Man charged with creating single-payer finance system faces challenge

December 06, 2013

VTDigger

Finding a way to pay for a health care system that doesn’t yet exist is a daunting task.

And as Vermont marches toward single-payer health care by 2017, that task largely falls to Michael Costa, the state’s deputy director of health care reform. Speaking to an audience of tax and insurance professionals Friday at the 41st annual Vermont Tax Seminar in Burlington, Costa mapped out his plan for getting there.

Preliminary studies peg the cost at $1.6 billion of public money, though Costa describes that less as a bull’s-eye and more as an approximate range. That large sum is not new spending, he says, but a rearrangement of costs that people already pay on the private market.

Getting that message across, Costa says, is supremely difficult considering the opacity of the current employer-based health insurance system.

Timeline
In early 2014, Costa will offer several financing structures for the Legislature to consider. Lawmakers will then spend the session crunching numbers to assess the relative impact of each option on Vermont residents, businesses and government.

Meanwhile, all stakeholders will be talking a lot about the benefits assumptions built into the alternatives. For example, will it cover dental care? At what rate will the system reimburse doctors? Will the state hire a private insurance carrier for the job, or take on the task itself?

With feedback from the Legislature, Costa and his team will go back to the drawing board. In spring 2015, the administration will propose a single financing plan to the Legislature, along with some alternative benefits packages.

A year later, in the 2016 legislative session — and, Costa hopes, with an approved financing plan in place — his colleagues on the policy side will propose a final benefits package for legislative approval.

With financing and benefits plans in place, the Legislature will appropriate funds in 2016 to spend the following year.

Meanwhile, the Green Mountain Care Board — the regulatory agency created to oversee almost all aspects of the state’s new health policies — will be watching.

As long as the board finds no “negative aggregate impact on Vermont’s economy,” that financing is sustainable and that the program generally meets its cost-containment goals, board members will pull the trigger to implement universal health care in 2017.

Challenges and questions
Describing what Vermont’s universal health care will look like is difficult because it doesn’t yet exist.

Costa could only talk about processes and potentials when he was peppered with questions from accountants and attorneys following his presentation at the tax seminar.

Will the package include prescription drug benefits? Will retirees on Medicare be overburdened or underserved? Will there be enough physicians to adequately serve all the people who suddenly will be getting preventive and medical care? Will we be able to keep our doctors?

“That’s up to the Legislature,” Costa responded several times. “That’s a great question. … That’s a legitimate concern.”

According to the timeline, however, there won’t likely be any firm answers, reassurances or even disappointments for at least a year.

The other major challenge, Costa says, is explaining single-payer health care to people who understand very little about the employer-based health insurance they have now.

Most people don’t see what their bosses pay for their health care, Costa said. That makes it very difficult for people to evaluate how their costs might change under a new health care financing and delivery system.

To illustrate his point, Costa described a small, family-run landscaping company. The three brothers who run it don’t have health insurance benefits through their business, and they fear that single-payer will impose new taxes that might put them out of business.

All three brothers are married to women who work in the local school system, Costa said. That drew a chuckle from the crowd in anticipation of Costa’s punchline: The school contributes a significant percentage toward each family’s roughly $25,000 annual health insurance plan.

“If you were to consider health care benefits foregone wages — which I do, which a lot of economists do — you would say, ‘Gee, they’re paying a lot of money for their health care,’” Costa said. But his landscaper friend’s perception is that he’s paying nothing.

Costa said if the state were to implement a system whereby that family’s health care costs were greatly reduced, the landscaper’s family might “win.” But instead of feeling like they were getting something free, they would see the cost.

“At the end of the day … do they consider themselves winners or losers?” he asked, rhetorically. He suspects they would win from single-payer, whether they recognize it or not.

But that’s not to say he assumes no one will lose under the new regime. He said he doesn’t see how such a sweeping policy could be changed without someone paying more.

Costa’s goal in the Legislature this spring is to have an informed conversation about how to figure out who the winners and losers will be after a transition to single-payer, because he knows there will be both.