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Vermont Edges Toward Single Payer Health Care

Oct 02, 2011

Starting now, Vermont begins building a single-payer health system that will move many state residents into a publicly financed insurance program and pay hospitals, doctors and other providers a set fee to care for patients.

Proposed by the governor and passed by the Democratic-controlled legislature, the new program will replace the traditional insurance plans currently used in the state and the traditional fee-for-service reimbursements, giving the state a system different from its 49 counterparts and more like its neighbor to the north, Canada.

Many of the details of the system, including the key issue of financing, still need to be worked out and more legislation will be required to complete the transformation. But Democratic Gov. Peter Shumlin has moved quickly since taking office last January to set the state on a path to create the single-payer system, called Green Mountain Care.

"Under the plan, single payer coverage will be a right and not a privilege, and will not be connected to employment," he wrote in a recent blog post. "This is groundbreaking. But our success in guaranteeing coverage depends on our ability to control health care costs, so our plan is focused squarely on that goal."

It will be a unique endeavor; no other state has tried such a dramatic restructuring of its health care system, and national lawmakers backed away from such an option in the health care overhaul debate after vehement opposition from conservatives.

But, Vermont has been a pioneer on other progressive initiatives. It was the first state to establish civil unions for gay couples; and nearly 20 years before the federal health overhaul, Vermont reformed its insurance regulations to bar plans from turning down applicants because of preexisting medical conditions and limit rate variation. It also has one of the nation’s most generous Medicaid programs, as well as a higher percentage of insured residents and health care spending than many other states.

Shumlin recently appointed the five-member Green Mountain Care board, which had an official start date of Oct. 1. That panel will set plans for revamping the state’s health care delivery and payment system including deciding on reimbursement rates.

"Every state in the nation faces a crisis in terms of health care costs rising faster than our ability to pay," said Anya Rader Wallack, who will chair the Green Mountain board. "What's unique about Vermont is that we have a governor who has said, 'I want to fix this problem,' and he's put us on a tight timeline for fixing it."

Here are some of the issues involved: 

What would the Vermont law do?

Green Mountain Care would be a state-funded-and-managed insurance pool that would provide near-universal coverage to residents with the expectation that it would reduce health care spending. On May 26, Shumlin signed a bill that started the process. However, the process will take several years. Many key details – such as how to pay for the system – remain unresolved.

The law allows for either a completely public system or a public-private venture where the state could contract out some administrative functions to private insurers. Employers with self-insured plans (usually large companies) would be able to keep their current health coverage.

The law:

--Launches a health insurance exchange as required by the 2010 federal health care law.

--Creates pilot projects to revamp the way health care is delivered and paid for, including possible efforts to use bundled payments, where a provider or group of providers would receive a lump sum for managing specific conditions, or creating a system called an "advanced medical home" in which doctors and other health care providers work together to improve the cost and quality of primary care.

--Establishes the Green Mountain Care Board. The board will provide oversight of cost-control initiatives, review and set rates for medical procedures and design the health benefit package. It will also create a cost projection and recommend a funding plan to the legislature.

How does it fit – or not  with the federal health care law?

Vermont wants to use funds offered in the federal law to build a health insurance exchange that would provide the basis for Green Mountain Care. Under the federal law, all states will have an exchange, or insurance marketplace for individuals and small business, by 2014 – or the federal government will set one up for them. But the law also allows states to seek a waiver from the specific federal requirements for running that exchange if they show they are providing at least equal coverage and benefits another way. Vermont is seeking a waiver to pursue the single payer system and not have to run two duplicative programs.

What are the benefits?

Supporters say that a single-payer system is friendly to consumers and providers and will help reduce the rate of health-care cost increases over time. A Commonwealth Fund report concluded that such a system could cut health care spending by 25 percent after it is fully implemented in about 10 years. After adding coverage for the uninsured and expanding other services, including dental care, the system would save Vermont households and employers nearly $200 million in the first year alone. Savings would come primarily from lower administrative expenses, reduced fraud and abuse, greater delivery system integration and malpractice reform. The report also found that the system would create about 3,800 new jobs and increase the state's total economic output by more than $100 million in 2015.

Dr. David Himmelstein, a professor at the City University of New York’s School of Public Health and a proponent of a national single payer system, said: "If they follow through like they say they would, it would be a fabulous thing, an enormous gift to the nation."

What are the criticisms?

Some business owners worry about losing control over how they provide employee insurance and about the potential for more taxes. Others are concerned about legal and fiscal challenges.

In addition is the key concern about the costs for the state. The legislature had to deal with a $150 million shortfall this year. No Republican in the House and only one Republican in the Senate supported the bill. Some House Republicans blasted the governor for not dealing with the hard part -- how to finance the plan -- until after he campaigns for a second two-year term in 2012.

Meanwhile, some single-payer advocates believe that the new system does not go far enough. Himmelstein said that the law should be more explicit about not having copayments and deductibles and make a greater commitment to global budgeting, in which providers pay for a patient’s healthcare with a set fee for the year.

He also warned that private insurance could undermine government coverage in the same way that the existence of Medicare Advantage plans has prevented the general Medicare program from upgrading its coverage. “The only reason to buy private coverage when there is public coverage is if the public is not good. So it gives the insurance lobby a very strong motive to make the public insurance inadequate since that gins up business for them," Himmelstein said.

How likely is it that the program will be implemented?

The next few years will prove pivotal in laying the groundwork for implementation. During that time, opponents will be able to organize. They have worked effectively in the past to kill other efforts, including former Gov. Howard Dean’s push to create a single-payer system in 1994.

Implementation may also depend on overcoming certain legal challenges including whether the state gets waivers from the federal government for Medicaid and Medicare because the system would change how health providers are paid for services in those systems.

Vermont might also face challenges from self-insured employers, who are protected by federal law from state regulations.

How will the state pay for the system?

Vermont is just beginning to examine potential funding options, including sales, income and payroll taxes. In two years, the secretary of administration will need to recommend a financing plan and then the legislature will vote on it.

First though, the Green Mountain Care Board will have to reexamine the costs of a single payer system and then present its findings to the secretary. "The governor said he won’t ask anyone to support a public financing system until he knows that we can do a sufficient job of cost-containment," Rader Wallack said. "So, we really see it as we have to do our work immediately in order to show that the system is sustainable before we ask for endorsement of any particular financing plan."

This article has corrected to say Vermont was the first state to establish  civil unions for gay couples rather than the first state to recognize gay marriage.

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