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.