A new report on the projected savings of single-payer health care in Vermont represents a green light for planners putting together the new system.
The report from the University of Massachusetts Medical School confirms the working assumptions contained in previous studies: that a new health care system could save many millions of dollars, which could then be used to extend health care to those who lack it now and to improve the coverage of those who at present are underinsured. And even at that, the new system would save money.
The report found that in the first three years of a single-payer system, Vermont would save a total of $281 million — or about $93 million annually. Some lawmakers have argued that savings at that level are minuscule relative to the total spent on health care each year, but health care planners say many of the gains would be invested back into the system in the form of expanded and improved coverage. Robin Lunge, director of health care reform for the Shumlin administration, estimated that gains from the new system would actually amount to about $547 million annually.
Savings will be achieved not just from a new payment scheme. Last week the federal government approved a plan by Dartmouth-Hitchcock, Fletcher Allen and most of Vermont’s other hospitals, and some clinics and practices, to create an accountable care organization called OneCare Vermont. This new organization would be established to coordinate care for 42,000 Medicare patients in Vermont. The goal is to switch from the traditional fee-for-service system, which rewards providers for every service they provide, to a system that compensates providers more broadly for the number of patients treated. Doctors and hospitals would have an incentive to keep people well while avoiding unnecessary treatments.
The establishment of OneCare Vermont ought to foreshadow a larger shift away from fee-for-service for the broader population. In the future accountable care organizations could play a major role in containing costs and providing seamless, coordinated care.
Skeptics remain. The health insurance industry has a stake in preserving the insurance model for health care coverage. But it is precisely the elimination of insurance that promises savings through the elimination of paperwork, red tape and insurance company profits.
If the UMass report validates the financing of the system at the macro level, the actual funding mechanism at the micro level remains to be devised. Mark Larson, commissioner of Vermont health access, says that individuals now pay about $2.2 billion in premiums. If the system is financed publicly, it would cost $1.6 billion, he says. The difference is that the money would be raised through some combination of business and individual taxes. We would be paying less, but we would be paying through a different mechanism.
The Shumlin administration has put off development of a funding system, knowing that it is a politically volatile issue. For example, small businesses that now do not provide coverage may be hit with payroll taxes for the first time. Members of the Legislature can be expected to do some spade work on the financing question this year.
The health care system has many moving parts, and policymakers will want to move carefully in order not to damage a system that is already better than in other parts of the country. After all, the health of Vermont’s children continues to rank at the top among the states.
But even if caution is in order, firmness of purpose is also important among those in Vermont carrying out reforms that may be the most significant legacy of Gov. Peter Shumlin. The administration and Legislature can be expected to press ahead with important allies among providers, especially Fletcher Allen and Dartmouth-Hitchcock. With Obamacare charting changes at the federal level and Shumlincare advancing in Vermont, there has never been a more promising time for real reform.