John Franco: Debunking the ‘Plan B’ taboo

Editor’s note: This commentary is by John Franco, a Burlington attorney who has been active in health care reform for over 25 years.

Last week’s kerfuffle whether there is a “Plan B” for premium-financed single payer demonstrates how far we still have to go in understanding how universal health care systems are actually financed, and the degree to which the thinking in Vermont has been a captive of the Canadian model.

The orthodoxy of a premium based single payer has impeccable credentials. Taiwan’s single payer system was design by William Hsiao – yes, the same William Hsiao who authored of the 2011 Vermont single payer study. While Taiwan chose the Canadian single payer as the insurance model, it avoided the Canadian model of general tax financing in favor of a premium based system typical of social insurance health care systems found in Europe.

But Hsiao insisted on one major break from the Canadian system: In Taiwan, National Health Insurance is not funded through general taxation; rather the money people pay to finance the health insurance fund is called a premium. Both employer and employee are required to chip in monthly to pay for this “premium.” For Hsiao, the nomenclature is important … “You never want to call it a tax,” Hsiao says. “If you call it a national insurance premium, then you’re asking people to pay for a product, not to pay a tax to some huge government entity.” From T.R. Reid’s “The Healing of America, A Global Quest for Better, Cheaper and Fairer Health Care” (2009).

This is of course is the very same debate about single payer financing that just recently erupted into the open here in Vermont.

Many Vermont employers such as UVM, the City of Burlington and some of our school district already use income-based premiums for their employees’ contribution toward their health plans.

 

Taiwan’s single payer is funded and operated on a self-sustaining basis using a formula which factors income, premium rates, contribution rates, and number of dependents insured. General tax support is supplemental, not primary, to the system. It is for this reason that Dr. Hsiao was careful in his 2011 Vermont report to define “single payer” as having two essential elements: (1) a uniform benefit plan, (2) provided through a single insurance fund. Nowhere did he include tax financing as an element essential to single payer’s definition.

Indeed, under the University of Massachusetts’ “tax financing” approach released in 2013, premiums would continue to finance as much as $500 million to cover one fifth of the 400,000 Vermonters who do not have Medicare or Medicaid as their primary source of insurance, the target audience for Green Mountain Care. They include federal employees, those on the military Tricare plan, and Vermonters who get their insurance from out-of-state employers.

Understanding that premium financing is not taboo should be a source of liberation for the discussion how to finance Green Mountain Care. Financing can occur, as the Republicans like to say, “off-budget,” in a way which doesn’t involve taxes just as occurred in Taiwan. We already have some home-grown precedent in Vermont to build on. Many Vermont employers such as UVM, the City of Burlington and some of our school district already use income-based premiums for their employees’ contribution toward their health plans. Even better, it appears that Vermont employers’ $1.5 billion contribution to private premiums is already graduated, with smaller employers who offer coverage tending to pay a much small portion of their payroll.

Our choices are not limited to either tax financing or a continuation of the current hodgepodge of private coverage. We can’t afford to keep thinking that they are.

Comments

  1. Dave Bellini :

    Regarding income based premiums:
    I’ve heard the Shumlin Administration call the premium structure of the state employees health plan “unfair.” State employees pay a flat dollar amount regardless of income.
    .
    However when the VSEA proposed to this Administration that we consider a premium structure like UVM, it was rejected immediately by this Administration. Yet they continue to cite the state employees plan as having the wrong kind of premium structure because it is not income based.

  2. The author confuses some major concepts in his piece.
    First, Taiwan’s- “premium” based system is really financed by a payroll tax and simply called a premium. It is not a premium paid to an insurance company.
    Second, the major flaw with “plan B” is there would be no guarantee that all Vermonters would be covered with a comprehensive benefit package.
    Every other system in the industrialized world has a comprehensive benefit package GUARANTEED to it’s residents. That is the goal of Act 48 -where ALL Vermonters would be GUARANTEED coverage to a comprehensive benefit package paid for through taxes.
    “Plan B” does not guarantee coverage if you lose your insurance for nonpayment and have to wait till the next enrollment period to re-enroll.
    “Plan B”does not guarantee to pay for the Vermonters who must pay nearly1/4 of their income for health care before getting a dollars worth of coverage
    “Plan B” does not guarantee to pay for coverage for someone still can’t afford the premium with a subsidy and has to go without insurance.
    “Plan B”does not guarantee to pay for extra benefits to those receiving Medicare.

    Yet those are all of the above would be covered under Act 48.
    The other major flaw with “Plan B” that in addition to the above major deficits it we would be adding $200 million to what we are already paying for health care.

    • Dave Bellini :

      Deb, you’ve been the point person for Vermont single payer. The Governor won’t turn over his cards.
      What’s your plan? How would you address all the unanswered questions? It’s 2014, we should be way past the concept stage.
      Would you have co-pays?
      A deductible?
      What about retirees living out of state?
      What would you do with ERISA plans?
      Workers comp?
      How would you pay for it?
      Who would pay how much?
      Would you limit the number of Doctors?
      Would people be able to choose their care?
      What’s the plan?

      • Walter Carpenter :

        “What’s the plan?”

        Do you have a better plan?

  3. Ethan Parke :

    Mr. Franco is misinformed. Taiwan has a National Health Insurance “premium assessment” that is deducted from employees’ paychecks and goes directly to the single government fund that pays for health care. See: http://prescriptions.blogs.nytimes.com/2009/11/03/health-care-abroad-taiwan
    The Taiwanese financing system is entirely different from the “Plan B” that was leaked from the Vermont Legislature’s health care consultant recently. The leaked Plan B would be based on premiums paid by employers and employees to insurance companies–basically the health care exchange that we now have in place. Moving to Green Mountain Care, we can call a payroll tax a “premium,” if that helps the perception, but as Dr. Hsiao said, you can control costs and provide quality universal health care, but you have to have a single payer to do it. That to me means public financing.

  4. John McClaughry :

    I agree with Deb – this is semantic gamesmanship. When the government forces you to make payments to the government, that’s a tax – unless it is a user fee that you specifically benefit from, like crossing a toll bridge, or buying a license to drive on government highways.
    I’m still trying to find out how a single payer system can have an 87% actuarial value – that is, 13% paid by patients – when there are no deductibles or copays of the kind familiar in insurance policies.

  5. Lance Hagen :

    “I’m still trying to find out how a single payer system can have an 87% actuarial value – that is, 13% paid by patients – when there are no deductibles or copays of the kind familiar in insurance policies.”

    John, it’s magic! Supported by Progressive style math.

  6. Kathy Callaghan :

    Mr. Parke, I note that your reference to the Taiwan health care system is from 2009. Perhaps you would like to see an update on how things are going in Taiwan circa 2012.
    Not so good three years later. (sorry I could not make it a live link but you can put it in your browser.)

    https://globalvoicesonline.org/2012/08/28/taiwan-national-health-insurance-system-in-crisis/

    • Ethan Parke :

      Ms. Callaghan, I am aware of the article you cite, and I am also aware that many doctors in Taiwan are unhappy with their level of reimbursement. However, I don’t think most Taiwanese would agree that the solution is to go back to the old pre-1994 system. Rather, Taiwan could increase its health care spending from a little over 6 percent of GDP to perhaps 8 percent. This would still be far less than what the US spends as a percent of GDP. At least in Taiwan they have the ability to make this kind of decision. Here in Vermont at present there is no way to effectively set health care spending and keep excessive inflation under control.

      • Walter Carpenter :

        “This would still be far less than what the US spends as a percent of GDP. ”

        Isn’t Vermont’s spending about 18% of GDP, with how many still uninsured?

  7. Moshe Braner :

    “You never want to call it a tax,” Hsiao says. “If you call it a national insurance premium, then you’re asking people to pay for a product, not to pay a tax to some huge government entity.”

    – well, too late. We already have what we call a Social Security “tax”, and a Medicare “tax”, so might as well have a single payer “tax”. I don’t care what you call it. The real question is: what’s the fair way to distribute this burden. If it is by income, say, should it cover all income (not just “payroll”)?

  8. Ida Hellander :

    On March 11, 2014, for the first time in U.S. history, the Senate held a hearing on what the US can learn from other nations’ health systems.

    Testimony was given by Ching-Chuan Yeh, MD, MPH , former Minister of Health for Taiwan and a professor at the School of Public Health, College of Medicine, Tzu-Chi University, Hualien City, Taiwan

    It contains current information about their system, which is an overwhelming success. The financing is explicitly addressed.

    http://www.help.senate.gov/imo/media/doc/Yeh1.pdf

    • Wendy wilton :

      Better check that premise on Taiwan. Only 40% of the country’s nurses are still in the profession as they are overworked and underpaid. Their health care system is in death spiral. See the link under Kathy C’s comment above.

      • Walter Carpenter :

        “Better check that premise on Taiwan. Only 40% of the country’s nurses are still in the profession as they are overworked and underpaid. ”

        they are overworked here too.

        • Karen McCauliffe :

          Walter,

          The deplorable working conditions for health care workers particularly nurses and doctors in Taiwan is much different than the US.

          Vermont is not a country so it is even easier for the medical personnel to flee this state. Even with Taiwan being a country, there has been a brain drain of doctors leaving to practice medicine elsewhere.

          “About 200 nurses protested in front of Taiwan’s Department of Health (DOH) on Saturday, urging authorities to modify labor laws to prevent exploitation at hospitals.

          “Let me sleep!” shouted Liang Hsiu-mei, a member of the Radical Nurses Union, which was formed recently to address the increasingly deteriorating working conditions for local nursing staff.

          Liang presented a sample shift chart that showed how employers forced nurses to take care of patients when they hadn’t had enough rest. Nearly one in four nurses said they had worked both the night and day shifts on the same day, Liang said, citing findings from a survey her organization conducted. ”

          http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20120513000060&cid=1103

          “Taiwan’s Medical Brain Drain
          Where Have All the Doctors Gone?

          What can Taiwan do to retain its medical elite, talent whose costly education was funded by devoted parents and the state? All of us, both the government and the public, need to face the fact that the NHI compensation system is unreasonable and that physicians have to put up with worsening working conditions. What it takes is the resolve to make decisions and solve these problems….

          Chen does not want to leave Taiwan, but he harbors strong feelings of resentment. “Do you know what’s tragic in Taiwan? Doctors have no choice but to bathe their own faces with their tears. The nation is mistreating its talent,” he complains. Chen believes that the government bears the greatest responsibility for the ills of the healthcare system, because payments from the NHI are too low.

          Investors, hospital operators and deserting physicians reap the greatest benefits from the medical brain drain to China. The victims are both the physicians who stay behind in Taiwan, treating spiraling numbers of patients, and Taiwanese patients themselves….

          In order to guarantee the welfare of Taiwan’s population of 23.4 million and to prevent a scenario in which physicians genuinely can’t be found in Taiwan, the island’s healthcare environment and NHI system must change – that much is sure.

          Not sometime in the future, but now.”

          http://english.cw.com.tw/article.do?action=show&id=14338&offset=0

  9. John Franco :

    I invite the readers to look at Taiwan’s own NHI website regarding how it calculates its premiums http://www.nhi.gov.tw/English/webdata/webdata.aspx?menu=11&menu_id=591&wd_ID=591&webdata_id=3153
    and let decide for yourselves whether I am confused or misinformed as to whether it simply assesses a payroll tax or instead uses an income based premium for both individuals and employers

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