Editor’s note: This op-ed is by Jeanne Keller, a health policy expert based in Burlington.
A helpful FAQ has been posted for the Hsiao report, and it brings some key features into high relief. In particular: FAQ #6: “How do you use the savings?”
The answer tallies projected gross savings, based on Hsiao’s proposal and economic modeling, as $590,000,000 ($590 million) in the first year, in 2010 dollars. Some of these are one-time savings, and some are structural savings. (The sources of these projected savings are enumerated in answer #5, though neither the FAQ nor the report break out the one-time savings from structural savings and quantify them).
So, to return to the original FAQ, how are the savings used? FAQ #6 provides this list:
- $300,000,000 ($300 million) to cover the uninsured and bring all others up to the Standard Benefits benefit level;
- $120,000,000 ($120 million) to cover dental and vision;
- $50,000,000 ($50 million) for physician recruitment and retention, and improvements to community hospitals
Says the FAQ: “This leaves approximately $100 million in savings that are unused.“
Got that? When accounting for the costs of universal coverage by a single payer, Vermont will spend $470,000,000 in new expenditures, leaving $120 million of the $590 million as “unused” in Option 3. Unused means “savings.”
In other words, when the dust clears, if everythingin Hsiao’s proposed Option 3 is implemented as he presented, he predicts that we’ll spend “approximately $100 million” less.
That’s still not chump change, but it’s not $500 million.
So could everyone please start using the FAQ’s $100 million, instead of $500 million, when talking about how much the plan is projected to “save?”
According to BISHCA, Vermont’s health care expenditures in 2010 dollars total $5,020,462,000. A reduction in spending of $100,000,000 comes to 1.99 percent
$100 million in projected savings, a 2 percent reduction in annual costs. That’s what Hsiao’s report says.
And there is another important detail to note: in the study itself (page 113), the charts displaying projected expenditures and the payroll tax needed to finance the program, having a possible error rate of “plus or minus 15 percent.
The devil indeed is in the details. The Governor and legislature should step very carefully as they attempt to implement a plan of this magnitude and delicacy.
- Dr. Hsiao has publicly stated that everything in the proposal has to be implemented as written in order to garner the savings/expenditures/tax revenues as projected. Everything. It is not a menu to choose from.
- The sizable (+/- 15 percent) margin of error in those projections of costs, saving and revenues argues for careful and continued modeling every step of the way; even implementing the proposal 100 percent as written may not turn out as projected
- By its very nature, the proposal eliminates the “safety net” of a private insurance market; will there be a Plan B in case things do not turn out as expected?
These issues are all on my mind as I watch the legislature address the Governor’s translation of the Hsiao report into proposed legislation.
