Editor’s note: This commentary is by Ifrad Islam and Laurence Eng, who lead a team of medical economics analysts in a multispecialty physician group practice in Worcester, Massachusetts. Islam holds a B.A. in Economics from Clark University and a M.S. in Health Informatics from Northeastern University. Eng holds a B.S. in Finance from University of Connecticut.
[S]ingle payer health care was within sure shot of Vermont after the gubernatorial elections of 2010, when Democratic Gov. Peter Shumlin assumed office. As the centerpiece of his campaign, the single payer revolution – universal health care coverage under one government-run insurance plan – was set to make Vermont a model for the entire nation.
However, after four years of studying and analysis, single payer was dead. The failure was accompanied by such grim rhetoric as “risk of economic shock,” threatening the future of single payer. Jaw-dropping budgetary projections that included hefty increases in tax rates left onlookers reeling. Since then, single payer advocates like Vermont Progressive Party director Kelly Mangan have spoken out about feeling betrayed. Skeptics like Jack Mozloom of the National Federation of Independent Business declared that there may never be a good time for single payer. Writer Geoffrey Norman painted a dark picture of Bernie Sanders’ vision of federally run single payer health care system on the Wall Street Journal, using Vermont’s failure as the exhibit.
Despite what has transpired, Vermont now needs to push the single payer agenda once again. Our post outlines key reasons why the so-called “Green Mountain Care” is worth another shot, perhaps with some adjustments that we recommend.
First, a few events appear to be aligning perfectly, thus making the time ripe for another attempt at single payer health care.
Nov. 8 will mark gubernatorial elections in Vermont. While Gov. Shumlin is not running for office again, three declared Democratic and two Republican candidates are competing for the top job in the state, according to Ballotpedia.org. At least two Democrats have explicitly spoken of a variation of single payer. Matt Dunne’s campaign advocates for universal primary care for all Vermonters, while Peter Galbraith plans to offer a public option on the state’s health exchange. This mentality, along with a changeover of an administration that set single payer aside, will help refuel the conversation about the merits of state-sponsored health care.
As Dr. John E McDonough writes in the New England Journal of Medicine, an April 2014 survey showed mixed opinions about the notion of single payer. Forty percent supported the initiative; 39 percent opposed it; 21 percent were undecided. While these statistics may have seemed discouraging at a time when Gov. Shumlin was trying to rally support around single payer, it importantly illustrates that a substantial portion of Vermont agreed with the idea. Though support may have declined slightly once the Shumlin administration released the financial report and officially withdrew the proposal, single payer can perhaps regain public backing with the appropriate adjustments and education.
In addition, thorough assessments and projections of expenditures are complete. As Avik Roy notes in Forbes, Harvard’s William Hsiao – who helped the Taiwanese government implement universal health care in 1995 – and a team of health economists reported on the feasibility of a single-payer system in 2011. The Shumlin administration did its own analysis. All in, there were four years of study that cost $2 million, as reported by the Wall Street Journal, which implies no further delays due to lack of information and guidance. The models may need to be tweaked in various ways, then promptly presented to the public again for approval.
2017 also marks the first year that the Section 1332 State Innovation Waiver will take effect. Cheryl Fish-Parcham writes in FamiliesUSA.org that the Waiver means that states would be authorized to divert federal funds to enact comprehensive changes in the health care delivery system. Dr. John E McDonough – a professor at the Harvard School of Public Health – described the waivers as a “statutory invitation for states to consider many sorts of unprecedented changes to health care policy within their borders, including by name the touchiest of political terrains, Medicare.”
The culmination of these factors represents an aligning of the single payer stars, and an ideal opportunity to get this initiative on the ballot once more.
To curb concerns about provider reimbursement, the state’s single payer plan should consider starting off the program by paying physicians and hospitals well above Medicare rates, in order to reduce the shock of lost revenue from higher-paying private plans.
Another major reason for reattempting single payer rests on reimbursement. More so than ever before, there is an acute focus on reimbursement for health care products and services – one of the very issues that single payer promises to right-size.
Consider for example a report on provider price variation published this year by the Health Policy Commission in Massachusetts. The key finding of the report: hospital and physician prices can vary widely for the same services, and higher prices are not associated with higher quality of care. This is a significant contributor to unwarranted health care spending growth, thanks to both higher prices for services, as well as larger share of services being performed by more expensive providers.
The state-commissioned 2011 single payer assessment by William Hsiao, Jonathan Gruber and Steven Kappel, suggests a uniform payment system for all providers. The authors recommend a combination of pay-for-performance, capitation or global budgets, and RVU-based fee schedules. In all cases, the philosophy is one of identical payment for same services across all care settings.
A single payer system would also allow the state government to negotiate prescription drug prices directly with manufacturers. This tactic could significantly curb the growth of drug prices – a phenomenon that has garnered national attention – and can alone provide fuel for the progress of the single payer agenda. Cost reports from Express Scripts indicate a 13.1 percent increase in pharmaceutical prices in 2014, followed by a 5.2 percent increase in 2015. Within the 2015 trend is an 18 percent increase in specialty drug spending among commercial patients, and a 28 percent increase among Medicare beneficiaries. Rising cost of drugs has also surfaced frequently in presidential debates, with both Republican and Democratic front-runners supporting negotiation of drug prices between Medicare and pharmaceutical companies. This may further bolster the possibility of state-level intervention, which Vermont’s single payer system will certainly ensure.
Finally, it is important to recognize that single payer in Vermont did not fail because it was necessarily impossible or financially unfeasible. As noted in much of the commentary about the withdrawal – like Dr. Gerald Friedman’s remarks in Modern Healthcare – the decision to pull the plug on this initiative was driven by politics.
Gov. Shumlin assumed office in 2010, making single payer the centerpiece of his campaign, writes Geoffrey Norman in the Wall Street Journal. Shumlin easily defeated his Republican rival in 2012, but the gubernatorial election of 2014 was much more marginal. Shumlin defeated his opponent Scott Milne by just over 1 percentage point, but since he did not receive a majority of the votes, the election was to be settled by the Legislature in January 2015. Ahead of this, he declared at a press conference that the “risk of economic shock is too high” to offer a responsible single payer plan. It would have required a sizeable tax increase for individuals and businesses, and the sticker shock would have caused significant political furor according to Dr. McDonough, something the incumbent governor could not afford given the electoral stakes.
In addition, some of the key modeling and analysis involved MIT economist Jonathan Gruber. As Noah Bierman writes in the Boston Globe, Gruber is notorious for his comments on how the Affordable Care Act depended on “the stupidity of the American voter.” This and similar remarks landed him in a four-hour congressional hearing in December 2014 where he apologized. While Gruber’s involvement in the Vermont analysis did not solely contribute to its failure, it surely added to the toxicity of the initiative.
When the politics are set aside, some experts like Dr. McDonough and Dr. Friedman argue that Green Mountain Care was in fact economically feasible and that budgetary considerations were not the main reason why it did not pass. The model certainly needs a few tweaks – that will impact the budget required for it to work – before it is brought back on the table.
According to Forbes, the actuarial value – the portion of cost covered by the insurer versus consumer out-of-pocket payments – was a key driver of the so-called “economic shock” presented by Gov. Shumlin. The state mandated a 94 percent actuarial value, compared to a 2011 Vermont average of 87 percent and that of gold plans on federal exchanges at 80 percent. More reasonable cost-sharing expectations may help ease the budgetary strains as well as contribute to reduced utilization of discretionary care.
With a single payer initiative, Vermont also needs to propose a tangible plan for the private health insurance industry and associated jobs. Some of the existing private-sector jobs may be absorbed by the now-larger state infrastructure required, while others may be eliminated. Given that these uncertainties make health plan leaders particularly nervous about significant reimbursement reform, the state should address this head on. To curb concerns about provider reimbursement, the state’s single payer plan should consider starting off the program by paying physicians and hospitals well above Medicare rates, in order to reduce the shock of lost revenue from higher-paying private plans.
In other words, a single payer plan cannot be executed in a vacuum. While all incumbent health care stakeholders may not be appeased, their concerns should be openly addressed, and curbed if possible.
To warm up to single payer once more, the public also needs to be sufficiently educated about the net impact on income. Jay Fitzgerald writes in the Boston Globe that financing for the original Vermont single payer plan was to come from income taxes as high as 9.5 percent along with an 11.5 percent employer payroll tax. The individual tax rate represented a 160 percent increase over then-current levels. While this prospect likely sent shudders through Vermonters, the public must understand that the new payments will be partially offset by the avoidance of premium contributions, and perhaps even some out-of-pocket payments. Hence the net economic impact of the increase in taxation is far less. It is the state’s duty to provide this education, if single payer is to succeed.
With the spotlight on health care cost containment growing brighter, and the focus on quality and outcomes becoming ever so intense, it is time for innovation. America needs a case study, and Vermont is ripe. The Green Mountain State should seriously consider putting this initiative to a vote once more.
