Single-payer takes on fresh debate

January 27, 2013

Rutland Herald

By Peter Hirschfeld
Vermont press bureau

MONTPELIER — A battle of ideas will be waged with a book of numbers as the Shumlin administration this year continues to make its case for single-payer health care.

A long-awaited report unveiled by administration officials last week has become the latest touchstone in a three-year-old debate over the merits of moving to a publicly financed system of universal care. To proponents of reform, the 90-page document confirms the clarity of Gov. Peter Shumlin’s vision.

“You can cover all Vermont residents with better coverage for less money in a universal system,” Robin Lunge, director of health care reform for the Shumlin administration, told a panel of lawmakers Friday morning.

To skeptics, however, the study, commissioned at a cost of $300,000 from the University of Massachusetts Medical School, uses junk math to paper over the one question on which the future of the reform effort hinges: Who’s going to pay?

“I would immediately challenge this analysis as being misleading, quite frankly,” said Jeff Wennberg, executive director of Vermonters for Health Care Freedom, a group that has been working since about this time last year to fight single-payer. “Any representation that there are going to be savings as a result of this reform should be looked at with the most skeptical eyes.”

Wennberg’s group has little sway in the Democrat-controlled Legislature. But it lends voice to an anti-single-payer sentiment that even the most ardent reform advocates say will intensify as the movement ages.

People like Lunge will try to use findings in the new report to sustain momentum long enough to make it to single-payer, something Shumlin has said he’ll accomplish by 2017.

To Mark Larson, commissioner of Vermont Health Access, the “big story” out of the report is the savings waiting to be had in a reformed system. The report found that Vermont will, over the first three years of single-payer, save a cumulative total of $281 million.

A 2009 study performed for lawmakers by Harvard economist William Hsiao also predicted savings under a single-payer framework. Larson said the latest analysis, however, is even more credible, since it bases its actuarial assumptions on specific provisions in Act 48, the single-payer statute enacted in 2009.

“Once again, we have demonstrated that a reformed health care system could provide great value to Vermonters and reduce the cost paid by Vermonters,” Larson said.

Some lawmakers, however, said they were taken aback by the scantness of the savings. Vermont will save an average of about $93 million annually over the first three years of single-payer, according to the report. But that’s in a $6.3 billion health care system, meaning the savings amount to less than 1.5 percent annually.

“I’ve heard some people refer to that as a rounding error,” said Rep. George Till, a Jericho Democrat, medical doctor and member of the House Committee on Health Care. “You’re going to upend a system that big and that critical to our state for such a small benefit? It just seems like a big gamble for such a small payoff.”

Lunge said price comparisons alone don’t tell the story. Not only will the reformed system be cheaper, according to Lunge, it will be of a far higher quality than the one Vermont would otherwise have.

The report assumes minimum quality standards outlined in Act 48 — standards that would require the single-payer system to provide better coverage than most Vermonters enjoy now.

For example, the average coverage plan for an employee getting coverage through a small business has an actuarial value of about 72 percent. That means that the insurance company will pay, on average, 72 percent of health care costs incurred by the individual. Coverage in the single-payer system envisioned in the report, meanwhile, would have an actuarial value of 87 percent.

Additionally, Lunge said, the reformed system would extend coverage to the estimated 12,100 individuals who still won’t have insurance in 2017 — people who would otherwise continue to live without insurance. And the single-payer cost calculations also include guaranteed vision and dental for people under 18.

She said the dollar value of perks unique to the reformed system total $547 million annually, money she said should be viewed as savings that the state is reinvesting into a better health care system.

More importantly, Larson said, the reformed system allows the state to minimize the financial burden on individuals and businesses by maximizing revenue from the federal government.

Without reform, according to the report, individuals and employers will collectively pay more than $2.2 billion on insurance premiums in 2017. In a reformed system, however, those same entities would have to come up only $1.6 billion in public financing, i.e. taxes.

That’s a big tax, as Wennberg’s groups has pointed out — more than three times the amount raised by the income tax.

The administration was accused last week of shirking its statutory duty to recommend a financing plan for raising that money. Indeed, the report fails to suggest what tax ought to be used to pay for single-payer.

But Larson said the state has three years to pinpoint a precise funding mechanism. The important takeaway now, he said, is that Vermonters are already spending that money.

“Individuals will pay $2.2 billion in private premiums, or we could finance it publicly for $1.6 billion,” Larson said. “So we’re not talking about new money, we’re talking about people paying in a different format, and paying less.”

Wennberg said that sounds great, if you believe the numbers. But he said there’s good reason Vermonters shouldn’t. Specifically, he pointed to one of the biggest sources of alleged savings in the new system: the increased Medicaid match.

Larson said the unified system will allow his office to draw down $249 million in federal Medicaid dollars that Vermont would forgo under the status quo. Wennberg said there’s no reason Vermont shouldn’t be able to maximize its Medicaid eligibility in a free-market health care system.

“They have absolutely no justification for crediting that $249 million to single-payer,” Wennberg said. “They’re taking credit for things that have nothing to do with single-payer reform.”

If you back the $249 million out of the report’s model, he said, then the savings not only disappear, but the single-payer system actually will increase overall health care costs.

Larson said a universal system is uniquely positioned to squeeze out maximum Medicaid revenue. The uninsured and under-insured people that would remain in a for-profit model, Larson said, are the same population that a universal system could use to draw down federal aid.

“If everyone is enrolled, then it becomes my office’s role to figure out for whom we can get the federal Medicaid match,” Larson said. “If someone has another proposal for how to do that, I haven’t heard it.”

Another outstanding concern: whether the proposed system will pay doctors, hospitals and other providers enough to sustain a functioning health care industry.

The report assumes that providers will be compensated at 105 percent of what Medicare pays. But commercial insurers currently reimburse at an average of 152 percent of Medicare. And while the reformed scheme would do away with paltry Medicaid reimbursements — that program pays only 82 percent of Medicare — it’s unclear whether the new, blended reimbursement rate would be better or worse for doctors.

Conventional wisdom in Montpelier had been that the new report would be trotted out for its big reveal and then stored in the back rooms until 2015, when the Shumlin administration has said it will be more appropriate to begin pondering financing schemes.

But Sen. Tim Ashe, a Chittenden County Democrat/Progressive and chairman of the Senate Finance Committee, said he plans to make significant progress this session on a financing plan.

Ashe said Vermonters won’t be able to kick the tires on the single-payer proposal until they know what it means for them. And he said that means addressing the issue of cost as soon as possible.

“It is my hope that at the end of this year, this comm will be able to answer to the following types of questions: I am an employer who pays 5 percent of payroll for health care — how will these different financing schemes affect me? I am a self-employed midde-income Vermonter — how will these different financing schemes affect me?” Ashe said. “We want to be able to answer those kinds basic questions, because those are the questions that people are going to be asking.”