Download Kaif1-OBSTACLES TO VERMONT`S 2017 SINGLE

OBSTACLES TO
VERMONT’S 2017
SINGLE-PAYER GOAL
By Kaif Syed
Healthcare Reform in Vermont
• In 2011, the Vermont legislature passed, and Governor Peter
Shumlin signed into law, Act 48. This act, in broad strokes, set forth
the general trajectory of healthcare reform in the state by declaring
that healthcare is a public good and hence, the state has a
responsibility to implement universal coverage. The deadline for its
implementation is 2017.
• Reform also includes the implementation of a uniform data and
claims system, a new method for measuring the delivery of quality
health care, a “pay-for-performance” model posed to replace the
traditional “fee-for-service” model, as well as all the applicable
federally mandated changes as per the Affordable Care Act
The Rationale
•
A Commonwealth Fund supported Health Affairs study, conducted by
economist William Hsiao, claims that Single-Payer in Vermont “will
produce annual savings of 25.3 percent compared with current spending,
cut employer and household spending by $200 million, create 3,800 jobs,
and boost the state's overall economic output by $100 million”
• How the savings and spending levels break down.
The Rationale
•
“Vermont’s case for single-payer health care can be summarized in one number:
$82,975. That’s the amount a 2011 study in the journal Health Affairs found the
average American doctor spends on dealing with insurance companies. Across the
border in Ontario, doctors spend about a quarter of that amount — $22,205 per
physician — interacting with the province’s single-payer agency.”
US Versus Canada in Healthcare Spending as Percent of GDP (From Goodman’s
Figures)
20.0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
1999
2000
2001
2002
2003
2004
Canada
2005
US
2006
2007
2008
2009
2010
Bumps in the Road
• All the benefits described all sound great – it seems to be
the perfect program. However, disregarding the fact that
the figures mayor may not be overly optimistic, a few
major issues loom.
• Firstly, there needs to be clarification regarding Vermont’s
program and its relationship with the federal Affordable
Care Act. From Kaiser Health News:
•
“Under the federal law, all states will have an exchange, or insurance
marketplace for individuals and small business, by 2014 – or the federal
government will set one up for them. But the law also allows states to seek
a waiver from the specific federal requirements for running that
exchange if they show they are providing at least equal coverage and
benefits another way. Vermont is seeking a waiver to pursue the single
payer system and not have to run two duplicative programs. “
Bumps in the Road
• Secondly, an August 26, 2014 study by the Health Care Cost Institute
made an interesting a potentially problematic finding.
• The study found that from 2007 to the end of 2011, the year that
reform was passed, Vermont (privately-insured) patients spent less
time hospitalized and spent more money on generic drugs compared
to the national levels. Vermont patients with ESI, in 2011, spent $4,408
compared to the national average of $4,520. Vermont spent $112 out
of pocket less per person than the national average on health care in
2011, and $282 less on hospital care per person than the national
average in 2011.
• However, although Vermont spent less per capita during this period,
health care spending as a whole in the state accelerated faster than the
national average over the same period. If it continues to outpace the
national average, eventually Vermont will no longer remain below
national spending levels, which could spell trouble for the single-payer
program.
Bumps in the Road
• The spending growth rate, according to the HCCI, could be, in part,
accounted for by the higher levels of laboratory, imaging,
radiology, and outpatient services consumed by patients. In
addition, Vermonter young adults spend on and receive more care
than the national average.
• According to a separate study by the HCCI, the national average of
health care expenditure growth itself has been depressed due to
sluggish economic growth – 70% of the decline, according to the
study, can be accounted for by the economic downturn between
2009 and 2011. This should also be taken into consideration.
However, Vermont, according to Greyhill Advisors, accounting for
size, is listed as #50 in annual GDP; however, it is 32nd in Per Capita
GDP and has among the lowest unemployment rates in the
country, at 6.2% in 2010 (listed as the fourth best in the country)
And the Big Bump
• The state has yet to draft a bill that raises the additional $1.6 billion a
year needed to implement and run the program.
•
Opponents claim that this would require the biggest tax increase in Vermont
history – according to Bloomberg, Vermont already only collects $2.7 billion a
year in tax revenues. Proponents claim, on the other hand, that this will be the
largest healthcare premium decrease in history. “The Shumlin administration is
quick to point out this isn’t the same as increasing healthcare costs by $1.6
billion. When there’s a single-payer system, lots of people who currently pay
private insurance premiums won’t.”
•
There are only four sources of tax revenue in Vermont that currently exceed
$100 million in revenue annually, payroll tax being the largest of which, at $624
million.
•
Proposals on the table center around increases in payroll taxes and income
taxes. Vermont Consultant Steve Kapper, “If you look at the landscape of
taxation here, there’s no one place to go to raise the money, you’d have to raise
the sales tax by something like 146 percent, which is not going to happen.”
Hsiao’s Proposal
• Harvard economist and program architect William Hsiao
recommended a proposal that focused on an 11%
payroll tax on employers and a 4.5% payroll tax on
employees.
• No legislator in VT has been in agreement with
everything is Hsiao’s proposal, but the sentiment is that
things will move in his general direction.
•
“Under Hsiao’s version of single payer, all Vermonters would have insurance
coverage and the system would be administered by private entity that would bid on
the project every two years. The system would be paid for through an 11 percent
payroll tax (split between the employer and employee, at one point estimated at a
30-70 split, but the number would be determined by the Legislature), federal
Medicaid funding and savings achieved through a cost-containment system that
would create a single pricing system for procedures, treatments and hospital stays.
The payroll taxes would provide for less than half of the money needed to fund the
system, according to Hsiao. Low-wage workers, their employers and Vermonters
who receive non-wage income would be exempt from the payroll tax.” from this
report.
Conclusion
• Although there is a lot of promise in the VT health care reform, it is
quite possible that, due to revenue issues, federal law, and
spending trends, the single-payer option might either end up not
coming to fruition (according to Bloomberg, the “politics are
impossible”) or become severely scaled back.
• If successful, Vermont, like Saskatchewan, could be a trail blazer for
the rest of the country, or at least other progressive states. If not, it
could have national implications, killing such statewide reform
campaigns across the country.
Bibliography
http://www.usatoday.com/story/news/nation/2014/08/07/statelinevermont-insurance-aca-obamacare/13721355/
http://content.healthaffairs.org/content/30/7/1232.full
http://ethanallen.org/wilton-vs-umass-green-mountain-care-tax-a-biggamble-for-vt/
http://watchdog.org/132835/end-single-payer/
http://www.vox.com/2014/4/9/5557696/forget-obamacare-vermontwants-to-bring-single-payer-to-america
http://www.bloombergview.com/articles/2014-04-11/vermont-s-singlepayer-dream-is-taxpayer-nightmare
http://www.kaiserhealthnews.org/stories/2011/october/02/vermontsingle-payer-health-care.aspx
http://www.commonwealthfund.org/Publications/In-theLiterature/2011/Jul/What-States-Can-Learn-from-Vermont.aspx
http://www.leg.state.vt.us/jfo/healthcare/Hsiao%20Proposal%20%20public.pdf
http://www.healthcostinstitute.org/news-and-events/vermonters-spentless-on-health-care
http://www.healthcostinstitute.org/news-and-events/sluggish-economynot-health-reform-drove-slowdown-health-spending-says-health-affair