March 02, 2012

The American Reporter

by Randolph T. Holhut
Chief of AR Correspondents

DUMMERSTON, Vt. -- While the national media was fixated last week on the kabuki theater of the new Republican majority in the U.S. House voting to repeal last year's health care reform bill, they missed another, more important, development in Vermont.

As the House Republicans engaged in empty symbolism with its repeal vote, the Vermont Legislature took its first step toward developing a single-payer health care system that could reduce health care costs, cover more Vermonters and create up to 5,000 new jobs.

Harvard University health care economist Dr. William Hsiao was hired by the Legislature last year to come up with three possible designs for a new health care system. Hsiao and his team of 23 spent several months analyzing Vermont's health care system to come up with the most efficient, cost-effective way to deliver health care.

The plan that Hsiao outlined to lawmakers on Jan. 19 is a hybrid public/private version of single-payer health care, where one entity processes medical claims. Most employers and employees would pay for health care through a new 11 percent payroll tax, which Hsiao said would be split between the employer and employee and would not increase current costs.

In return, everyone would receive an "essential" benefits package that would cover 87 percent of medical care and 77 percent of drug expenses. There would be small co-pays for doctors' visits, but no deductibles.

Hsiao said this plan would be better than the coverage that most Vermonters have today, and would give access to health care to the 47,000 uninsured Vermonters, as well as the tens of thousands of underinsured Vermonters who are paying large amounts of money for inadequate, mediocre coverage.

The state wouldn't actually administer this single-payer system. Instead, administration of the plan would be put out to bid to private insurance companies.

At the same time, as many as 30 percent of Vermont workers who are either employed at big companies that self-insure, or who are at businesses with fewer than 10 employees, would be exempt from the proposal. Also, the Hsiao plan would not affect Medicare coverage.

Hsiao said moving to a single-payer system will help create up to 5,000 new jobs over a number of years. How? By lifting the burden of providing and administering insurance off the shoulders of businesses, giving an incentive for expansion.

There are only three major health insurance companies still doing business in Vermont - Blue Cross Blue Shield of Vermont, MVP and Cigna. All are already angling for a piece of the new health care pie.

"Given Vermont's history with reforms such as guaranteed-issue, community-rating, and the Blueprint program, it must be noted that the remaining health insurers in Vermont - especially those run as nonprofits - are likely more accustomed and potentially more open than insurers elsewhere to working with state-led regulations," wrote Hsiao in his report.

There is also talk the three companies might also offer supplemental policies, similar to the "gap" policies sold to those enrolled in Medicare, to those who can afford a higher level of coverage.

The biggest threat to public/private version of single-payer health care in not in Vermont. It's the insurance industry in the other 49 states that sees Vermont's plan as a threat. If our state somehow comes up with a workable alternative to the broken and dysfunctional system we now have, other states may follow.

"It is reasonably safe to assume that health insurance companies would oppose any major health system reform that reduces their autonomy in financing and paying for health care, increases government's role, and/or introduces new competitors to their market," Hsiao wrote.

Hsiao and his team identified at least 15 hurdles that could block Vermont health care reform, the biggest being restrictions contained in the federal health reform bill and the need to obtain a federal waiver to create its own program.

Fortunately, Vermont's congressional delegation is solidly behind this plan and will introduce legislation to do just that. Vermont already has experience in getting waivers - it has gotten waivers from Medicaid to get its share of money in a block grant for the past several years.

"If Vermont is successful in designing and implementing health care reform based on our recommendations, it will be seen as a leader in resolving the most important domestic policy issue of our time," Hsiao said.

Compared to past attempts at health care reform in Vermont, there appears to be broad support for this plan. With newly-elected Democratic Gov. Peter Shumlin and an overwhelming Democratic majority in the Legislature, there is little chance that it will be defeated. Many business leaders in the state also support the plan, and there is widespread support by Vermonters from all walks of life.

This support is a reflection of the truly messed up state of our nation's health care system and the realization that nothing is going to happen on the federal level to change it.

Once again, it's up to Vermont to lead the way for the rest of the nation.

AR Chief of Correspondents Randolph T. Holhut has been a journalist in New England for more than 30 years. He edited "The George Seldes Reader" (Barricade Books). He can be reached at