In debate after debate, Sen. Peter Shumlin, the Democrat running for governor, has touted his No. 1 initiative for pulling the state’s economy out of the ditch: curbing out-of-control health care costs.
Shumlin is a passionate advocate for a universal, government-administered health care system. He believes that a so-called “single-payer” system would contain skyrocketing medical costs that are eating into the state’s budget, business revenues and family incomes.
He cites statistics at will. Here’s a sampling: Health care costs are going up $1 million a day in Vermont; 47,000 Vermonters are uninsured; 30 percent of all medical tests are duplicative; and we spend 12 cents to 14 cents on the dollar “chasing money around,” for billing and administrative costs.
“If we don’t tackle this one, if we’re spending $2.5 billion more in eight years, I believe we’ll bankrupt our small businesses, bankrupt our taxpayers,” Shumlin told members of the Vermont League of Cities and Towns last week.
Shumlin’s plan, as outlined in his economic platform,“Vision for Vermont,” would be a radical shift from the current system. Shumlin would take “health insurance profits out of the picture” by eliminating insurers from the system. He advocates for a one-stop-shop health care system in which patients can use a plastic swipe card, like a credit card, that holds all of their medical data on a computer chip and keeps track of billing information.
Under Shumlin’s plan, everyone – Medicare, Medicaid, employer-insured and self-insured patients — would be part of the system. All Vermonters would have health care coverage, he says, and spending would go down.
He writes: “All too often Vermonters don’t get the care they need because of unaffordable deductibles, copays and coinsurance.”
The savings? Shumlin cites a Lewin Group report that states a single payer health system would reduce system-wide costs in Vermont by 5 percent. In 2001, when the study was conducted, the firm determined a single-payer system would reduce net health spending by $118 million. The current cost of health care is $4.9 billion; it is expected to increase to $5.9 billion by 2012, according to the Department of Banking, Insurance, Securities and Health Care Administration.
The current cost of health care is $4.9 billion; it is expected to increase to $5.9 billion by 2012.
Never mind that no other state in the nation has attempted such a major change in health care administration. Vermont can lead the nation in this effort, Shumlin says. “I support, and will do everything in my power to pass, a single-payer health care plan that gets health insurance off the backs of our employers and off our property tax base,” Shumlin said.
Does it sound too good to be true? The answer depends on whom you ask.
One thing is clear, though: The road to a single-payer system is fraught with political, legal, financial and logistical obstacles. Navigating past the problems would be no easy task – even for Shumlin, who repeats the mantra — “I’m the guy who gets tough things done” – whenever the subject of health care comes up.
Still, Shumlin has a big-time pro in his corner, thanks to Act 128, which he helped to pass in the Senate in the last legislative session. Under the new law, the Legislature hired Dr. William Hsiao, the Harvard economist who created a government-administered health care delivery system for Taiwan in the 1990s, to design three different health care plans — including a single-payer option — for the Legislature to consider in January.
In nearly every speech about health care, Shumlin invokes Hsiao’s name like a talisman.
But even if the Hsiao team devises a viable single-payer system and Shumlin is elected, and the Legislature then approves the plan after driving past the obvious potholes — moneyed self-interests of hospitals, doctors, pharmaceutical companies and federal and state bureaucracies – the state still faces a gauntlet of legal issues.
Two of the brick walls Shumlin’s single-payer vision runs up against are federal laws: the 2010 Affordable Care Act, and the Employee Retirement Income Security Act of 1974.
Two of the brick walls Shumlin’s single-payer vision runs up against are federal laws: the 2010 Affordable Care Act, and the Employee Retirement Income Security Act of 1974.
In addition to overcoming these hurdles, Vermont must obtain waivers from the federal government to incorporate Medicare and Medicaid patients into a universal health care system.
The political fray
During the primary and in the beginning of the General Election campaign, which officially began just over a month ago, Shumlin asserted that he would solve next year’s $112 million budget gap by cutting the Department of Corrections by $40 million over four years and by implementing a single-payer health care plan. In addition, he has said he would cut by 10 percent government contracts with private companies that help provide state services.
A few weeks ago, Shumlin admitted that his Corrections and health care initiatives would take at least several years to implement and that significant savings from either plan might not be realized right away. (Like his opponent, Republican Lt. Gov. Brian Dubie, Shumlin has shied away from outlining specific cuts in state government for fiscal year 2012.)
The public soft-pedaling gave the Dubie camp an opportunity to accuse Shumlin of being “dishonest” about his health care plan and of making promises he can’t keep.
“Peter Shumlin can talk up his plan for health care all he wants, but that does not make it more true,” Corry Bliss, Dubie’s campaign manager, said in a statement. “It’s all smoke aimed at covering up the fact that pursuing a single-payer system before 2017 would violate federal law, and there is no evidence that any of the promises Peter Shumlin is making have any basis in reality.”
Kate Duffy, Dubie’s communications director, claims, too, that Shumlin is “not being honest” about the cost of health care for families cited in his plan, and, at first glance, it appears she has a point. Shumlin’s plan says that coverage costs the average Vermont family $32,000 a year.
An insurance plan premium for a family of four typically costs between $10,500 and $13,500 a year, according to Christine Oliver, deputy commissioner of Banking, Insurance, Securities and Health Care Administration.
The problem is one of semantics, according to Alex MacLean, Shumlin’s campaign manager. The plan should have stated that the total cost of health care for a family of four is $32,000 (when additional non-premium costs are also included.) MacLean explained that they arrived at the figure by dividing the total number of Vermonters (620,000) by the total annual cost of health care ($5.2 billion), which includes taxes, fees, out-of-pocket expenses, deductibles, premiums, payments by insurers and government agencies. Answer? $8,400. Multiply that number by four, and you get … $33,600. The number is still off, but MacLean insists “we were in no way lying.”
Dubie’s health care strategy is an extension of the existing system. He wants to reform malpractice law, reduce administrative costs, manage chronic disease and promote healthy living.
Shumlin characterizes Dubie’s approach as more of the same, and at last week’s appearance in front of the League, he disparaged the new federal bill, the Affordable Care Act, and his opponent’s faith in the current system. “I ask you this, how many of those here think Washington has helped to save us from ourselves on health care — raise your hand? That’s Brian’s plan. It’s a bill that’s going to make matters worse, not better.”
The Dubie campaign asserts that Shumlin is dissing a bill that the Vermont congressional delegation has supported.
The waiver wedge
Dubie has used the waiver for a single-payer system as a wedge issue for good reason. He’s right about its restrictions on states acting on their own. He points to Sec. 1332 of the law Congress recently passed, the Affordable Care Act, as proof. (See the end of this story for a copy of the section.) The ACA prohibits federal agencies from granting waivers (legal exemptions) to states for alternative programs until 2017.
The state needs an act of Congress to work around the new law, according to state and federal health care experts.
Shumlin’s oft-repeated retort? “This is Brian’s claim, that we can’t get a waiver until 2017,” Shumlin said. “We have a single-payer health care plan in Vermont right now, and I’m proud of it. I helped write it. It’s called Dr. Dynasaur. We’re the only state in the country that has a single-payer health care system for our children. Now we didn’t get that without a waiver. A waiver means you are exempted from the current law. That’s what it means.”
On that point, Shumlin is right, too. The state did obtain waivers for VHAP, Dr. Dynasaur and “global commitment” (a block grant that is used to support Green Mountain Care programs).
The difference this time? The state needs an act of Congress to work around the new law, according to state and federal health care experts. That’s because the Affordable Care Act specifies in Sec. 1332 that state waivers to the provisions of the law won’t be available until 2017.
In the meantime, Vermont is obliged to move ahead with the creation of “exchanges,” a program that enables individuals and small businesses to purchase health insurance at competitive rates. Medicare and Medicaid eligibility and IRS tax credit access will be built into the application system. The state must have the exchanges in place by 2014, according to Christine Oliver, deputy commissioner of the Department of Banking, Insurance, Securities and Health Care Administration.
“You have to prove to Health and Human Services that you’re able to do that by 2013 when they’ll make their determination,” Oliver said. “You cannot, by law, seek a waiver until 2017. They (Congress) … has to change the date.”
Last March, Rep. Peter Welch, D-Vt., attempted to do just that. He unsuccessfully petitioned House Speaker Nancy Pelosi to get the waiver date moved to 2014.
So, why would Pelosi, or Congress, have a change of heart in the next session?
“There are a lot of folks who are resisting health care change of any kind,” Welch said. “This was an enormously complicated bill. So there are a number of us who support state flexibility, and the argument I made was, Vermont may want to do single-payer (and) your state may want to do something else. … I don’t want states to undercut universal coverage, but as long as you give states flexibility to find a better way to accomplish the goal of universal coverage and maintain lower costs, let them do it.
So my argument in favor of the waiver was basically to empower states to take steps that they thought would work in their state.”
Sen. Bernie Sanders, I-Vt., and Sen. Patrick Leahy, D-Vt., also say they would support a new bill or amendment that would move the date for waiver applications to 2014. All three members of the congressional delegation support a national single-payer health care system. Sanders and Welch proposed single-payer provisions that failed to be considered as part of the nearly 1,000-page Affordable Care Act.
Leahy told reporter John Flowers of the Addison Independent on Monday that “the way the law (ACA) is written almost begs for some areas of experimentation, provided you still have the basic health protections that were written into it.”
Welch pointed to the global commitment waiver the state obtained in 2006 as an example. Vermont has used the block grant to fund Catamount Health and the suite of programs under Green Mountain Care to provide insurance coverage for more Vermonters. The Legislature and the Douglas administration went ahead with its plan without knowing whether the global commitment block grant would be approved. He said the state’s development of a single-payer system would be similar.
“With global commitment we took a risk, but it was based on very tough debate with advocates around the entitlement issue, but in the end this issue enabled us to take advantage of the flexibility with the confidence to in effect deliver more care within the budget,” Welch said.
Read the Kaiser Family Foundation issue brief on Vermont’s 2006 Global Commitment waiver.
Welch said now that the health care bill has passed, Congress will likely look at the waiver issue again. “The waiver argument is not about a specific health (care plan),” Welch said. “I find on the question of state flexibility there are a number of people on the Republican side who are generally supportive.”
Given the potential GOP takeover of the U.S. House, that support may be more crucial than ever.
Leahy told the Addison Independent that a repeal of the law is unlikely, however. Instead, he expects there will be some “fine-tuning” of the ACA. “You are going to have to have the flexibility, so that if a state has a better idea, they can do it,” Leahy said in an interview with reporter Flowers.
Con Hogan, who serves on the Vermont Health Care Reform Commission and is a former secretary of Vermont’s Agency of Human Services, says the law, as it applies to states, is not as rigid as it would appear.
“The law is the law, but within the law HHS and Centers for Medicare and Medicaid Services have always had some flexibilities for state-level demonstrations and tests,” Hogan said. “You will never get (waivers) if you don’t plan for them, and do the due diligence, so you are ready when there is an opening. Our congressional delegation could well be successful in opening that door.”
Flexibility for corporations has already been granted. Since ACA was signed into law last summer, the Obama administration has given out 30, one-year waivers under the new law to insurers and companies, according to The New York Times. McDonald’s was one of the corporations that was granted a waiver. The company said the new federal regulations would have forced the company to eliminate coverage for its employees, according to the report by Reed Abelson. In addition, insurers have threatened to pull out of certain markets, Abelson wrote. WellPoint, Aetna and Cigna object to new rules that would require them to sell new policies to cover seriously ill children in some states, according to the Times story.
Even if Vermont gets a waiver for ACA, however, it still has much to overcome. The ERISA law, for one thing. Hunt Blair, director of health care reform for the Department of Vermont Health Access, says states can’t regulate employers under their own insurance plans.
“That’s a hefty percentage of people who would be excluded for anything that would be included in the waiver,” Blair said.
There is also the problem of getting Medicare to agree to participate in a state program, Blair said. Not to mention “the complexity of living in a small state with permeable borders,” he said. The second most popular hospital for Vermonters is in New Hampshire (Dartmouth-Hitchcock Medical Center in Lebanon).
Blair said he is also skeptical about a single-payer system providing the panacea many Vermonters are looking for. He described it as a “religion.”
“There is plenty to do in fixing the health care system,” Blair said. “A lot of single-payer advocates think if the system were changed, everything would fall into place. I have to confess I’m a bit skeptical of that prescription. But I think there is a lot we can do to have a more singular system.”
Blair said Dr. Hsiao, who is designing health care reform plans for the state, has a tough road ahead.
“There is a big difference between Vermont and Taiwan,” Blair said. “Taiwan is an island. My sense is, he’s going to try to propose something that splits the difference – something possible under ACA and potentially set us on a path over time.”
Hogan said he thinks the country and the state will be ripe for change in a few years as health care costs continue to rise exponentially. He doesn’t see Medicare and ERISA as impossible hurdles to overcome.
“I think it’s wrong for anyone to talk about (the law) in terms of ironclad prohibitions,” Hogan said. “Things are going to constantly change on the health care front. You have to take the long view. Turning this health care ship around is a 3- to 5-year project. What appears to be a barrier today, in all probability will not be tomorrow. The world is changing fast, and our job is to get ready. You’re going to have increasing desperation about the rising cost of health care. As a result, the (national) health care bill could be open for dissection as early as next year. It’s the same kind of change scenario here in Vermont.”
Editor’s note: Con Hogan is a member of the vtdigger.org advisory board.
UPDATE: A write-through with minor copyedits and an add-in, a paragraph regarding the 2001 Lewin Group study, was posted at about 2 p.m. Oct. 15, 2010.
The waiver provision of the Affordable Care Act
SEC. 1332. WAIVER FOR STATE INNOVATION.
(a) APPLICATION.—
(1) IN GENERAL.—A State may apply to the Secretary for the waiver of all or any requirements described in paragraph (2) with respect to health insurance coverage within that State for plan years beginning on or after January 1, 2017. Such application shall—(A) be filed at such time and in such manner as the Secretary may require;(B) contain such information as the Secretary may require, including—(i) a comprehensive description of the State legislation and program to implement a plan meeting the requirements for a waiver under this section; and (ii) a 10-year budget plan for such plan that is budget neutral for the Federal Government; and (C) provide an assurance that the State has enacted the law described in subsection (b)(2).
