A Single Payer Health Care System: As Vermont Goes….?

As Vermont goes, so goes the nation?

Back in 2010, as many of you may know, Peter Shumlin narrowly won election as Vermont governor in part on a promise to implement a single payer health coverage system run by the state. Although the term “single payer” can encompass a range of plans, the essential idea is that the state would institute a system of public financing to pay for universal health care coverage. In May, 2011, the Vermont legislature committed itself to implementing such as system when it passed, and Shumlin signed into law, Act 48 which laid out the basic principles underlying a single payer plan.

Advocates saw Vermont as the ideal laboratory for hatching a single payer system that might even serve as a role model for other states. As they often pointed out, Vermont had a strong progressive record of “firsts” – the first state to mandate public financing for universal education in its constitution, the first to outlaw slavery in its constitution, the first to introduce civil unions for same-sex couples, and even the first to legislate in favor of gay marriages (as opposed to getting there through court order.) Could a single-payer health system be the next first? In a piece she wrote last April on Vermont’s single payer proposal, the Vox’s Sarah Kliff  quoted Shumlin saying, “If Vermont gets single-payer health care right, which I believe we will, other states will follow. If we screw it up, it will set back this effort for a long time. So I know we have a tremendous amount of responsibility, not only to Vermonters.”

But then came the hard part: figuring out how to raise the estimated $1.6-$2 billion needed to get the plan up and running by the 2017 target date. After Shumlin missed a 2013 deadline for revealing exactly how the state planned to finance the reform, criticism mounted that the costs were likely to be much higher than initial estimates suggested. In the 2014 gubernatorial campaign, long-shot political novice Scott Milne, Shumlin’s Republican rival, hammered away at the incumbent governor on this issue, repeatedly arguing that Shumlin knew that single payer “was dead”. In an interview on Nov. 1, Milne reportedly said, “During the campaign I said that single-payer is dead — I’m telling you that now, and Peter Shumlin’s going to wait until after the election.” And, in an outcome that surprised almost everyone, Milne came within a bit more than 2,000 votes in unseating the incumbent. Indeed, analysts suggested that without the presence of the Libertarian candidate Dan Feliciano, who earned more than 8,000 votes, Milne would have become Vermont’s next governor. But the race is not over. Under Vermont law, because no gubernatorial candidate got more than 50 percent of the vote, the newly-elected legislature will decide the race by secret ballot in early January. In a move that has surprised even some of his strongest supporters, Milne has announced that he is not willing to concede the race to Shumlin.

It was against this backdrop that, last Wednesday, in a news conference in the Statehouse, Shumlin dropped a bombshell by admitting, in effect, that the state had “screwed up.” He announced that the state would forego, at least for now, any effort to implement a single-payer system.
The reason, Shumlin acknowledged, was precisely what critics had long maintained: the plan was fiscally untenable. According to the governor, the most recent studies indicate a single payer system would require an 11.5% payroll tax on businesses and a sliding income tax that would tax some wage earners up to 9.5% on top of the existing state income tax. Moreover, some small business owners who do not now provide health coverage would take a double whammy by getting hit with both income and payroll tax hikes. All told the price tag for a single-payer system was now estimated to be $2.6 billion in a state with revenues totaling about $2 billion a year.

Not surprisingly, advocates for a single health care plan felt betrayed by Shumlin’s reversal, and vowed to push forward with the plan through legislative action.  Opponents, meanwhile, voiced a loud “We told you so.” As with health care reform nationally, polls suggested the public was divided on the Vermont plan, with approval rates varying depending on how the poll question was worded. The immediate issue, of course, is what impact, if any, Shumlin’s announcement will have on the legislative vote on January 8 to determine the next governor. I have no doubt that Milne is right – Shumlin certainly knew for weeks, if not months, that the numbers would not add up but like any smart politician he withheld the bad news until after the election. By announcing the death of single payer now, however, he may have removed a political weight from the shoulders of many Democratic legislators who probably did not relish having to vote on a single-payer financing system in the coming legislative session. Some are even lauding Shumlin for his political “courage” in making the announcement now. This, in my view, is a dubious claim – real courage would have meant making the announcement before the November election. However, I doubt many legislators are going to vote against Shumlin for governor on the basis of this one announcement, and it might even shore up support among some who are relieved that the issue has been removed, at least for now. We’ll know soon enough.

As for the broader lessons from this ill-fated effort,  supporters and skeptics alike are left wondering if a single-payer system lacked political support in a liberal-leaning deep-blue state like Vermont, what chance does it have in any U.S. state? However, I think this misses the real lesson of the Vermont experience. One of the reasons why the Vermont plan proved fiscally unworkable is that the latest estimates showed that in part because of Obamacare, the state would get $150 million less in federal health care aid than anticipated earlier, as well as $150 million less in Medicaid assistance. Other difficulties included how to pay for coverage for non-residents who were employed in Vermont. These problems point to the difficulty of enacting a state-based single-payer plan in a health care system that is inextricably bound up with a national economy and which is struggling to implement a national health care reform plan. As it turns out, many of the factors cited for why a single payer system might work in Vermont – its small population and progressive leanings – mattered a lot less than supporters understood.  Indeed, Vermont’s small economy might make it more susceptible to national economic forces. The plain fact is that it is going to be difficult for any state, no matter what its ideological leanings and fiscal health, to move ahead by itself with comprehensive health care reform. In the end, health care is primarily a national issue and if single-payer is the way to go, it is likely going to have to happen at the national level. That, I think, is the lesson to take from the Vermont experience.

6 comments

  1. Matt, this may be a shock to your system, but I agree with you! Shumlin has counted heads and is quite sure that he has the votes in the run-off legislators’ secret ballot versus Milne. Thus, he can make the decision to say that he is not going ahead with single payer. Of course, the numbers suggested that he should be confident going into the November election and, oops, he shouldn’t have been. I agree with Milne that Shumlin’s strategic call was to wait until after election day to pull the plug, i.e., take the denials with a grain of salt.

    As a citizen who worked with health insurance issues for many years before “sort of” retiring, I found the whole single payer issue very confusing. I had a letter in the Rutland Herald before the election commenting that newspapers and the Vermont Press Bureau weren’t addressing where Medicare Advantage participants would fall under single payer. Shortly afterward, a letter appeared in the paper from a supporter of single payer essentially stated that there were no changes for Advantage participants under single payer. The next day there was an op-ed piece saying exactly the opposite! So I remained confused until the question was no longer relevant…at least for a while!

  2. Marty,

    If you start agreeing with me too much, I’m going to lose an important check on my opinions! So here’s a question for you: how much is Shumlin hurt politically by this heading into 2016 (I’m assuming you are right that he has the votes to prevail in the legislature in this go around.) I can see both Republicans – who are saying I told you so – but also Progressives turning against him in 2016 in numbers great enough to cost him reelection. So, what does your crystal ball say?

  3. I would only add a reminder of the way that state’s uses taxes to compete for business investment. A sudden, substantial increase in one state’s taxes would put it at a disadvantage in trying to attract businesses, and states like Texas would go out of their way to convince Vermont businesses to move. You may have had that in mind as part of being “susceptible to national economic forces,” but I think it’s worth highlighting.

  4. Scott,

    Yes, that’s exactly right, and something well worth highlighting in discussing some of the difficulties one state faces in taking the lead in moving toward single payer. In fact, state officials that I talked to often brought this up, arguing that single payer would put Vermont at a competitive disadvantage with other states. Supporters, in response, believe that many health care costs now paid by businesses and consumers are hidden/indirect, so that moving to a single-payer system wouldn’t be nearly as costly as the raw estimates seem to indicate since a lot of these costs would now be included in health care premiums. Still, it was clear that Shumlin’s dithering in trying to determine how to pay for the system hurt him politically, since businesses were operating under conditions of tremendous uncertainty regarding future financing decisions.

  5. Marty,

    The other point I would make is to echo your comment regarding health care complexity. In theory, as you know, the virtue of single payer is that it is a far simpler system of providing coverage than what currently exists. But the lack of clarity regarding financing, and other issues such as the one you raise, hurt it politically. Much the same thing, I would argue, is happening with Obamacare – confusion regarding what it does, particularly in terms of cost control, hasn’t helped its popularity.

  6. Matt, sorry for the delay in responding. Let’s go from the most recent comment and work backwards. Obamacare has had a rather peaceful enrollment this year. From the President’s perspective, that’s a plus. In re Vermont, I think ultimately the State will join the Federal exchange. Certainly, Governor Peter Shumlin will have neither the stomach nor the leverage to be a health care pioneer again.

    As for 2016, I don’t think Shumlin will run for re-election. Assuming the prior sentence is correct, the leading Democratic candidate in my mind as of now is Shap Smith, the House Majority Leader. But there are other Democrats who jump to mind, including Deb Markowitz (who alienated a number of people in Addison and Rutland Counties with the way meetings were held on the proposed and now approved lake shore regulations) and Doug Racine (who Shumlin did not have the guts to terminate face-to-face.) I think Lieutenant Governor Phil Scott will be the Republican candidate. Milne ran a non-campaign. However, given the results, maybe that was a deliberate, brilliant strategy. But I doubt that. I have no idea what the Progressives will do. Assuming the Progressives have a different candidate, Scott will win in an election that, like this year, will go to the Legislature.

    Matt, I leave to you the reading of the tea leaves whether Senator Leahy will run again. If he doesn’t, some of the predictions above may evaporate.

    Finally, I don’t know why I bit on the bait you offered to me in your post.

    Cheers, Marty

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