OBSTACLES TO VERMONT’S 2017 SINGLE-PAYER GOAL By Kaif Syed.

OBSTACLES TO VERMONT’S

2017 SINGLE-PAYER GOAL

By Kaif Syed

Healthcare Reform in Vermont•In 2011, the Vermont legislature passed, and Governor Peter Shumlin signed into law, Act 48. This act, in broad strokes, set forth the general trajectory of healthcare reform in the state by declaring that healthcare is a public good and hence, the state has a responsibility to implement universal coverage. The deadline for its implementation is 2017.

•Reform also includes the implementation of a uniform data and claims system, a new method for measuring the delivery of quality health care, a “pay-for-performance” model posed to replace the traditional “fee-for-service” model, as well as all the applicable federally mandated changes as per the Affordable Care Act

The Rationale

•A Commonwealth Fund supported Health Affairs study, conducted by economist William Hsiao, claims that Single-Payer in Vermont “will produce annual savings of 25.3 percent compared with current spending, cut employer and household spending by $200 million, create 3,800 jobs, and boost the state's overall economic output by $100 million”

•How the savings and spending levels break down.

The Rationale•“Vermont’s case for single-payer health care can be summarized in one number: $82,975. That’s the amount a 2011 study in the journal Health Affairs found the average American doctor spends on dealing with insurance companies. Across the border in Ontario, doctors spend about a quarter of that amount — $22,205 per physician — interacting with the province’s single-payer agency.”

Bumps in the Road

•All the benefits described all sound great – it seems to be the perfect program. However, disregarding the fact that the figures mayor may not be overly optimistic, a few major issues loom.

•Firstly, there needs to be clarification regarding Vermont’s program and its relationship with the federal Affordable Care Act. From Kaiser Health News:

•“Under the federal law, all states will have an exchange, or insurance marketplace for individuals and small business, by 2014 – or the federal government will set one up for them. But the law also allows states to seek a waiver from the specific federal requirements for running that exchange if they show they are providing at least equal coverage and benefits another way. Vermont is seeking a waiver to pursue the single payer system and not have to run two duplicative programs. “

Bumps in the Road

•Secondly, an August 26, 2014 study by the Health Care Cost Institute made an interesting a potentially problematic finding.

•The study found that from 2007 to the end of 2011, the year that reform was passed, Vermont (privately-insured) patients spent less time hospitalized and spent more money on generic drugs compared to the national levels. Vermont patients with ESI, in 2011, spent $4,408 compared to the national average of $4,520. Vermont spent $112 out of pocket less per person than the national average on health care in 2011, and $282 less on hospital care per person than the national average in 2011.

•However, although Vermont spent less per capita during this period, health care spending as a whole in the state accelerated faster than the national average over the same period. If it continues to outpace the national average, eventually Vermont will no longer remain below national spending levels, which could spell trouble for the single-payer program.

Bumps in the Road

•The spending growth rate, according to the HCCI, could be, in part, accounted for by the higher levels of laboratory, imaging, radiology, and outpatient services consumed by patients. In addition, Vermonter young adults spend on and receive more care than the national average.

•According to a separate study by the HCCI, the national average of health care expenditure growth itself has been depressed due to sluggish economic growth – 70% of the decline, according to the study, can be accounted for by the economic downturn between 2009 and 2011. This should also be taken into consideration. However, Vermont, according to Greyhill Advisors, accounting for size, is listed as #50 in annual GDP; however, it is 32nd in Per Capita GDP and has among the lowest unemployment rates in the country, at 6.2% in 2010 (listed as the fourth best in the country)

And the Big Bump

•The state has yet to draft a bill that raises the additional $1.6 billion a year needed to implement and run the program.

• Opponents claim that this would require the biggest tax increase in Vermont history – according to Bloomberg, Vermont already only collects $2.7 billion a year in tax revenues. Proponents claim, on the other hand, that this will be the largest healthcare premium decrease in history. “The Shumlin administration is quick to point out this isn’t the same as increasing healthcare costs by $1.6 billion. When there’s a single-payer system, lots of people who currently pay private insurance premiums won’t.”

• There are only four sources of tax revenue in Vermont that currently exceed $100 million in revenue annually, payroll tax being the largest of which, at $624 million.

• Proposals on the table center around increases in payroll taxes and income taxes. Vermont Consultant Steve Kapper, “If you look at the landscape of taxation here, there’s no one place to go to raise the money, you’d have to raise the sales tax by something like 146 percent, which is not going to happen.”

Hsiao’s Proposal

•Harvard economist and program architect William Hsiao recommended a proposal that focused on an 11% payroll tax on employers and a 4.5% payroll tax on employees.

•No legislator in VT has been in agreement with everything is Hsiao’s proposal, but the sentiment is that things will move in his general direction.

• “Under Hsiao’s version of single payer, all Vermonters would have insurance coverage and the system would be administered by private entity that would bid on the project every two years. The system would be paid for through an 11 percent payroll tax (split between the employer and employee, at one point estimated at a 30-70 split, but the number would be determined by the Legislature), federal Medicaid funding and savings achieved through a cost-containment system that would create a single pricing system for procedures, treatments and hospital stays. The payroll taxes would provide for less than half of the money needed to fund the system, according to Hsiao. Low-wage workers, their employers and Vermonters who receive non-wage income would be exempt from the payroll tax.” from this report.

Conclusion

•Although there is a lot of promise in the VT health care reform, it is quite possible that, due to revenue issues, federal law, and spending trends, the single-payer option might either end up not coming to fruition (according to Bloomberg, the “politics are impossible”) or become severely scaled back.

•If successful, Vermont, like Saskatchewan, could be a trail blazer for the rest of the country, or at least other progressive states. If not, it could have national implications, killing such statewide reform campaigns across the country.

Bibliography

http://www.usatoday.com/story/news/nation/2014/08/07/stateline-vermont-insurance-aca-obamacare/13721355/

http://content.healthaffairs.org/content/30/7/1232.fullhttp://ethanallen.org/wilton-vs-umass-green-mountain-care-tax-a-big-gamble-for-vt/

http://watchdog.org/132835/end-single-payer/http://www.vox.com/2014/4/9/5557696/forget-obamacare-vermont-wants-to-bring-single-payer-to-america

http://www.bloombergview.com/articles/2014-04-11/vermont-s-single-payer-dream-is-taxpayer-nightmare

http://www.kaiserhealthnews.org/stories/2011/october/02/vermont-single-payer-health-care.aspx

http://www.commonwealthfund.org/Publications/In-the-Literature/2011/Jul/What-States-Can-Learn-from-Vermont.aspxhttp://www.leg.state.vt.us/jfo/healthcare/Hsiao%20Proposal%20-%20public.pdfhttp://www.healthcostinstitute.org/news-and-events/vermonters-spent-less-on-health-carehttp://www.healthcostinstitute.org/news-and-events/sluggish-economy-not-health-reform-drove-slowdown-health-spending-says-health-affair