Vermont To Be First "Single Payer" Health Insurance State

I must admit, I didn't see this coming. But after all, we are talking about Vermont. I just didn't think any state would be ready to take on such an ambitious, daunting commitment: creating a statewide, "single-payer" health insurance system. But they have. It will take some years to get there, but they have the outline of a plan, and the commitment to pursue it. And I'm pleased they did, for it may turn out to be just the experiment we need to better inform us about the possibilities and the barriers. Here's more from a recent edition of The Economist:

...In Vermont Peter Shumlin, the Democratic candidate for governor, insisted that Barack Obama's reforms had not gone far enough. "Vermont needs a single-payer system," he told voters. "Get insurance companies out of the picture." Mr Shumlin won the election. Now he is preparing to fulfill his promise. 

On May 5th Vermont's legislature passed a bill that lays out steps to adopt a single-payer health system. Mr Shumlin is expected to sign the bill shortly. No state is likely to follow Vermont's lead, at least in the near future. But with Vermont, America begins its first experiment with government-run health care.  

Vermont is an appropriate setting for the test. It is the state that re-elects Bernie Sanders, the self-described socialist senator who in 2009 presented a 700-page single-payer amendment. For local politicians, reforming health care is something of a hobby. They have debated universal coverage for decades, notably in the 1990s. But they have also enacted other changes, such as a state-subsidised health plan and a requirement that insurers cover services for autistic children. Vermont's Medicaid programme is among America's most generous. As a result only 10% of Vermonters are uninsured, according to the Kaiser Family Foundation, compared with 17% of Americans. Health spending per person is 15% higher than the national average.  

---"The American exception: Vermont may become the first state to have government-run health care," The Economist (5.14.11)

But if per capita health care spending in Vermont is 15% higher than the national average, what is the game plan to significantly reduce healthcare costs, and move toward the level of some of the European single-payer systems that operate at half the per capita costs of the US? From the same article:

The new law attempts to expand coverage and lower costs. The state will move forward in two steps. The first goal is to create a health exchange by 2014, as required by the national health reform. The second is to use the infrastructure of that exchange, such as a single system for paying claims, to introduce publicly-funded health care in 2017. An independent board will set payment rates for doctors and hospitals, as well as benefit packages for patients. Costs will be contained, Mr Shumlin says, by cutting administrative expenses, slashing fraud and rewarding doctors for the quality rather than just the quantity of care.

As moved as I am to see healthcare as a "public good," and the need for a government-based, single-payer system to equitably and effectively administer it, there's more to cost reduction and cost containment than that. It's not just about the insurance structure, as friend Dieter Haussmann, informed observer and skeptic of a single-payer US healthcare insurance system, is wont to remind me. It's about effective cost reduction and cost containment; that's the sine qua non of any universal health care system if it is to be both effective and affordable. And it has to be both.

Dieter is understandably skeptical about the ability of government to effectively lead and manage such an enterprise, especially on such a cost-conscious basis. The government record in the US is not inspiring. And regardless of my insistence that among those single-payer systems in other countries are good benchmarks for healthcare coverage policy, cost-efficient service systems, and good medical practice, those countries have their cost containment challenges, too.

But Vermont clearly appears to appreciate that there are many unresolved issues and unanswered questions to be addressed as they move forward: how to reduce cost per capita, to be sure, but also related issues of defining the scope of services and identifying reliable funding sources:

However, this progress may not proceed as hoped. Single-payer systems are not a panacea—health spending is growing at a faster clip in Britain and Canada than in America. Furthermore, the main aspects of Vermont's plan have yet to be worked out. Most crucial, politicians have not decided how the scheme will be funded. In a study for the state legislature, William Hsiao of Harvard University recommended a payroll tax on companies and employees, rather than paying for it out of general taxation. But the governor's office has until 2013 to present a plan. It is also unclear which health services will be covered and how to pay for Vermonters who seek care out-of-state. And the whole scheme will need federal approval.

This process in Vermont should be instructive for the rest of the country to observe. I am hopeful, of course. But I have questions about whether a small state has the economies of scale and resources to prove a good test of the possibilities. But it's the only opportunity we have, and we are fortunate to have that. I'll be watching; so will Dieter. So will the nation, the Democrats, Republicans, Independents, all.