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.

Leave a Reply

16 Comments on "John Franco: Debunking the ‘Plan B’ taboo"

1000

Comment Policy

VTDigger.org requires that all commenters identify themselves by their authentic first and last names. Initials, pseudonyms or screen names are not permissible.

No personal harassment, abuse, or hate speech is permitted. Be succinct and to the point. If your comment is over 500 words, consider sending a commentary instead.

We personally review and moderate every comment that is posted here. This takes a lot of time; please consider donating to keep the conversation productive and informative.

The purpose of this policy is to encourage a civil discourse among readers who are willing to stand behind their identities and their comments. VTDigger has created a safe zone for readers who wish to engage in a thoughtful discussion on a range of subjects. We hope you join the conversation.

Privacy policy
Sort by:   newest | oldest | most voted
Dave Bellini
2 years 4 months ago

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 years 4 months ago
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… Read more »
Dave Bellini
2 years 4 months ago

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
2 years 4 months ago

“What’s the plan?”

Do you have a better plan?

Ethan Parke
2 years 4 months ago
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,… Read more »
John McClaughry
2 years 4 months ago

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.

Lance Hagen
2 years 4 months ago

“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.

Kathy Callaghan
2 years 4 months ago

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
2 years 4 months ago
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… Read more »
Walter Carpenter
2 years 4 months ago

“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?

Moshe Braner
2 years 4 months ago

“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”)?

Ida Hellander
2 years 4 months ago

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
2 years 4 months ago

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
2 years 4 months ago

“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
2 years 4 months ago
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… Read more »
John Franco
2 years 4 months ago

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

wpDiscuz
Thanks for reporting an error with the story, "John Franco: Debunking the ‘Plan B’ taboo"