labor and Industries, Labor Market Information Division, both Olympia, Washington.

[7] Initiative 245, Section 16(5).

[8] Ibid.

[9] Initiative 245, Section 2(5).

[10] “Explanation of Initiative 245 Costs and Financing,” Health Care 2000 fact sheet, November 2000, www.wolfenet.com/~hc2k/financing.html.

[11] “State Budget for the 1999-01 Biennium, Updated for the 2000 Supplemental Budget,” Office of Financial Management, Olympia, Washington, www.ofm.wa.gov/faq/size.pdf.

[12] Labor Market Analysis, Washington State Employment Security Department, Olympia, Washington, October 26, 2000. Figures are for all ownerships, including multiple establishments, and are based on reports for the first quarter, 2000.

[13] Initiative 245, Section 20.

[14] See graph on “Health Benefit Cost Per Employee - Average Annual Premium Cost per Active Employee, Large Employers,” from “Taking the Pulse of Washington’s Health Care System, 1999 Report,” Vital Signs of Washington’s Health, September 1999, p. 23.

[15] Ibid, p.24.

[16] “Trends in Offering Employer-Sponsored Coverage,” by Stephen H. Long and M. Susan Marquis, Data Bulletin, Center for Studying Health System Change, Washington D.C., Fall 1998, www.hschange.com.

[17] “Health System Change in Seattle, Washington,” by Douglas L. Fountain et al., The Lewin Group and Center for Studying Health System Change, Washington, D.C., June, 2000, www.hschange.com/ community/reports.

[18] Initiative 245, Section 2(5).

[19] The Random House Dictionary of the English Language, Second Edition, Unabridged, Random House, New York, 1987, p. 283.

[20] Revised Code of Washington, 82.04.140.

[21] Based on U.S. Census data for Washington state. Because figures for residents with incomes between 150% and 250% of poverty level are not currently available, the table leaves this group out of the final calculation.

[22] Initiative 245, Section 8.

[23] Ibid, Section 17(3).

[24] “What is the Measure of Inflation for Washington?” Economic Topics, Office of Financial Management, Olympia, Washington, November 2000, www.ofm.wa.gov/econtopic/inflation.htm.

[25] “Various Inflation Indicators, 1984 - 1999,” Washington Forecast Council and the Bureau of Labor Statistics, Olympia, Washington.

[26] Initiative 245, Section 11(4).

[27] Public Employees Benefit Boards, Final Quarterly Budget Report, FY 1999, Washington State Health Care Authority, July, 1999. Explanatory notes for Tables 5 and 6:

(1) This is a rounded estimate. For K-12, it assumes 85% of insurance benefit costs (health, dental, life, etc.) are paid for health benefits, consistent with PEBB expenditure breakdown.

(2) For K-12 assessment a weighted rate of 11.25% is used based on distribution of salaries by district size. The same assumption is used for Other Local Governments.

(3) Assumes 12.4% of employees have a nonworking spouse, consistent with Census data for all U.S. employees.

(4) Estimates are based on Census data for local government employees. Multiplied by ratio of Other-Local,K-12 Census data and assumes the same per-FTE benefit costs as for K-12.

[28] This is necessarily a rough estimate. The schools’ total is $510 million a year, all of which would appear to be exempt from the single-payer payroll tax as “non-business” activity. All local government total $621 million a year, the clear majority of which is non-business and not subject to the payroll tax. Therefore, an estimate of one billion a year in cross-subsidization to pay for the cost of providing health coverage to public employees seems reasonable.

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