Colorado Might Rewrite the Rules of Healthcare in 2016

In the spirit of Colorado's consistently groundbreaking legislation, hundreds of thousands of taxpayers and voters get behind a new bill that will leave the state footing the cost of healthcare.

In this video segment, Motley Fool analyst Kristine Harjes and Fool contributor Todd Campbell weigh in on what such legislation might mean for the state's budget, and how it could impact the healthcare sector. 

A full transcript follows the video.

Kristine Harjes: Earlier this week, it was announced that a proposal involving a single-payer healthcare system in Colorado will officially be on the 2016 ballot. Now, that's pretty exciting. They needed to get almost 100,000 signatures to get it on the ballot and they collected way more than that. Absolutely crushed it. They got 158,000 signatures. So, what are Colorado residents weighing in on, here?

Todd Campbell: Colorado voters are not afraid to shake things up, are they?

Harjes: Not even a little bit.

Campbell: Haha. You know the approval, obviously, of marijuana was groundbreaking if you will. And new ground could also be broken if voters pass legislation next year that would allow for a single-payer system for people who live and earn money in Colorado. Wherein, the residents will be able to pick their provider, go to the doctor, and the state of Colorado would pick up the tab.

Harjes: How on Earth are they gonna pay for that, Todd?

Campbell: It's going to be pricey. Estimates are pegging the cost around $25 billion.

Harjes: And that's coming from the backers. They're the ones saying that. That's not even the opponents.

Campbell: Yea, $25 billion. I mean, it's probably gonna be much higher than that. I mean, who knows, right? But they're trying to -- they're trying to attack a situation that is on the minds of everyone. Especially now that we're in open enrollment.

A lot of people are signing up for health insurance for next year. Insurance premiums continue to climb. And one of the ways the proponents think they can reign in those costs is by getting the private insurers out of the marketplace. You get rid of their administrative, rid of their profit, and you negotiate directly with the drug makers, directly with the hospitals and the primary care physicians.

You get maybe, better pricing, and then you pay for that through taxation rather than premium payments. So, what they're saying is, "OK, we'll pay for that $25 billion by instituting a 10% payroll tax. 6.67% of that payroll tax is going to be picked up by the employer. The remainder will be picked up by the employee." But at the same time, yes you're paying more in taxes, but now you won't have to pay your insurance premium. Or your co-pays.

Harjes: Yeah, and moving that budget over to government is kind of a huge expansion of government for the state. It would literally double the size of their budget. However, you get people that are in support of this bill, that the initiative could slash $5 billion from what residents currently pay in premiums.

Campbell: Yeah, I'm skeptical of all of those numbers at this point. I think that we'll probably get more insight as people really dig into this and the battle goes on. It escalates next year, ahead of the election and the vote. The costs are what the costs are. I mean, we know. Anyone who's been listening to our program knows the expenses that they're tied to; next-generation medications work better, and care is climbing. And those expenses have to be paid for somehow.

So, you can say, "OK, it's going to be a 10% tax, and we're gonna make up the saving somewhere else." But at the end of the day, the drug companies are still gonna wanna make more money next year than they did this year. The primary care doctors are still gonna wanna make more money next year than they do this year. So, you know, what does that mean? Does that mean taxes continue to go higher and higher and higher? No one knows, right?

So, I don't think necessarily by saying, "OK, we're gonna go to single-payer," that we're going to eliminate cost increases for the system. It's more that we're going to shift them, and we'll better understand what those costs are. Now, that's gonna have big implications potentially. Both to the insurance companies, obviously. They're getting cut out of that market -- 5.3 million people live in Colorado. But it could have implications in a lot of different ways. So, we're going to have to watch this vote very carefully. And pay attention to the debate as it rages on next year.

Harjes: There are so many good points being brought up on both sides of this argument. I saw one critic contend that nearly one-fifth of Colorado jobs are somehow associated with the healthcare industry. And the guy that says that, says that a single-payer system would destroy the industry. So, you're talking about a lot of people, there. And obviously, the tax itself would impact everybody. Particularly if you're self-employed, you're going to be paying that tax just, completely yourself. Like all of that 10%, instead of just paying a third of it and having the rest of it being picked up by your employer.

So, clearly, a lot of moving pieces here. And this is a very new proposal to be officially on the ballot. So, I'm sure people on both sides of the argument are going to be weighing in a ton more. And so chalk it up to the list.

We've already talked about a couple other things on this program that will end up being theoretically, or probably, or definitely on the 2016 ballot.