Lawmakers in the next biennium are scheduled to take up the financing of the Green Mountain Care single payer health care system. That has already generated much discussion, including criticism from Rutland City Treasurer Wendy Wilton.
What Is A Single Payer?
The best definition I have come across is that by Harvard economist William Hsiao: “one insurance fund and a uniform benefit package for all non-Medicare and Medicaid beneficiaries.”
This saves money in two ways. A single insurance fund creates a consolidated risk pool which eliminates all the jockeying by insurers trying to sell coverage to the healthy and avoid the sick. The uniform benefit package provides coverage which is universal, comprehensive and portable (not dependent on your employment). By streamlining coverage it creates administrative savings by reliving providers of the burden of having to administer differing coverage plans.
Medicare and Medicare are excluded only because of history. They are distinct federally financed programs whose full cost no state is in a position to take over. However they will be coordinated with the single payer to the degree possible in what is called a “single pipe.”
How Big Is The Single Insurance Fund?
It would cover about 400 thousand Vermonters – the 355 thousand currently privately insured plus the 47,500 uninsured. Our single payer would be smaller than the number of people covered by Blue Cross of North Dakota.
But Isn’t The Government The Insurer?
Not necessarily. When George Aiken brought universal electric service to Vermont, he created electric cooperatives rather than a state power authority.
Maybe we need to channel a little George Aiken in providing universal health insurance. A mutual or cooperative insurer could serve as the single insurance fund. Nova Scotia’s single payer is provided by its Blue Cross plan (Medavie Blue Cross). By having an insurer self governed by the members – all those covered by Green Mountain Care — we would go a long way to eliminating the specter of “government rationing.” Think of it as a hybrid of a school district and an electric cooperative. Its members could have the authority to approve the annual budget, any change to the benefits, and any changes in payroll, income or other taxes, and would make the appropriate choices in a self governing democracy.
How Much Will The Uniform Benefit Package Cost?
The answer is less that what we are already spending in private insurance premiums. A good benchmark is about 1/3 of our total health spending in any given year. So if our spending reaching $6 billion by 2014 or 2015 the single payer would cost about $2 billion.
How do we know that? Dr. Hsiao recommended a benefit package equal to the average coverage now enjoyed by privately insured Vermonters. We are currently paying about $1.7 billion in private insurance premiums for comparable levels of coverage. When we add the cost of insuring the uninsured and increase the coverage of those underinsured – about $200 million – and subtract the short term administrative savings generated – about $250 million — we get a net cost of about $1.65 billion.
If we’re smart about it, the credits from the federal Affordable Care Act could reduce the cost paid by Vermonters by another $300 to $400 million, for a net cost for a single payer of about $1.3 billion. That’s $350 million less than the cost of private coverage. And that is after we have covered everyone.
This is a significant difference from the numbers bandied about by single payer opponents such as Ms. Wilton. Her analysis errs because it
• uses a program cost number of over $3 billion which is almost double the actual cost. This sum is actually close to the amount we will be spending in private premiums by 2020 if we do nothing.
• 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;
• adds to the cost of the single payer the co-payments and deductibles which would be paid out of pocket;
• 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;
• makes no allowance for any of the new federal funds from the Affordable Care Act; and
• most importantly, assumes rate of growth in health care spending significantly higher than that even under a do-nothing scenario.
The Cost of Doing Nothing Is Unacceptable
In 1999 Vermont spent $2 billion a year on health care. By 2010 this grew to $5 billion annually. In other words, our do-nothing “business plan” was to spend an additional $3 billion a year, but still not cover everyone.
If we continue to do nothing, our spending will have doubled again to $10 billion by 2020. Our private health insurance premiums will have ballooned to $3.4 billion.
And we still won’t have covered everyone.
John Franco is a Burlington attorney who was been active in health care reform for over 25 years.
NOTE: This is the same article that appeared in the Times Argus. However, a typo in paragraph ten used the words "300 billion to 400 billion." It should have said "300 million to 400 million" and it has been corrected in this version.