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Health expert urges single-payer for Vermont

January 19, 2011

Staff Writer
BENNINGTON — An expert told lawmakers Wednesday that a hybrid, public-private single-payer health care system can replace the current “broken” system while covering all Vermonters, improving health facilities and saving money.

“Vermont has a broken health care system. To fix such a system is possible but will require change of your system,” said Dr. William Hsiao, a Harvard economist and renowned health care system expert commissioned by the state.

Hsiao has designed the health system in Taiwan and led or contributed to efforts in eight other nations to implement health systems. He delivered a report, called for in a law passed last year, to lawmakers Wednesday in a special joint session of the Legislature. Hsiao and a team of about 20 others designed three separate health systems for Vermont, including a single-payer system, according to the law.

Vermont currently has about 47,000 uninsured residents, according to Hsiao. Recent federal changes after taking effect will leave about 5 percent of the state without coverage. Federal health care reform “will not solve the problem for you,” he said.

Hsiao predicted Congress will revisit health care reform soon and said Vermont can demonstrate what is possible.

“In five years I predict the United States will go through another major debate on how to reform the health care system. The question for Vermont is do you want to walk ahead of the United States? Do you want to be a model?” he said.

Hsiao said the third option in the report, a single-payer system that is a public-private endeavor, is the best solution for Vermont. “… The best strategy for you to achieve what Vermont wants to achieve is a single-payer,” he said.

It be paid for with payroll contributions from employers and workers. That, Hsiao said, is the “most viable and most practical” financing mechanism. The plan would produce health care savings of 8 to 12 percent in the first year, allowing the state to expand coverage to all Vermonters, add additional primary care physicians in the state and improve some hospitals, he said.

“We will exempt the low-wage employers and the low-earner workers because their ability to pay the payroll contribution would be very limited or non-existent,” he said.

Most employers and workers would not pay more than they are currently paying in premiums, he said. And businesses could still provide private insurance but would not avoid the payroll tax by doing so, according to Hsiao.

The system would provide common “essential” benefits to Vermonters and payments would funnel through a single system with uniform processes and rates for providers, Hsiao said. Dental insurance would be included for children and a vision plan for everyone.

The plan would not be run solely by the government, according to Hsiao. Administration of the system should be put out to bid every few years, he said, and a private or quasi-government entity could administer the system, he said.

“Government is a monopoly. We know when businesses are a monopoly what they will do. They will exploit the customers as well as get lazy,” he said.

The system should also be overseen by an independent entity, Hsiao said. “Other countries found the best way to do it is you create an independent board,” he said. “Right now what you have is a political process. If you have an independent process you take out most of the politics.”

Current Medicare recipients would not see the services they enjoy eliminated, according to Hsiao. “We want to assure the elderly and the permanently disabled that we will not disturb their benefits,” he said

And he also called for tort reform, which was a rallying cry of sorts for Republicans as Congress waded through federal health care reform last year. “That’s why I have many friends who refuse to return my calls and these friends are trial lawyers,” Hsiao said.

He was careful to note that at least 15 “hurdles” exist to implementing such a system. The federal health care law does not
allow for states to obtain necessary waivers to implement such a system until 2017. Vermont’s congressional delegation announced Tuesday, however, that they will introduce legislation to move the date to 2014.

A politically viable system is also important. “You cannot just dream in the clouds,” Hsiao said.

Up to 5,000 jobs could be created by implementation of the proposed single-payer plan, according to Hsiao. Lower premiums for employees and employers will have an ancillary impact on the state’s economy, he said.

“When you can reduce the health care costs and health insurance premiums for employers and employees, the employer will increase the cash wage of the worker,” Hsiao said. “When health premiums go down, the savings will be passed on to the workers as higher wages. With higher wages, the workers will consume more in Vermont. They may buy more clothing. They may go to the movie more often, or the restaurant.”

The savings in the plan he endorsed would result largely from removing administrative costs in the current system, which allows for several companies to offer various health care plans. Sales and marketing expenses, as well as underwriting expenses, would be eliminated, Hsiao said.

It will have a negative impact on some, however. “Unfortunately, it’s not a panacea. Some people are going to bear the burden.”

Private insurers, particularly Cigna and MVP, will see their business “vastly reduced or completely withdrawn,” he said.

Some jobs will be eliminated, too.

“Under single-payer you do not need sales and marketing people. You do not need underwriters. These people are going to lose their jobs,” he said.

Hsiao’s first option in the report, a state-run, single-payer system that is publicly financed and offers “comprehensive” benefits, is not feasible, he said. That option included full dental and vision coverage, as well as nursing facility and home health care, he said.

“We found for that option the cost is so high that Vermont would have to spend a significant amount of new money for health care. Most of the stakeholders in Vermont are against spending any additional funds for health care. They feel their budgets are already strained,” he said in his briefing to reporters.

The second option would keep in place a “multi-payer” system and encourage competition between public and private plans through a health plan exchange, similar to the public option some unsuccessfully sought in federal health care legislation. It would produce less savings, however, Hsiao said.

New Democratic Gov. Peter Shumlin praised the report Wednesday. He was the president pro tem in the Vermont Senate last year when the law calling for the report was passed.

Potential savings outlined in the report is “very good news for Vermonters who are being forced to spend $1 million more tomorrow than we did today on health care,” Shumlin said.

“It’s clear that moving to a single payer plan, with or without a limited role for private insurers, will save Vermont significant
money in health care,” Shumlin said. “Dr. Hsiao estimates that a single payer plan with a limited role for a private insurer would save $500 million in the first year of operation, and a government-run single payer plan would save between $50 million and $100 million.”

Democratic leaders in the Legislature also embraced the report as a positive step to reform.

“The Hsiao report provides us with a road map to develop a health care system with a strong foundation. We owe it to the state of Vermont to formulate a plan that will ensure future generation of Vermonters will have full access to quality care,” Senate President Pro Tem John Campbell said.

House Speaker Shap Smith said the report addressed everything lawmakers asked for.

“As his report accurately notes, the path that we are on is unsustainable and will lead to higher costs and fewer people who can access the system. That is unacceptable,” Smith said. “Dr. Hsiao incorporates the three fundamental principles necessary for reform — coverage for all Vermonters, a simpler, more cost-effective system, and retention of a high quality of care.”

Bennington Rep. Mary Morrissey, R-Bennington, a member of the House Health Care Committee, said lawmakers have not yet had a chance to read the full, 100-plus page report.

“I think everyone is kind of digesting the overview,” Morrissey said. “There’s probably a lot of details within it that may not be clear.”

However, she said lawmakers in her committee across the political spectrum are asking important questions and looking to work together.

“I think the key piece for me right now is how did we get to this third option,” she said.

Contact Neal P. Goswami at

Read the full report HERE

The release of the draft is followed by a 15 day public comment period.  Send comments to:

Public comment will be accepted until 4:30 p.m. on Feb. 3.

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