Vermont Health Insurance Exchange Is Bridge to Single Payer

Published August 9, 2012

Unlike those in other states which have chosen to implement President Obama’s health care law, Vermont’s health insurance exchange isn’t expected to last long. Instead, it is envisioned as a short-term bridge which will be destroyed to achieve the state’s ultimate goal: a government-run single-payer health care system.

In April the Vermont legislature passed, and Democratic Gov. Peter Shumlin signed, legislation establishing the state’s health insurance exchange. According to John McClaughry, vice president of the Ethan Allen Institute, the health insurance exchange is not important in and of itself. For Vermont, its importance lies in the federal money it will bring to the state, which is necessary for Vermont to implement its proposed single-payer health care system, Green Mountain Care, in 2017.

“The whole point of the Shumlin exchange is to corral as much in tax credits as possible, and then in 2017 get HHS to allow Vermont to grab all the tax credit dollars, put them into the pot to finance single-payer Green Mountain Care, and abolish the exchange since there won’t be any insurance companies in existence,” said McClaughry.

In 2011, Vermont lawmakers approved legislation to transition the state to a government-financed single-payer system called Green Mountain Care. There are many questions surrounding how this single-payer system will be financed, and the state is counting on significant federal funding for it.

Avoiding Cost Estimates

McClaughry says the law is part of a pattern of avoiding cost estimates and attempting to obtain more federal funding for the single payer experiment.

McClaughry notes the fiscal note attached to the legislation Shumlin signed had no firm numbers on how much the setup and operation of an exchange would cost taxpayers. But the state does have estimates for the exchange’s cost. In August 2011 Arizona health policy consultants Burns & Associates, Inc. sent the Vermont government a report providing a range of projections for the cost of the state’s health insurance exchange.

According to the Burns & Associates report, Vermont’s health insurance exchange will cost between $12.9 and $22.5 million to establish. In its first year it will cost taxpayers between $12 and $16.5 million, and in its second year it will cost between $8.9 and $10.9 million.

Single Payer’s Cost Uncertain

McClaughry is skeptical Green Mountain Care will be fiscally solvent, no matter how much federal funding comes into the state from the health insurance exchange.

“I can’t see any way, if everything goes as planned, that Green Mountain Care can be made to work fiscally,” says McClaughry. “Our best estimate is a five-year shortfall of $1.6 billion—even after a new payroll tax. Slashing provider payments, savagely rationing care, price controls—even this statist bag of tricks won’t be enough to save it, in my opinion.”

Marc Kilmer ([email protected]) is a Maryland Public Policy Institute senior fellow specializing in health care issues.