Vermont Single Payer Health Care Financing Slides Toward Chaos

Published May 23, 2013

In his 2011 inaugural address Vermont Gov. Peter Shumlin declared “we must create a single-payer healthcare system that provides universal, affordable health insurance for all Vermonters that brings these skyrocketing costs under control. Let Vermont be the first state in the nation to treat healthcare as a right and not a privilege.”

From that moment on, Shumlin has directed a large part of his political capital to bringing that vision to reality. So, how are we doing?

Brave New World

The great goals of Canadian-style single-payer health care are to abolish health insurance, guarantee all Vermont residents get “affordable and appropriate care at the appropriate time in the appropriate setting” (as determined by a government board); enforce cost-saving efficiencies, “payment reforms,” and “global budgets” on medical providers; and finance the $5 billion enterprise with tax dollars from one source or another.

Early in the legislature’s 2011 session, Dr. William Hsaio of Harvard delivered his blueprint for achieving all these objectives. His cost projection for Option 3, the one selected by the governor, projected an astonishing “savings” of $580 million in the first year of single payer operation (2017).

In May 2011 the governor proudly signed Act 48, built on 13 principles that have achieved mythic status among advocates. Notable among them is (11): “The financing of health care in Vermont must be sufficient, fair, predictable, transparent, sustainable, and shared equitably.”

The Shumlin team was supremely confident it knew just how to do this. The governor’s health care guru, Anya Rader Wallack, set forth the coming Vermont program in an article in the New England Journal of Medicine. When it was pointed out that much of what Act 48 hoped to do required waivers from the federal government, our equally confident governor informed the media “we can outsmart the feds.”

No Answers on Costs

In practice, this proved more difficult to achieve. Act 48 required a detailed financing plan for Green Mountain Care, to be delivered by January 15, 2013 (conveniently after the 2012 elections). In July 2012 the Shumlin administration contracted with the University of Massachusetts to perform the specified work.

As the emails and documents obtained by Vermonters for Health Care Freedom later revealed, in November 2012, with the presentation deadline two months off, the Shumlin administration suddenly got a serious case of the vapors.

UMass was told not to try to explain where Shumlin should find the $1.6 billion in new tax dollars needed to pay the Green Mountain Care bill (above and beyond current Medicaid spending). When the administration released the sanitized UMass report in late January 2013, the governor triumphantly claimed Green Mountain Care would achieve $34 million in first-year “savings.”

What became of the rest of Hsiao’s predicted $580 million? And that wasn’t the only question. Upon closer inspection, the Vermont Medical Society discovered almost all of the claimed “savings” “appear to be achieved solely by reducing provider payment rates” by $155 million.

Taxpayers Facing Huge Burden

The only answer to the conundrum is a massive increase in taxes to fund the single-payer dream. A month after the UMass report was released, Shumlin supported the formation of a special legislative committee to figure out how to get Vermonters to agree to pay $1.6 billion in new taxes in 2017—larger than the state’s entire current General Fund.

A month later the governor announced a “Governor’s Business Advisory Council on Health Care Finances,” composed of hand-picked GMC supporters. The administration pocketed a $45 million federal grant to design workable “payment reform” models to achieve savings—models the single payer advocates thought they knew all about just two years ago. And Administration Secretary Spaulding endorsed a “Joint Legislative-Executive Commission on Health Care Financing” to give Vermonters the bad news in 2015—after yet another election.

Running Out of Grants

While all this was going on, the Shumlin administration has been eating through a $125 million federal grant to create a health insurance exchange called Health Connect, which will offer a small menu of federally subsidized but comparatively unaffordable insurance plans to individuals and small groups beginning in 2014.

Health Connect is a stopgap implementation of President Obama’s health care law, which was slated to function as a bridge to single-payer. Costing Vermont taxpayers $18.4 million in just the first year, this ill-formed exchange will disappear in 2017 when Green Mountain Care replaces health insurance under Shumlin’s plan.

The signs of a pending disaster are everywhere. On March 28 Wallack, whom the governor had appointed to head the all-powerful and supposedly “independent” Green Mountain Care Board, announced her departure in September 2013, leaving the yet-unborn Green Mountain Care to fend for itself.

Hamilton Davis, a longtime single-payer advocate, recently cast a critical eye on this financing saga. He concluded, “Shumlin’s performance on this dimension has been pretty much a mess.”  Not even the profusion of new study committees is likely to keep this grandiose but completely unworkable scheme from a monumental crash and burn.

In truth, Shumlin’s grand scheme of “universal” single payer health care can work, on paper, only where the government completely controls the medical universe. The voters should emphatically remind the governor and other single-payer advocates that the first word of our state’s motto is “Freedom.”

John McClaughry ([email protected]) is vice president of the Ethan Allen Institute.