Editor’s note: This commentary is by John Franco, a Burlington attorney who has been active in health care reform for over 25 years.
I last wrote that for a payroll tax of about 1 percent we could both attain universal coverage and relieve almost all Vermont employers of the burden of health insurance by using the exchange to maximize the drawdown of federal subsidies.
But how does that get us to a single payer?
Blue Cross/Blue Shield of Vermont would sort of be a single payer. By underwriting over 90 percent of the exchange coverage, which in turn would relieve the coverage obligation for nearly 20,000 Vermont employers, it would look a lot like Nova Scotia’s single-payer which is run by their Blue Cross plan. But that would still leave Vermont’s 725 largest employers who insure over half of all privately covered Vermonters. What about them?
What’s a single payer?
The Hsiao Report defined a Vermont single payer as “one insurance fund and a uniform benefit package for all non-Medicare and Medicaid beneficiaries.” The single fund is the key. It eliminates once and for all the practice of avoiding covering high-cost patients. It stabilizes the risk because no single high cost episode can have a significant impact on the costs of a large pool. It creates better bargaining power with providers. It administratively streamlines the system because administrative costs are disproportionately higher for each discrete, smaller plan. And with global budgeting, Vermont can achieve significant immediate health care savings by fundamentally changing the way we pay for hospital and other related services.
Grow the single payer by pooling
In the mid 1980s, insurers in Rochester, New York, initiated a “Hospital Experimental Payment Program” which pooled a portion of their premiums. The pool was then used to pay for hospital services under a prospective-payment, global budgeting system. According to a 1993 GAO report, it reduced hospitalization costs by a third.
Rochester had a single payer. The pooling created a single insurance fund which was the single payer for certain covered services. This is why the failure to start global budgeting at Rutland Regional Medical Center this year with a similar pooling approach was such a missed opportunity. But because Rochester’s was a voluntary program, the hospitals withdrew when deregulation went into effect and pastures were greener elsewhere. For this reason, our approach has to be mandatory.
Third-party payers pay a tax into the pool
This is a tax financed single payer. The difference is that the tax is on the third-party payers.
In Vermont, Green Mountain Care would be the pool. It would be exclusively authorized to pay health care providers for those services covered by GMC. Third party payers — including exchange insurers — would be required to pay into the pool, but in return would no longer have responsibility for the coverage. So if, for example, hospital services were covered by GMC, the insurers would pay into GMC to cover hospital services, and hospital services would then be the responsibility of GMC. Mechanically this pooling would be best accomplished by a tax on each third-party payer in an amount for each Vermont resident they cover.
Flat premium assessments are regressive. Many Vermont employers such as UVM, the City of Burlington, and some school districts now use income-sensitive premiums for their employee contributions.
Vermont’s Medicaid spending on covered services which is already tax financed should be rolled into the GMC pool as well, further enhancing the strength of the pool and further streamlining administrative expenses for savings to taxpayers. Hopefully we could eventually also coax Medicare to join in as well.
How broad should GMC’s scope of services be? It should target the health care system’s cost drivers, such as hospital and related services and chronic conditions. Other services which are not major cost drivers should remain part of required minimum coverage as they are now, but need not necessarily be part of the single insurance fund.
Pooling avoids interference with collective bargaining agreements, along with other complications
Orthodox single payer financing runs smack dab into most collective bargaining agreements. For example, the health plan recently agreed to in the Chittenden County Transportation Authority strike requires no employee contribution by the Teamster members at all. A single payer financing approach that has union members paying a quarter of the cost of coverage through an income tax would substantially undermine that. The pooling approach avoids this conflict. It does not change the negotiated proportional contribution to their plans. Instead it changes the way plans secure medical services for their members.
For this same reason this tax-based pooling approach saves the single payer from ERISA pre-emption, and does not conflict with multi-employer multi-state plans found in the building trades, or out-of-state employer or out-of–state retirement plans that cover Vermonters. The difference is that to the extent that those plans cover Vermont residents, they pay into the single payer pool.
Require income-sensitive premiums
Flat premium assessments are regressive. Many Vermont employers such as UVM, the City of Burlington, and some school districts now use income-sensitive premiums for their employee contributions. Unless governed by a collective bargaining agreement or otherwise prohibited by law, this should be required of all Vermont employer plans.
The digestible alternative
So there you have it.
For a tax of about 1 percent of payroll it is possible to attain the holy grail of universal health insurance, to have coverage based on ability to pay, and to enjoy the cost savings benefits of a tax-funded single payer insurance fund, in a form which is politically and economically digestible, without the complexity and dangers of widespread economic dislocation of other approaches.
