Vermont Is ‘Single-Payer’ Trailblazer

Vermont Is ‘Single-Payer’ Trailblazer

By Michael Ollove,

BERLIN, Vt. — Dr. Marvin Malek has been yearning and advocating for a publicly financed, single-payer health care system for at least two decades. Now, as Vermont stands on the threshold of being the first state to launch such a plan, he’s confessing to trepidation.

“I am pretty damn nervous,” he confided before bounding off for rounds at the Vermont Central Medical Center, still clutching the bicycle helmet he wore on his ride to work.

It’s not that Malek has reservations about the desirability of a single-payer system. He and other supporters in Vermont point out that it is already in place in many developed countries that produce better health outcomes at lower cost than the United States.

It’s that getting there seems so fraught with complexity. “The problem is that the tentacles of our completely dysfunctional U.S. health system reach so deeply into every state,” he said. “How do you disentangle from that abysmal structure to create single-payer?”

That explains why Malek and many others here believe the Vermont legislature’s landmark vote in 2011 to move the state to a single-payer system by 2017 was the easy part of the process. Devising how to actually do it, a process the state is enmeshed in now, will be much more grueling.

The outcome couldn’t be more consequential, not only for Democratic Gov. Peter Shumlin, who put single-payer health care at the center of his first gubernatorial campaign in 2010, but also for many others who have long cherished the idea of universal health care built on the foundation of a single-payer system.

Some believe that if the Vermont experiment is successful, other states could follow. In Canada, they note, single-payer started in one province and then spread across the country.

“We could be the Saskatchewan of America,” said Bram Kleppner, CEO of Danforth, a pewter manufacturer in Middlebury with roots tracing back to colonial America. He is among a group of business executives in Vermont Businesses for Social Responsibility, which actively promotes single-payer. He also sits on a board advising the governor on the financing of the plan.

A single-payer system is one in which the government, rather than private insurance companies, pays all health care costs. Some on the left have long harbored hopes for a national single-payer system, but the odds that Congress would ever extinguish the private insurance industry have never been anything but long.

Vermont is different. Vermonters proudly bring up the state’s maverick, progressive past: first state to mandate public financing for universal education in its constitution, first to partially outlaw slavery in its constitution, first to introduce civil unions for same-sex couples, and first to allow gay marriages by legislation, rather than through a court order. Many Vermonters hope a single-payer health system will be the latest addition to that list.

But it’s way too early to predict that other states will fall like dominoes for single-payer. Vermont’s unusual characteristics helped make that legislative vote possible. It is tiny and it has Democratic super-majorities in both legislative chambers. Its seven hospitals (eight if you count Dartmouth-Hitchcock Medical Center just across the border in New Hampshire), are spread out and tend not to think of themselves as competitors.

Nevertheless, other states will be watching closely to see if Vermont can successfully build the elements of its single-payer plan, including a unified data and claims system, a method for measuring the delivery of quality health care and a pay-for-performance scheme to replace the traditional “fee-for-service” model.

“Even for states that are keeping it ‘old school,’ watching a state create a unified health budget and seeing how it benefits them and the process they use, that will be enlightening to everybody,” said Hilary Heishman, a program analyst at the Robert Wood Johnson Foundation.

Medicare, Medicaid, and health benefit plans for both veterans and active duty military personnel will continue to operate in Vermont after 2017. Other plans would also continue, including those serving employees and retirees of out-of-state companies, and tourists and other visitors. Plus, there are major businesses in the state that could continue to self-insure if they are exempted from the new taxes. (Some countries with single-payer systems also have separate health plans for some constituencies, such as veterans.)

Despite those caveats, Act 48, as it is called, represents the first time a state has guaranteed all its citizens health care simply on the basis of their residency. Instead of premiums, Vermonters and businesses would pay for health care through yet-to-be determined taxes. Benefits and formularies (the prescription medicines that are covered in a plan) would be uniform, excluding Medicare and Medicaid, although both programs, through waivers, would be folded into a unified claims administration and payment system run under a new, independent agency called Green Mountain Care.

The Vermont plan largely derives from Harvard economist William Hsiao, who described it in a 2011 Health Affairs paper. He estimated that single-payer would save 25.3 percent over current state health spending, cut employer and household health care spending by $200 million, create 3,800 jobs, and raise the state’s economic output by $100 million.

The savings, according to Hsiao, would come from the consolidation of insurance functions, reduced administrative costs for providers, better mechanisms for detecting fraud and abuse, and shifting to a no-fault medical malpractice model.

Hsiao said the savings, an estimated $4.3 billion over five years, could be used to pay for coverage of the uninsured and improved benefits, reducing the overall savings to a still healthy $2.3 billion.

Those numbers quickly proved overly optimistic. The legislature didn’t adopt the malpractice reforms Hsiao recommended, and the multiple payers still active in the state could reduce the expected administrative savings. Meanwhile, a University of Massachusetts study commissioned by the state estimated Vermont would have to raise $1.6 billion in new revenues each year to support the plan. A later report by Avalere Health, a consulting firm, estimated the annual cost to be $1.9 billion to $2.2 billion.

Robin Lunge, director of Health Care Reform for the Shumlin administration, said last week the state is assuming it will need between $1.7 billion and $2.2 billion in additional annual revenue. Right now, Vermont collects about $2.85 billion in annual revenue from state sources, mainly through taxes, so raising that amount would be a huge lift for the state. But Lunge thinks a fairer comparison is the amount of new revenue that would have to be raised versus the $1.9 billion in private health insurance premiums that Vermonters pay now.

Shumlin missed a 2013 deadline for revealing exactly how he planned to finance the reforms. Now he is promising to do so in January, in time for the next legislative session. Some critics say he purposely withheld the details to not imperil his re-election in November.

Lunge said the state will raise most of the revenue through some combination of income and payroll taxes on both employers and employees. People will not be asked to pay premiums, although Lunge said she expects there will be some kind of cost-sharing (as in co-pays or co-insurance) to discourage overuse of medical services.

“You can say it will be the biggest tax increase in Vermont’s history,” Lunge said, “but you could also say it’ll be the biggest premium decrease in our history, too.” She also pointed out that the tax increase will be based on household income, while under the current system people pay the same premiums no matter how much they earn.

Photo: Orange County Register/MCT/Ana Venegas

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