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Karen Hein, former member of the Green Mountain Care Board.

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To mixed reactions, governor halts plans for single-payer health care

Future of health care reform in Vermont uncertain; Governor pledges that ‘our time will come’

BRATTLEBORO—Vermont Governor Peter Shumlin left heads spinning last week when he announced the state is putting the brakes on financing single-payer health care.

For health-care-reform advocates who thought they could finally see such a system on the horizon, Shumlin’s news felt like whiplash. Opponents of single-payer health care, worried about the new program increasing costs, welcomed the news.

In a Dec. 17 press conference, Shumlin said the numbers didn’t work for transitioning to single-payer.

“Pushing for single-payer health-care financing when the time isn’t right and it would likely hurt our economy is not good for Vermont, and it would not be good for true health-care reform,” said Shumlin. “It could set back for years and years all of our hard work toward the important goal of universal, publicly financed health care for all.”

He continued, “I am not going to undermine the hope of achieving critically important health-care reforms for this state by pushing prematurely for single-payer when it is not the right time for Vermont.”

Shumlin described the proposed taxes necessary to fund single-payer as “enormous” and proved too great a shock to the state’s economy.

To achieve the levels of coverage the state aimed for under single-payer would require an 11.5-percent payroll tax on companies and an income tax of up to 9.5 percent.

Small businesses whose owners are on the payroll would strain under the burden of paying both taxes, said Shumlin.

Most of the numbers Shumlin quoted were not new or unknown. Many groups and reports have stressed that taxes would have to finance single-payer. The 11.5-percent payroll tax and a 9.5-percent income tax scenario appeared in reports to the legislature last year.

Shumlin highlighted other unanticipated factors in the equation. The General Fund’s projected growth for fiscal years 2016 and 2017 has decreased $75 million “after two successive downgrades, and another one may well lie ahead in January.”

The pool of federal money available to Vermont through the Affordable Care Act also dropped below 2013 estimates by more than $150 million, he said.

The timeline for receiving a federal waiver to opt out of the federal exchange system has also become uncertain, added Shumlin.

The governor pointed to a slower-than-expected economic recovery from the 2008 recession which has hampered the state’s ability to increase Medicaid-provider payments.

The governor said that financial models run by the state did not show a viable way to transition small businesses to single-payer.

Some health-care advocates have worked for two decades toward affordable health care that covers all Vermonters. The Legislature enacted Act 48 in 2011, legislation designed, in part, to transition the state to a single-payer health-care system. Up until last week, it seemed the state would achieve that goal.

Act 48 calls for the state to complete the transition to single-payer by 2017.

Shumlin expressed determination that the state continue working to strengthen health-care reform.

“We can and must make progress in 2015 to put in place a better, fairer, and less-costly health-care system, one that in the future supports a transition to Green Mountain Care so that all Vermonters receive affordable, publicly-financed health care,” he said.

Shumlin stressed cost-containment measures and giving the Green Mountain Care Board additional authority, as well as working with the federal government to receive the necessary waivers.

Another such measure is maintaining the state’s commitment to the Blueprint for Health, which focuses on improving care and controlling costs through promoting actions like prevention, he added.

Shumlin tried to place the struggle for health-care reform in perspective. He reminded the audience that it took 31 years for Medicare to become law. Medicaid took half a century to become law, while Social Security took 25 years.

“The point is that change is difficult to achieve, and worthy causes take time to take root. A better, fairer, more rational, and more sustainable way to pay for health care is worth fighting for,” he said.

“We must continue our hard work and our successes,” Shumlin said. “Our time will come.”

Mixed reactions

The governor’s news prompted a flurry of press releases, news reports, and op-eds from supporters and opponents.

Some business organizations applauded the Shumlin’s decision.

The Vermont Chamber of Commerce called the decision “pragmatic.”

“The 11.5-percent payroll tax and 9.5-percent income tax would make the challenge of surviving in the current economic climate nearly impossible,” said Betsy Bishop, president of the Vermont Chamber of Commerce.

Bishop said that the chamber will continue to support cost-containment measures and efforts that focus on health quality and outcomes undertaken by the Green Mountain Care Board.

The National Federation of Independent Business (NFIB), a small business advocacy group, took Shumln’s decision as an opportunity to repeal Act 48.

“Small business is calling for the ill-fated Act 48 to be repealed immediately,” wrote NFIB/VT director Shawn Shouldice. “The Green Mountain Care Board failed at their attempt to provide the Legislature with a funding stream for single-payer health care that was palatable to the people of Vermont, and the only sensible thing left to do is for the bill to be repealed.”

In a press release, Vermont Businesses for Social Responsibility (VBSR) expressed disappointment, yet pledged to continue advocating for reforms.

“We would have preferred that the governor release a menu of financing options and [have] used his position to facilitate a debate about the challenges and opportunities for fixing the current broken financing system for health care,” wrote VBSR, also asserting that an equitable health-care system is good for business.

“Vermont’s business community needs a level playing field in which all contribute based on ability to pay and all will benefit,” the organization wrote. “We need to remove the link between insurance and employment.”

In an email rallying support, Deb Richter of Vermont Health Care for All wrote, “We are writing to say, ‘Single-payer is very much alive!’”

“We have known all along that organizing support behind guaranteed health care for every Vermont resident, financed fairly and publicly, would be difficult, but we are up for the task,” she added.

Not all responses were optimistic.

The Vermont Workers’ Center (VWC) has pushed for health-care reform through its Healthcare is a Human Right Campaign, and advocates there were vocal in their disappointment with Shumlin.

The center helped organize a protest at the Statehouse in Montpelier on Dec. 18. Protesters burned their medical bills on the Statehouse steps and later brought a plate of toast to the governor’s office to symbolize the future of his political career.

Shela Linton, a VWC community organizer, described Shumlin’s announcement as “a real slap in the face.”

In her opinion, putting the brakes on single-payer showed a lack of commitment by Shumlin and an unwillingness to increase taxes on businesses or the wealthy.

Linton also noted that Act 48 requires the state to move to single-payer, so Shumlin must find a way to finance the program or he could be in breach of Vermont law.

Despite the setback, Linton said the workers’ center will continue fighting for an equitable health-care system.

“We need to pass this now,” she said.

The VWC will hold a demonstration at the statehouse on Jan. 8, the same day as Shumlin’s State of the State address. Linton encouraged health-care-reform supporters to attend.

She said a free workshop in direct action training to help prepare people for the Jan. 8 rally will take place at the Root Social Justice Center on Saturday, Jan. 3, from noon to 5 p.m. Contact Linton at shela@workerscenter.org or 802-275-2363 for more information.

Peter Sterling, director of Vermont Leads, a nonprofit advocacy organization dedicated to enacting a universal, publicly funded health-care system in the state, expressed disappointment at Shumlin’s announcement.

“Clearly, I’m shocked,” he said during a phone interview.

Sterling added that people will be hardest hit in the long run.

Once he looked at the numbers, however, Sterling said he understood the governor’s decision.

Later, in an op-ed piece sent to media statewide, Sterling wrote of the governor’s intended tax package: “The plan had been to eliminate insurance companies and the roughly $3 billion we Vermonters pay them each year in the form of deductibles, premiums, co-pays, etc with a roughly $2 billion package of taxes to fund the nation’s first universal health care system.”

“I truly believe the governor and his team left no stone unturned in their effort to develop a financing package for this new system that was workable,” he wrote.

Transitioning small businesses, Sterling said, was the stumbling block.

The 11.5-percent tax, although dramatic, was not the killer, Sterling said. Most companies already pay the equivalent of a 15-percent tax now in the form of health benefits for their employees.

“This was never a slam-dunk from the beginning,” he said of enacting a single-payer system.

Sterling, however, said not all was lost. The governor’s announcement might serve as an opportunity for the state to find an alternative to the federal health-care exchange.

In Sterling’s opinion, a publicly funded health-care system is the only way to provide affordable health care for all Vermonters.

The health-care exchange, as it stands now, provides coverage, but is not affordable, he said.

In the exchange, a couple with a combined gross income of $47,000 pays approximately $358 monthly for a silver plan, he said. The premium might be doable, he said. Yet add premiums, deductibles, and out-of-pocket allowances, and the couple might fork over as much as $11,000 for health care annually.

When asked what next steps the state could take to move health-care reform forward, Sterling said he didn’t know.

Given time to think, however, Sterling later wrote in his op-ed that one solution is for the state to further subsidize low- and middle-income Vermonters’ insurance costs incurred under Vermont Health Connect.

“One possible source of financing for this subsidy that has been widely discussed is a tax on sugary beverages such as soda, sports drinks, and energy drinks,” he continued. “This tax would raise upwards of $30 million a year, more than enough to fund this and other initiatives to help Vermonters lead healthier lives.”

No easy task

The response to the the announcement by outgoing State Sen. Peter Galbraith, D-Windham, boiled down to “I told you so.”

“We’ve known for a long time what this was going to cost,” he said.

However, in his opinion, the state hasn’t got the stomach to enact taxes necessary to fund single-payer.

“We adopted the goodies, and then we didn’t want to pay for them,” he said.

Outcomes, reforms, and cost should have been worked out together from the start, he said.

“Raising the necessary money was always a very hard decision, but it was always easy to do it,” Galbraith said.

The scope of money needed to fund single-payer can come to the state only in a few ways — all various forms of new taxes, he said.

Instead, the state, in hiding behind how it would pay for health care, subjected its citizens and businesses to unnecessary uncertainty, said Galbraith.

After reading multiple reports to the Legislature on the potential costs of single-payer that included figures like the 11.5-percent payroll tax, Galbraith had presented a potential financing plan. This first proposal did not pass.

He also put forward a “plan B” for the state in case single-payer bit the dust. This bill didn’t pass the Legislature, either.

This back-up plan comprised what Galbraith called “an interim step” that would have created a public option on the health-care exchange.

Funding for this option, which unlike single-payer would not have required a federal waiver, would have come from a 2.2-percent payroll tax and the elimination of two state deductions that people could still claim on their federal tax returns — one on charitable giving and another on home mortgages.

According to Galbraith, the two deductions and payroll tax would have raised $350 million to subsidize the public option.

Dr. Karen Hein, a former member of the Green Mountain Care Board (GMCB), cautioned against interpreting Shumlin’s decision as the death knell for single-payer.

Hein (whose term ended September and whose comments reflect her personal opinions) said Shumlin’s decision focuses on the funding side of health care.

The two goals of health-care reform are to improve health and moderate the costs, said Hein.

The requirements to achieve these goals also takes two forms, she said. One is financing. The other is delivery, which includes aspects like coverage, outcomes, and what services people need.

In Hein’s opinion, Shumlin has not halted health-care reform as a whole. She supports giving the GMCB more authority. The Blueprint for Health program will continue its efforts to improve the overall health of Vermonters.

Single-payer might not happen on the timeline we expected, she said, but that does not mean it will never happen.

Vermont will continue improving health-care, said a confident Hein.

“None of that changes,” she said. “We need to keep going.”

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Originally published in The Commons issue #286 (Wednesday, December 24, 2014). This story appeared on page A1.

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