Vermont considers single-payer plan for its own health reform

Such a system would help reach nearly universal coverage while saving up to $500 million during the first year, an economist says.

By Doug Trapp — Posted Feb. 22, 2011

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Vermont Gov. Peter Shumlin on Feb. 8 formally introduced a proposal to create a single-payer health system by 2014, but the measure would require an act of Congress to take effect as proposed.

Shumlin's plan would establish a five-member board to create a health insurance exchange as called for in the national health system reform law. But the exchange would go further, becoming the sole source of health coverage for all Vermonters by 2014. That would eliminate all but at least one private health plan and de-link health insurance from employment in the state.

Health care spending in Vermont has doubled in the last decade, reaching $4.71 billion in 2009, Shumlin said during his Jan. 25 fiscal 2012 budget presentation. Implementing a single-payer system would achieve nearly universal health coverage and save up to $500 million in its first year, said William Hsiao, PhD, a Harvard University economics professor the state hired as a consultant to propose health system alternatives.

"That is yet another reason why it is so important that we pass a single-payer health care plan," Shumlin said.

Hsiao designed Taiwan's single-payer system and has consulted on health system reform efforts in eight other countries, according to a Jan. 19 statement by the leaders of the Vermont House and Senate. He also helped develop the relative value scale system that has been used to determine Medicare physician pay since the early 1990s.

The national health reform law allows individual states starting in 2017 to opt out of its requirements for individuals to have health coverage, but only if the states adopt systems that provide coverage at least as comprehensive as the federal law. The Shumlin proposal seeks to opt out three years earlier, in 2014. Sen. Bernie Sanders (I, Vt.) and Rep. Peter Welch (D, Vt.) have introduced legislation to allow the earlier opt-out.

The Shumlin measure does not specify a funding mechanism, but payroll and income taxes are likely sources of revenue, said Vermont Medical Society Executive Vice President Paul Harrington. Employer, state and federal contributions are anticipated as well.

The state medical society does not have a formal position on the single-payer bill, but it is pleased the measure would create a single drug formulary for the state, Harrington said.

He also expects the single-payer bill to be adopted largely as proposed by the Democratic-controlled Vermont Legislature. The Legislature is scheduled to adjourn by May 31.

But the state medical society opposes a proposal in Shumlin's fiscal 2012 budget request to move the 12,500 enrollees in the state-subsidized Catamount Health plan into Medicaid. The change would save the state $5 million and significantly decrease physician pay for providing care to these enrollees. Catamount pays at 118% of Medicare rates, while Medicaid fees are only at 78% of Medicare's, Harrington said. Private health plans pay at about 130% of Medicare rates.

"Increasing the number of Medicaid patients while paying doctors substantially lower than all other payers would be financially devastating to physicians in the state," said Paula Duncan, MD, a pediatrician and the society's president.

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