Gov. Shumlin and the Push for Single-Payer Health Care

At a time when states are struggling to comply with healthcare reform, Vermont's governor sees his state's push for a single-payer system as common sense.
by | October 25, 2011

At a time when states are struggling to comply with the provisions of the Affordable Care Act (ACA), Vermont's ambitious plan to create the nation's first single-payer health financing system might be hard to comprehend. Vermont Gov. Peter Shumlin sees this initiative as common sense. I recently had a chance to talk with Shumlin, an experienced legislator and small business owner, about why he thinks such radical change in health care is a necessity. An edited transcript follows.

Earlier this year you signed legislation making Vermont the only state in the nation to move toward a single-payer system. Why?

Good question. I guess what I keep wondering is, why not? The rising cost of health care in America and in Vermont is unsustainable. If we don't get health-care costs under control, we will bankrupt our small businesses and use the precious resources that we need to invest in job growth and innovation and spend them on health care.

We're trying to pass the first health-care system in the country where health care is a right and not a privilege. Where it falls on the individual and isn't the burden of the employer. Where it's publicly financed. And most importantly, where we spend our health-care dollars on preventive care -- not on waste, insurance company profits, bureaucracy and a payment system that rewards providers for the quantity of work they do to you, not the quality of work they do for you.

It's an ambitious plan, but if Vermont can get this one right, we'll get the jobs, we'll get economic growth and we'll save our small businesses.

One of the big questions that people ask about Vermont's approach is: Why are you acting now? After all, just two years ago, Congress passed ACA. What is Vermont trying to do that Congress didn't do?

I've been working on health-care reform as a House member, as a state senator and now as a governor, for years. I've become convinced that piecemeal reform will cause more problems than it solves. I've learned that the hard way. If you're not willing to reform, if you're not willing to address the way we spend dollars, you're not going to solve the problem.

I think the federal bill is a step in the right direction. But what government has done wrong almost every single time is confuse the need for access with the need for cost containment. We constantly come up with schemes to make it possible for those who can't afford it to have coverage. We have never done universal reform where we actually stop spending like a bunch of drunken bandits on the delivery of health care. We've got to do that.

Listen, the rest of the world spends a fraction of what we spend and they have better health care outcomes than we do. If we don't attack the cost problem, the spending problem, we will bankrupt our nation. We've watched all of this with tremendous frustration from almost any political perspective. We've watched the ineptitude of Congress over the past few months. If you took all of the proposals that were made for cost containment, for cutting budgets by the Tea Party folks in Congress and you took all the suggestions for revenue, going back to the Clinton tax rates [from] Democrats, you would still be right back where you are in three years because health care spending is rising so uncontrollably. My question is: How can public officials from both parties continue to ignore the real problem? It's called rising health-care costs and spending.

Could you explain how the system Vermont is setting up, Green Mountain Care, will actually work?

Well, for consumers, it would mean you would get a Green Mountain health-care card, assuming you're a resident of the State of Vermont. That card will give you health-care coverage for a defined-benefit package [which will be administered by a single insurer the state contracts with to run the system]. With that card, you'll adjudicate your bill with the single payer when you come out of the provider's office.

After Vermonters go in for their doctors' visit, they'll check out with the receptionist and be told, "You owe us X dollars," and that will be that?

Right. With everybody in a single system, the insurer will tell you on the spot how much you're paying and how much they're paying. You'll pull out a check, cash or credit card, and you'll pay that before you leave the provider's office. That saves 8 to 9 cents to the dollar according to Dr. [Bill] Hsiao [of the Harvard School of Public Health].

That same card will be a pipeline to your medical records so that when you go to the next doctor, the next provider will know exactly what all of the providers in your medical history have done to you. That stops waste, inefficiency and unnecessary health-care services.

Finally, and this is the most difficult and challenging but most important, we're going to move from a fee-for-service payment system to one where providers get reimbursed for keeping you healthy. Outcomes-based medicine is going to replace the fee-for-service payment system.

And how will this work for health-care providers?

For the provider, what it means is getting the insurance company off their back. They get to spend their time making you healthy instead of dealing with billing bureaucrats. So, we think Vermont will be a better and more attractive place to practice medicine since providers really want to make people healthy. That's what they're trained to do.

You often talk about health-care reform in the context of economic competitiveness. What's the connection?

I'm a business person. I came to government from business. Like many Vermont businesses, my biggest challenge as a business person is that every year, I get from one of our three payers (MVP Healthcare, Blue Cross Blue Shield, or Cigna) my premium increase. It's never a decrease. It's anywhere between a 12 and 32 percent increase every single year. I have no way to control that cost. As a small business person, we're too small to run an ERISA plan. Some 80 percent of Vermont's businesses are 50 employees or less. It's a cost that gets forced upon us as employers. Our response is to pay more and more money to insurance companies, sign up for less and less coverage and ask our employees to pay a larger and larger share. It's not sustainable.

My point is this: If we can design the first health-care system in the country that delivers better quality care for less money, I think that Vermonters will be delighted to pay for that system versus the current system which they know they can't afford. How would we pay for it? We'll come up with a package that spreads the burden equally among all Vermonters. We're not going to ask business alone to pay the bill.

Did you feel like the current system puts Vermont at a competitive disadvantage with the Canadian provinces?

Absolutely. [Quebec Premier Jean Charest] and I are pretty good friends. I was up there recently. After we had a couple of glasses of wine, he turned to me and he said, "You know I love eating your lunch on jobs. I love eating your lunch every single time on job growth, new jobs."

I said, "What do you mean?"

He said, "You know, I meet employers that are thinking about settling in Quebec or Vermont or New York or Maine, and I get them every time."

I said, "Well, how do you do that?"

He said, "Well, I just explain that it's $8,000 to $9,000 an employee for them to go across the United States border. Or, up here, they won't have any of that cost. It seems to convince them every time."

I said, "Premier Charest, that's not nice. That's not fair. I want to fix that."

As the ACA is currently written, it would not be until 2017 when you could actually opt out of the mandated system of exchanges and create a single-payer system.

We're shooting for 2014. The one act that we need from Congress is to change the date by which they allow single-payer assistance from 2017 to 2014. Sen. Leahy, Sen.Sanders and Rep. Welch are working hard on that. President Obama has been extraordinarily open to the suggestion. At the [National Governors Association] January meeting, at my urging, he said to all 50 governors, "I believe that your states should be the laboratories for change. As long as you're not reducing standards, I'm with you. And we want to give you that flexibility, including supporting moving the 2017 date to 2014 for single-payer health care."

What are Vermont's next steps?

Really, the next step is to design the system that I just described that no one has ever done before in America. A system that has the technology to adjudicate the bill on the spot. That has the technology to get all of the medical records into a single form and card. Most importantly, that has a payment system that rewards -- that allows doctors, providers, to practice medicine again by promoting healthy living, good diet, early prevention, and preventative care instead of the current system that rewards financially for quantity of care.

What do you see as the most challenging obstacles to actually doing this?

I think the most daunting task is to be inclusive enough with providers, consumers, the health-care community and the business community, so that we can actually make this happen without fear of the unknown and eroding public confidence.

Has there been a lot of concern about this in the business community?

To be honest, most businesses understand that they're paying a health-care tax right now and it's rising much faster than they can afford. They understand that the current system isn't sustainable. So I think most of them are grateful that we're trying to solve a real problem. I think what puzzles many of us in Vermont is: How can so many others pretend that this isn't the biggest threat to job growth, to economic expansion and the economic security of the middle class?

I've got 625,000 Vermonters. We only have 40,000 to 50,000 uninsured. That's pretty remarkable. But I've got 150,000 who are underinsured. What's that mean? That means that every single day middle-class families know that if they get really, really sick or one of the family members get really, really sick, they're bankrupt. They're done. The party's over. They can't pay the bill.

And you obviously feel like ACA doesn't do enough to address that problem?

Right. It's a great start. It's going to help us tremendously because it's a bridge to the single-payer system. But the challenge of the Affordable Care Act is like most of what happens in Washington. By the time you compromise and water it down, it doesn't solve the real problem which is health-care costs, health-care spending. It's not sustainable.

Even the biggest critics of my plan, and I've got plenty of them as you can imagine, if you ask them, "Hey, what if we do nothing?" They say, "Oh, we can't do that. It's not sustainable. The system's not sustainable." Now, we're not talking about the corner grocery store here that's not sustainable, or the corner laundromat. We're talking about our health-care system.

We understand that in a small rural state, our providers and our small hospitals are the first to go. I mean, we've got health-care providers in small hospitals that are struggling to stay alive in this state right now. They know that the current system is going to bankrupt them. We have docs every year that can't stay in private practice because they have a lot of Medicaid and Medicare patients and they just can't pay their bills. It's not that they don't want to deliver health care. It's that they're not getting paid enough to do it. So we've got real challenges and we're trying our best to solve them. I say, if we can get this one right, it'll be a huge lift for Vermont both in terms of job growth and in terms of quality of life.

Must Reads

--Is health care ready for a Moneyball-style focus on metrics? Dan Diamond argues that policymakers should be cautious with this intriguing idea.

--The Institute of Medicine (IOM) recently issued a set of recommendations for the essential health benefits (EHB) package -- a requirement under the Affordable Care Act that stipulates that certain insurance plans cover a minimum set of benefits as defined by the U.S. Department of Health and Human Services (HHS).  Would the recs be generous but potentially costly, or skimpy and thrifty?

The answer was skimpy: "One way to think about the EHB package," wrote the IOM, "is to compare HHS's task to going grocery shopping. One option is to go shopping, fill up your cart with the groceries you want, and then find out what it costs. The other option is to walk into the store with a firm idea of what you can spend and to fill the cart carefully, with only enough food to fit within your budget. The committee recommends that HHS take the latter approach to developing the EHB package." Maggie Mahar unpacks the nuances.

--Health policy experts agree that one of the areas with the greatest opportunity to produce significant savings is better coordination for the "dual eligibles," people who qualify for both Medicare and Medicaid. Toward that end, the Centers for Medicare & Medicaid Services (CMS) has made major efforts to develop partnerships with states. (See Governing's recent interview with Melanie Bella, director of the newly created Federal Coordinated Health Care Office at CMS.) However, a new report from the Robert Wood Johnson Foundation and the Urban Institute argues that primary responsibility for dealing with the duals should reside with Medicare. According to the study's summary, policymakers are relying too much on the states when most of the spending and potential cost-savings could come from better management of the federal Medicare program.

--The battle between the state of California and Medicaid providers who insist that reimbursement rates have been cut too far has made it to the U.S. Supreme Court. Providers argue that California's cuts violate provisions of federal law that mandate that Medicaid recipients have "equal access" to health care. The state, supported by the Obama administration, argues that Medicaid is an arrangement between the federal government and the states, thus providers lack standing for their lawsuit. Whatever the decision, the court's ruling will define the contours of Medicaid in important ways.

A note: Next month (November 7-8) is the National Association of Medicaid Directors conference in Arlington, Va. I'll be reporting live via Twitter for Governing. If you have any questions that you'd like me to pose regarding any Medicaid issues, please send those my way at jbuntin@governing.com. Alternately, you can send tweets to me at @jbbuntin.

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