Dr. William C. Hsiao’s report on the potential for a single-payer health care system in Vermont has met with optimism and excitement by local lawmakers and community.
But that optimism was mixed with healthy doses of reality.
Hsiao, the K.T. Li Professor of Economics at the Harvard School of Public Health, presented his team’s 130-page report, Health System Reform Design: Achieving Affordable Universal Health Care in Vermont, to the Legislature on Jan. 19.
While still in draft form until after a public comment period, the report outlined what Hsiao and his team of economists, political scientists, and public health specialists consider the best health care systems available to Vermont, the challenges facing the state, proposed benefit packages, and financing options.
“Despite its valiant efforts, Vermont has not been able to provide high quality, affordable health care for all of its residents,” wrote Hsiao. “It is fair to say that the system is broken.”
Hsiao said Vermont faces escalating health care costs estimated to increase by $1 billion between 2010 and 2012, from $4.9 billion to $5.9 billion. And these rising costs are nothing new. The state’s costs between 2004 and 2008 rose 8 percent, compared to the nation’s 5 percent average.
According to Hsiao, approximately 47,000 Vermonters lack health insurance while about 15 percent are underinsured, pumping “too much of their household budget” to health care expenses.
At this stage, Hsiao recommends what he calls a public/private single-payer system, which he defined as a system that would provide all Vermonters with a common benefits package and channel payments through a single administrator.
The plan would provide an “essential benefits package.” While an independent board would run the program, it would employ a “competitively-selected” third party “to manage provider relations and claims adjudication and processing.” It also calls for a funding through a payroll-based tax split between employees and employers.
He estimates that most Vermonters won’t pay more for the single-payer coverage than they currently do for their existing insurance plans.
“If implemented properly, a single-payer system can provide universal coverage; yield significant savings that help fund the under-insured and uninsured; and control the escalating costs of health care,” he said. “In short, it allows Vermont to do more for less over time, and to do so more fairly.”
“It’s a pretty rigorous report and a great place to start,” said Hilary Cooke, a health insurance broker in Brattleboro who ran for the State Senate last year.
He said the report was Vermont-specific, and although it may not be the single-payer plan that advocates wanted, it will be good enough for most people.
“Health is about individuals. Health policy is about the aggregate,” said Cooke.
Cooke said for anything to happen, the state will need to obtain several waivers exempting it from the federal program. Vermont’s Congressional delegation last week introduced legislation to pursue these waivers.
Earlier in the year, Cooke didn’t think Vermont could get the federal waivers. Now, with Republicans in Congress trying to repeal President Obama’s health care reform bill, Cooke thinks Vermont has a chance.
He said one exciting aspect of Hsiao’s plan is the eventual compensation o health care professionals based on patient outcomes and preventative care, rather than on procedures conducted.
Cooke said he and other Vermonters involved in the insurance industry might lose their jobs as a result. Although Cooke said that he’s reinvented himself before, he hopes that community members will be sensitive to how the new system could affect their neighbors.
“We need this [reform] as part of our overall economic development strategy, along with broadband,” said Rep. Sarah Edwards, P/D-Brattleboro.
Health care costs suck up money, said Edwards, and implementing a more fair and efficient system could allow Vermont to free up its financial resources.
Edwards said that in comparison to the unsustainable and soaring costs of the current health care system, the state had little to risk by acting on Hsiao’s suggestions.
She feels she has watched Vermont’s health care system evolve and adapt over many years to provide equitable coverage to more people. But with Hsiao’s plan, she believes the state can take multiple steps forward.
“We need to move with optimism and critical thinking,” said Edwards. “What we must not do is act out of pessimism and throw up barriers before we know where we are.”
Rep. John Moran, D-Wardsboro, said the state is at the “kicking the tires” stage with Hsiao’s plan. Many details still need ironing out like, one of Moran’s concerns, making sure small businesses aren’t hurt in the reform process.
“I’m very pleased. Dr. Hsiao has given us an excellent framework from which to work,” Moran said.
There will be winners and losers, said Moran. Employers who don’t currently provide insurance will have to start paying for it. But he also views affordable health care as pro-business.
“This is absolutely a positive. You will have health insurance when this plan is done,” said Moran.
Rep. Oliver Olsen, R-Jamaica, has questions about how the new system will integrate with other states and businesses beyond state lines.
“You can’t ignore the fact that there will be health care systems outside the state,” he said.
Olsen is reaching out to experts and health care providers within his district to discuss Hsiao’s report.
Rep. Mike Mrowicki, D-Putney, helps run a free health care clinic in Putney. He said insurance costs keep flying up at an unsustainable rate. He said 40 percent of the people coming to the clinic on Thursday nights aren’t indigent, but patients who can only afford catastrophic insurance coverage.
He knows it’s early, but believes that under a single-payer plan the money most people pay towards health insurance now will shift from insurance companies to “direct services to Vermonters.”
“I’m as excited as a lot of other people,” Mrowicki said. “This is doable.”
Rep. Mollie Burke, P/D-Brattleboro, said she is hopeful about Hsiao’s plan, and that he was on a mission to help move Vermont forward and out of its present health care morass. Now, she said, everyone in the Legislature is poised for the next step.
Rep. Richard Marek, D-Newfane, said he felt Hsiao delivered a plan exactly as the Legislature had asked for and dispelled any notion “it was just one more study.”
“Dealing with details responsibly takes time,” said Marek. “If you have a combination of being optimistic and realistic then you obtain your goals.”
Rep. Michael Hebert, R-Vernon, said he didn’t want to see anyone go uninsured, but that he had more questions than answers at this early stage.
He referenced the financial burden with which Acts 60 and 68, in an attempt to equalize education, had saddled some communities.
“We have to take it slow and easy. If we don’t build it right, it could be a catastrophe,” said Hebert.
Overall, Hebert thought Hsiao had completed a tremendous amount of work and presented the Legislature with a thoughtful report. But Hebert, who chairs the Vernon School Board, worries that teachers with good benefit packages may lose out.
He also asks how the proposed payroll tax and insurance would be applied, or not, to workers who live in neighboring states, but work in Vermont. “It’s a very interesting conversation, but a huge conversation,” said Hebert.
Rep. David Deen, D-Westminster, said he is looking to the House Committee on Health Care to provide leadership on this issue.
“I’m hopeful they’ll follow the leadership of Dr. Hsiao, and we will move toward universal coverage and a single-payer plan,” said Deen, who also co-sponsored a single-payer plan for Vermont more than a decade ago.
“We’re on the edge here,” said Richard Davis, a nurse and health-care advocate from Guilford who described the report as a “historical framework.”
Davis said the process will be slow and deliberate, and won’t provide everyone with exactly what they want but that, bottom line, the state is poised to save $590 million in the first year Hsiao’s plan goes into effect.
Benefits and work
Hsiao said Vermont would reap the financial benefits of the single-payer option upon implementation in 2015.
He said to implement these health care reforms would require structural changes. Namely, Vermont will need to align its multiple health delivery systems — such as Catamount Health, VHAP, and Dr. Dynasaur — and streamline the administrative process.
Act 128, which was passed by the Legislature last year, charged Hsaio’s team to develop three health care options — a state government-administered and publicly-finance single-payer system, a state government-administered, public option allowing Vermonters choice between public and private plans, and the single-player plan that Hsiao and his team ultimately decided upon.
Hsiao’s team also identified at least 15 barriers to achieving the goals of Act 128.
According to Hsiao, Vermont must also contend with a “diverse and often complex political dynamic.”
However, Hsiao is no stranger to dealing with complex political dynamics. He has either led or closely advised nine nations in health care system reforms, and is best known for developing Taiwan’s single-payer health care system.
Implemented in 1995, the system covers all of Taiwan’s citizens and has reduced costs. Taiwan’s health expenditures amount to around 6 percent of its Gross Domestic Product, compared to 16 percent for the United States.