By John L. Franco Jr.
In a recent opinion piece, Republican Rutland City Treasurer Wendy Wilton critiqued the analysis of potential single-payer costs and savings developed for the Vermont Legislature by Harvard economist William Hsiao. Ms. Wilton purports to “prove” that a single-payer program in Vermont will be doomed from the start. Her analysis is flawed in several ways:
n She first overstates the program size by about 25,000 people. A single-payer system is defined by the Hsiao report as “one insurance fund and a uniform benefit package for all non-Medicare and Medicaid beneficiaries.” That fund would cover about 400,000 Vermonters — the 355,000 Vermonters currently privately insured plus the 47,500 uninsured — with a benefit package equal to the average coverage now enjoyed by privately insured Vermonters. That enrollment would be about the same number as those insured by Blue Cross of North Dakota.
n The cost will not remotely reach the $3.2 billion start-up cost Ms. Wilton estimates. To put her number in context, this past year Vermonters spent about $1.9 billion on private health insurance. When we subtract out programs such as workers’ compensation and other coverage, which is separate from or in addition to the coverage contemplated by the single-payer system, the premiums paid were about $1.67 billion.
n Ms. Wilton erroneously adds the cost of private supplemental insurance to the cost of the single-payer. This is like including the cost of supplemental policies sold by AARP as part of the cost of Medicare.
n She adds to the cost of the single-payer the co-payments and deductibles that would be paid out of pocket.
n She double counts administrative costs, which are already included in the baseline premium she used to estimate total costs, and does not accurately account for the accruing administrative savings identified by the Hsiao report. These were nearly $600 million in the first year and over $700 million in the second.
n She makes no allowance for any of the $400 million in new federal funds from the Affordable Care Act identified by the Hsiao report.
n Together these estimated savings and federal funds are nearly $1 billion.
n Each of her scenarios assumes a rate of growth in health care spending significantly higher than that of the Vermont Department of Banking, Insurance, Securities and Health Care Administration, whose estimates are based on the assumption that we do nothing different to control costs in the meantime.
Given her assumptions, it is little wonder the program would fail.
The health care reform just enacted by the Legislature requires rigorous examination of benefits, costs, financing and economic impacts before any single-payer program is put into place. That work is just starting. Unfortunately, Ms. Wilton’s work is more fear-mongering than serious analysis.
John L. Franco Jr. is a Burlington lawyer in private practice who is serving as special counsel to the Vermont Department of Banking, Insurance, Securities and Health Care Administration.