Vermont Goes For Single Payer

Today’s Managing Health Care Costs Number is 6

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While Washington continues the battle of sound bites about the Affordable Care Act, some of the most interesting experiments in providing increased health care coverage while controlling health care costs are happening in the states.   Today, Vermont is in the news for a plan to convert to a single payer government run health care system, even as Capitol Hill reverberates with opposition to the government regulations and standards in the ACA.

The Vermont Legislature passed a bill mandating study of implementation of universal health care in that state, and hired William Hsaio of Harvard School of Public Health to help with system design.  He and his team set forward six goals for health care reform

1.      Maximize federal funds for Vermont.
2.      No increase in overall health spending and therefore all funding for the options must derive from savings
3.      No increase of the overall health care cost burden faced by employees or employers
4.      No reduction in the overall net income received by physicians, hospitals, or other health care providers
5.      The implementation of any option must move Vermont toward an integrated health care delivery system that allows for a transition to global budgets and risk-adjusted capitated payments
6.      No changes for Medicare beneficiaries in Vermont

These are a tough series of goals that in many states are mutually exclusive. For instance, spending more on health care will usually cause a reduction of physician, hospital, and other health care income!  

Hsaio offers three options:

  • Single payer administered by a government agency, with either comprehensive or less generous benefits.  He says this could save as much as 24% of total health care expenditures.
  • Multipayer system with competition.   He estimates that this system would save “only” 16% of total costs.  It would also extend coverage to only a few thousand new enrollees – and is thus not recommended.
  • Single payer system administered by a private party, which he estimates could save 25% of total costs, because of the effectiveness of hiring a private party with the proper expertise to do the claims processing at the outset.   He recommends this option – with the less generous (and thus more affordable) benefits.  This would include full vision and dental benefits.

In an interview with Ezra Klein, Vermont Governor Peter Shumlin says that the reason providers won’t have accept lower income due to Vermont’s money-saving single payer system is

We don’t have a lot of high-paid physicians in Vermont. We have a lot of low-paid physicians. We have rural providers who’re making less than they did when they graduated from medical school. Our cost driver is not that we have a lot of physicians running around in Mercedes-Benzes. It’s waste in the system.

Where are these big savings coming from?

1.      Decreased administrative costs.  (However, providers will continue to have staff to bill out-of-state payers – so they won’t be able to utterly eliminate much of their overhead
2.      Less wasteful diagnostic and other spending
3.      Better care coordination
Healther Vermonters will need less expensive medical care

Of note, the researchers recommend that primary care physicians be paid risk-adjusted capitation and specialists be paid salary with quality rewards.   It appears that negotiation of physician rates would be left to Accountable Care Organizations, and this might require that physicians join such organizations.  Approaches that change physician reimbursement methods and require physicians to join organizations are usually opposed by the medical establishment. So far, the Vermont Medical Society says it is reviewing the legislation” and withholding comment.  Hsaio et al also recommend a single electronic health record system (EHR).  I’d expecdt provider organizations which have already invested in EHRs to oppose being forced to join a different system.

The Vermont plan will probably require multiple federal Medicare and other waivers to take effect. 

Health care reform isn’t easy – and a small progressive, community-oriented rural state might make it over the substantial hurdles required to make this a reality.  I’m skeptical of the promises of huge cost savings – but increasing access, moving toward better care integration, and lowering costs even just a little bit would be a huge accomplishment.  Stay tuned.