Vermont Report Says State Can Save More Under Single Payer Than Obamacare

Yesterday, as House Republicans voted to repeal the Affordable Care Act, the Vermont legislature heard a proposal for how to move the state to a single-payer system. The report, organized by Bill Hsiao, a professor at the Harvard School of Public Health, would provide insurance to everyone with a common benefit package that would pay at least “87 percent of each Vermonter’s medical and mental health expenses and 77 percent of his or her drug expenses” and channel all the payments to doctors and hospitals “through a single pipe.”

The “pipe,” so to speak, is an Independent Board representing “all the major payers, including, employers, state government and consumers, as well as the beneficiaries or recipients of benefits and payments, including providers and consumer groups.” The board would “negotiate updates to the benefit packages and payment rates to providers,” but outsource all claims administration and provider relations work to a private company. This kind of approach, Hsiao estimates, would create savings that would outpace those of reform, producing savings of “approximately $590 in 2010 US Dollar real terms“:

Specifically, in 2015 project that the cost would decrease by approximately 11% of what they would be under PPACA….Under those savings assumptions, total health care costs in 2015 would reach approximately $5.776 billion in real 2010 dollars, $500 million less than under implementation of PPACA. On a per capita basis, total expenditures would be $8,580 in 2015, or about $750 than under PPACA. The savings would reach about $1.2 billion in 2019. By that year, the total per capita expenditures would increase to $8,800, representing a per capita savings of about $1,800 compared to PPACA.

The plan would be financed through a higher payroll tax on employees and their workers, but Hsiao estimates that the tax burden would be “less than what they are paying in premiums now.” Premiums costs could further be lowered through payment and malpractice reform. Private insurers, meanwhile, will their role greatly reduced, but not entirely eliminated. The report indicates private companies could sell “supplementary insurance” that provides greater coverage than the common benefits package.

Hsiao said that Vermont faced “no fewer than 15 hurdles before it would be able to implement the plan,” not the least of which are some of the new requirements and regulations in the Affordable Care Act. The Vermont Congressional delegation has introduced an amendment that would expand a provision in the law that allows states to propose their own pilot health care programs and seek a waiver from the federal health care law so that they can pursue their own approaches to health care reform. The current law allows states to pursue these waivers in 2017; the amendment would move this waiver date up to 2014. A companion measure has also been introduced by Sens. Ron Wyden (D-OR) and Scott Brown (R-MA) in the Senate, but it remains to be seen how cooperative HHS will be in granting waiver and allowing the state to pursue these reforms.