News conference video Part 1
Gov. Peter Shumlin will not pursue a single payer health care plan this legislative session or in the near future.
The governor had pinned his hopes on making Vermont the first state in the nation to implement a single payer system.
Three years ago, Shumlin touted Act 48, the framework for single payer as an unparalleled political achievement. Wednesday, the governor said economic conditions precluded making that dream a reality.
“We obviously wish that the numbers were different. It’s a huge disappointment for me, it’s the biggest disappointment of my public service so far, but we’ll make progress by pushing forward in other ways,” Shumlin said.
Reaction was swift and intense. Business leaders lauded his pragmatism while supporters expressed dismay that the governor flinched at what they saw as a crucial moment for health reform. Many were surprised by Shumlin’s announcement because he had said he would reveal his plans after the Christmas holiday.
Even members of the Governor’s Business Council on Health Care Reform and the Governor’s Consumer Advisory Council were surprised by the news.
The governor kept the development of his financing plan under wraps for several years and had come under increasing pressure to include members of the public in the process. He waited, however, until after the election to make his move. The delay may have cost him voter support as he narrowly defeated an relatively unknown Republican challenger, Scott Milne, by only 2,434 votes in November.
His health care reform team ultimately came to the conclusion that moving ahead with single payer was financially unfeasible as they pushed through an economic simulation model over the past several weeks. By Friday, it became clear that the cost of the plan would be too rich for Vermonters’ pocketbooks. Shumlin said he finalized his decision to pull the plug on single payer Monday.
Shumlin said that the latest economic modeling showed the cost of providing high quality health coverage to all Vermonters would be prohibitive.
The price tag for a publicly financed universal health care system turned out to be $2.6 billion, not the $1.6 billion to $2.2 billion that Shumlin and his team originally believed. The objective was to replace what Vermonters now pay in premiums with taxes.
Meanwhile, the continued slow economic recovery has created new budget pressures on state government, including an anticipated $75 million reduction in revenues over fiscal years 2016 and 2017.
The Shumlin administration revealed Wednesday that his health care reform team was considering an 11.5 percent payroll tax on employers and an income tax with a sliding scale from 0 percent to 9.5 percent, depending on income and family size. The maximum income tax a family would pay was capped at $27,500 per household. In previous news reports about the single payer financing plan, the payroll percentage was pegged at 5 percent and 8 percent, respectively.
Small businesses would have been hurt by the plan, officials said, without a costly transition period that would have insulated small employers in the first three years of the program.
The benefits plan the Shumlin administration chose had an actuarial value of 94 percent, meaning those covered would be responsible for 6 percent of the costs. Over the past two weeks, the administration modeled scenarios with lower actuarial values, but decided that would not be equitable.
Twenty-two percent of Vermonters currently have coverage at a 95 percent actuarial value and another 25 percent are between 90 percent and 95 percent.
“It did not seem feasible for that many Vermonters to take a hit on out-of-pocket costs,” said Robin Lunge, director of health reform. “It would not have been fair.”
At one point during a new conference that lasted more than an hour, Shumlin said he would continue to “advance the ball on affordable universal health care” without asking the Legislature to pass a “fantasy package that would hurt Vermont’s economy at this time.”
Assumptions from reports in 2011 and 2013 suggested the state would receive $262 million through a waiver to the federal Affordable Care Act. That estimate has been revised down to $161 million, according to Michael Costa, deputy director of health care reform.
Previous reports also assumed administrative savings that Costa now says would not be practical to achieve in the short term.
The state assumed that $637 million in Medicaid funding would have been available to help pay for the program, but current state and Medicaid funding is estimated to fall $150 million short of that estimate.
“Things change,” Costa said. “It wasn’t one thing it was those things cumulatively that make this an extraordinarily difficult task for Vermont and Vermont’s economy.”
In 2011, Professor William Hsiao, a Harvard health care economist, told lawmakers that a single payer system would have to be financially supported through a payroll tax. He predicted the tax would be 12.5 percent in 2015 and 11.6 percent in 2019, including a 3 percent contribution from employees.
News conference video Part 2
Shumlin said he would continue to work with the Green Mountain Care Board to slow the growth in health care spending. To that end, the state will also pursue a federal all-payer waiver to reduce the cost shift by equalizing payments from government programs and private payers.
The governor also wants to build on the promise of Vermont’s Blueprint for Health managed care program, by increasing the reimbursements rates for that program.
He will also push to move the public-private partnership Vermont Information Technology Leaders, under the purview of the Green Mountain Care Board, in order to empower the board to streamline medical record-keeping.
“If we pushed for single payer financing when the timing isn’t right it would likely hurt our economy, and it is not good for Vermont, and it would not be good for health care reform,” Shumlin said. “It could set back for years and years all the hard work toward the important goal of universal publicly financed health care for all.”
News conference video Part 3
Reaction from advocates, health care providers, business, opponents and politicians
James Haslam, who spearheaded the effort to pass Act 48 in 2011 and now leads the Vermont Workers Center, was outraged by the governor’s decision. He said it was a “slap in the face of people that worked really hard” to advocate for the issue.
“Right now we have a health care crisis in this state under the current system,” Haslam said, “People are not getting the care they need.
“Clearly a political decision was made not to raise adequate revenue from big businesses and from wealthy folks to fund this thing,” Haslam continued. “The money is there. It’s just the political will to raise the taxes. We don’t buy the idea that this was something we could do up until Friday and then all of the sudden we can’t do it.”
But many in the business community, including members of the governor’s business advisory council on health care reform, applauded Shumlin’s pragmatism in acknowledging the economic dislocation that could result.
Andrew Brewer, owner of Onion River Sports in Montpelier and a member of the business council, said the administration’s attempt at a single payer plan was not a wasted effort.
“I think overall he made the right decision,” Brewer said. “I think the exercise was a good idea.”
Brewer also defended the timing of the announcement. “There were a lot of calls that maybe the plan was already baked a year ago, and he was just waiting until after the election,” he said. “I don’t know about that unless we were victims of elaborate theater for the last several months with fake numbers up on the screen. No, we watched them work very, very hard to come up with this and I think we all appreciate this.”
Win Smith, owner of Sugarbush resort, said an 11.5 percent payroll tax would have pushed his health care costs up by 61 percent.
Smith has 162 employees, all of whom have insurance through the company. Some workers at the resort opt out because they are on a spouse’s plan, some are part-time or seasonal workers who don’t qualify for the company plan. Sugarbush would have been subject to a health care payroll tax for all of those workers and that would have inflated Smith’s overall costs, he said.
“I’m glad we’re not jumping into things to be politically correct, but we’re really thoughtfully doing it,” Smith said.
Burlington developer Ernie Pomerleau, also a member of the governor’s business advisory council, praised Shumlin for his “realism” and praised the administration’s work reining in health care costs through the Green Mountain Care Board.
“From a business perspective … they’re hard numbers to swallow,” he said, adding that the business community will continue to support reforms toward a “fairer” system.
Longtime single payer advocate Deb Richter with the group Vermont Health Care for All said she was disappointed, but still has faith in Shumlin and his team.
“There isn’t any other politician that could have gotten this done,” Richter said. “Not any of the Democrats that ran [in the 2010 Democratic primary] could get this done, in my view.
“The economics of it at this point are very difficult, but my feeling is that if this is something we do in smaller manageable chunks we can get it done, and it’s something that will even be appealing to the business community,” Richter said.
She is still optimistic that Vermont will become the first state in the U.S. to move to a single payer program, and after 26 years of advocacy for public universal health care, Richter said she’s learned to be patient.
House Speaker Shap Smith said the governor’s decision “reflects the realities and difficulty of financing health care now, and the dislocation that would happen in changing that financing.
“My hope is that we can figure out a way to give Vermonters some relief from our high cost of health care and make it easier for them to have access to health care while we can’t move ahead with single payer,” Speaker Smith said. “Maybe we can find out a way to make health care more easily accessible for Vermonters.”
Speaker Smith’s top priority for the new legislative session is education finance reform, and he says health care costs are tied to that. “In some way, it gives more runway for the education issues; in some ways, it takes away one of the potential solutions for health care costs,” he said.
John Campbell, Senate president pro tem, said the biggest concern for most people was how much it would cost and who would pay for it.
“I have to commend the governor for at least trying and going as far as he did,” Campbell said. “He could have punted it many times over this long road, and he didn’t because he thought there was a ray of hope he could pull it off fiscally.”
At least one lawmaker believes that the Legislature could seek to advance single payer on its own.
Sen. Anthony Pollina, D/P/W-Washington, said it’s premature to write off significant health care reform this session.
“I think there are ways Vermonters can put their heads together and build upon what we have in a way that really works,” Pollina said. “I think that the governor saying he can’t make it happen does not translate into thinking that the Legislature can’t make it happen because he has a credibility problem, and I don’t think the Legislature does.”
For Republicans, it was an I-told-you-so opportunity. They openly chastised the governor for not being more realistic.
GOP gubernatorial candidate Scott Milne, who has yet to concede to Shumlin, said toward the end of his campaign that single payer idea was “dead” and speculated that Shumlin would announce as much after the election. Because neither Milne nor Shumlin received 50 percent of the vote, lawmakers will choose the next governor Jan. 8. Legislators can vote for any of the top three finishers, Shumlin, Milne or Libertarian Dan Feliciano.
“It just seemed like it was implausible that it was going to go forward,” Milne said.
“I think, unfortunately for Vermonters, that what Gov. Shumlin has done is surround himself with a bunch of people who are all drinking from the same Kool-Aid,” he said.
Feliciano said he hopes this means the single payer idea will be off the table for good. “There’s other solutions to reduce health care costs rather than just going to single payer,” he said.
The Vermont Association of Hospitals and Health Systems praised the governor’s decision. Its president, Bea Grause, said in a statement that her organization will work with the governor and the Green Mountain Care Board on reforms that “provide coverage for all Vermonters and make health insurance more affordable without damaging Vermont’s economy.”
Green Mountain Care Board Chairman Al Gobeille issued a statement in support of Shumlin’s determination that single payer isn’t “feasible” currently, but pledged to continue the board’s efforts to reduce the growth in health care costs.
“These efforts are not easy and are not a full solution to what ails our health care system, but they are necessary and the Green Mountain Care Board stands ready to continue this important work,” he said.
Republican Lt. Gov. Phil Scott supported the governor’s decision but also took a shot at the state’s problematic health insurance exchange.
“The governor made the right decision today, especially in light of the mismanagement of Vermont Health Connect and the need to put our full focus on growing Vermont’s economy,” Scott said in a statement. “In that vein, I both hope and expect we will all work together to make sure the exchange works, truly lowers the cost of health care, and insures more Vermonters without taxing people out of the State.”
Darcie Johnston of the anti-single payer group Vermonters for Health Care Freedom, said she thinks the governor evinced a renewed sense of purpose and confidence she hadn’t seen from him in months. “This monkey is now off his back,” Johnston said.
News conference video Part 4
Editor’s note: VTDigger’s Laura Krantz contributed to this report.