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Costs derail Vermont’s dream of a single-payer health plan

Demonstrators gathered on the steps of the State House in Montpelier on Dec. 18 for a rally in favor of single-payer health care, following Governor Peter Shumlin’s decision to pull the plug on Vermont’s single-payer plan.
Glenn Russell/Burlington Free Press/AP
Demonstrators gathered on the steps of the State House in Montpelier on Dec. 18 for a rally in favor of single-payer health care, following Governor Peter Shumlin’s decision to pull the plug on Vermont’s single-payer plan.

For decades, liberal activists yearned for a European-style, single-payer health system that they argued would lead to more affordable, efficient, and comprehensive medical coverage for all citizens. When Vermont four years ago enacted a landmark bill to establish the nation’s first single-payer health care system, they saw their long-sought dream about to be fulfilled.

But reality hit last month. Governor Peter Shumlin released a financial report that showed the cost of the program would nearly double the size of the state’s budget in the first year alone and require large tax increases for residents and businesses. Shumlin, a Democrat and long-time single-payer advocate, said he would not seek funding for the law, effectively tabling the program called Green Mountain Care.

“In my judgment, now is not the time to ask our Legislature to take the step of passing a financing plan for Green Mountain Care,’’ Shumlin said.

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The decision not only stunned and angered supporters in Vermont, but also signaled that the dream of universal, government-funded health care in the United States may be near its end. Vermont’s experience, analysts said, shows how difficult — and costly — it can be to shift from a system long-dominated by private health insurance, and that the future of universal health care lies within the private market.

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In short, if a liberal state electing a Socialist (US Senator Bernie Sanders) to Congress can’t or won’t put a single-payer system into place, then who will?

“The idea of single-payer, or a Medicare-for-all type program, has always been a cherished dream for many in the Democratic Party,” said Henry J. Aaron, a senior fellow at the Brookings Institution, a liberal-leaning Washington think tank. “In truth, there had never been a hard, developed plan to implement such a dream. In Vermont, they finally developed a plan, and look what happened.”

A single-payer system has been the Holy Grail for progressives since the end of World War II, when President Harry Truman unsuccessfully pushed for a government-run National Health Insurance Plan to provide medical coverage for all Americans. In the 1970s, the late Senator Edward M. Kennedy of Massachusetts vainly battled for a variation of Truman’s national insurance plan.

In the 1990s, President Bill Clinton turned to the private market to provide universal care, requiring that employers furnish health insurance for their workers. But that plan was rejected, too. Finally, in 2010, after a momentous congressional battle, President Obama signed into law the Affordable Care Act, achieving universal coverage by expanding Medicaid, the government health care program for the poor, and mandating private insurance for others.

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Vermont took Obamacare a step further. In 2011, Shumlin proudly signed a bill to establish a publicly financed, single-payer system. The law required Shumlin to submit a detailed financial plan by 2013.

Shumlin missed the deadline, raising fears among supporters and critics alike that single-payer health care would cost much more than anticipated. Those fears were realized on Dec. 17, when Shumlin, two years late and just a month from narrowly winning reelection, released the financial analysis.

The numbers were stunning. To implement single-payer, the analysis showed, it would cost $4.3 billion in 2017, with Vermont taxpayers picking up $2.6 billion and the federal government covering the rest. To put the figures into perspective, Vermont’s entire fiscal 2015 budget, including both state and federal funds, is about $4.9 billion.

Shumlin’s office estimated the state would need to impose new personal income taxes of up to 9.5 percent, on top of current rates that range from 3.55 to 8.95 percent. Businesses would be hit with an 11.5 percent payroll tax, on top of 7.65 percent payroll taxes employer pay for Social Security and Medicare.

And even those tax increases might not have been enough. The governor’s office estimated the Green Mountain Care program would run deficits of $82 million by 2020 and $146 million in 2021. Shumlin said he feared the tax increases would harm businesses and the economy.

Stauch Blaise, 59, a former landscaping firm owner who is now disabled, said health care is “an issue of human rights and justice.”
Jessica Rinaldi/Globe Staff
Stauch Blaise, 59, a former landscaping firm owner who is now disabled, said health care is “an issue of human rights and justice.”
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Art Woolf, an economist at the University of Vermont, said Shumlin was right to be worried. Though Vermont’s unemployment rate is 4.4 percent, compared with 5.6 percent nationally, residents and companies are burdened by high property taxes, housing prices, utility costs, and other expenses, he said.

Betsy Bishop, president of the Vermont Chamber of Commerce, said the 11.5 percent payroll tax would have crippled small companies that account for most of the state’s employment. “Our businesses experienced a collective sigh of relief when the governor announced his decision last month,” Bishop said.

So what went wrong? In a speech last month, Shumlin explained that conditions had changed since Vermont embarked on Green Mountain Care at the start of the decade. He noted the state’s recovery from the last recession was slower than expected and tax revenues had not grown as much as a result.

He also said federal funding would be less than anticipated, forcing Vermont residents to cover more of the costs of a single-payer system.

Health care specialists said Vermont always faced a daunting challenge. Switching from the current system — a hybrid of private insurance and government programs such as Medicaid and Medicare — was inherently complicated, contentious, and costly.

In Europe, many countries built their universal health care systems from scratch, with some starting early last century when most citizens had no medical coverage and any services provided by governments were welcome, the Brooking Institution’s Aaron said. That allowed those countries to slowly build and expand health care systems over decades.

But in the United States private insurance arrangements between employees and employers have expanded and matured over the decades, with many people with insurance expecting a high level of medical service. So, switching to a single-payer system would need to meet those higher expectations — and higher costs — all at once, Aaron said.

“It’s easier to build from scratch than when a system is already up and running,” he said. “We could have maybe created a single-payer system 60 or so years ago, when insurance wasn’t as complete and widespread. But it would be very disruptive and costly today.”

Ron Pollack, executive director of Families USA, a national organization representing health care consumers, said he has long believed in the benefits of a single-payer system. But he also remembered his talks with Kennedy. The late senator, Pollack said, expressed regrets he didn’t earlier embrace insurance-based universal care, rather than holding out for a single-payer system that never materialized.

Pollack said activists might be better off pushing to improve provisions of the Affordable Care Act. “It may change in time and single-payer might become reality,” Pollack said. “But the political reality and the fiscal realities make it a very tough sell.”

In Vermont, however, activists have not given up the fight. During Shumlin’s inauguration this month in Montpelier, protesters disrupted festivities to protest the decision to drop the single-payer plan. Twenty-nine protesters were arrested and charged with unlawful trespassing; some were also charged with resisting arrest.

One of the protesters was Stauch Blaise, 59, a former landscaping firm owner who is now disabled from spine and nerve problems. He said he supported the state’s single-payer plan because he can’t afford all his medical expenses not covered by Medicare.

“It’s an issue of human rights and justice,” said Blaise, of East Randolph, Vt.

Vermont political analysts say the state’s Progressive Party, which didn’t run gubernatorial candidates against Shumlin in recent elections, is all but certain to nominate a gubernatorial candidate in favor of single-payer care in 2016. Shumlin, who is now in his third two-year term, declined requests for an interview.

For the time being, many Democrats, who control the Legislature, are rallying around Shumlin, who has held out hope that a single-payer system could be implemented one day in the future.

“He would have damaged the whole cause of universal health care if he had proceeded with a plan that didn’t work,” said state Senator Claire Ayer, a Democrat and chairwoman of the Senate Health and Welfare Committee. “It costs too much and could create difficulties. It was just completely unsustainable.”

Jay Fitzgerald can be reached at jayfitzmedia@gmail.com.