HCR -- Vermont Is Going Single Payer

By John Ballard

I seldom reblog someone else's work, but Ezra Klein's column is too important to miss and too well-crafted to parse.
This. Is. Important.

Kevin Outterson is an associate professor of health law, bioethics and human rights at Boston University, as well as a blogger at the Incidental Economist. He�s also been following the Vermont health-care reform process in some detail, and is one of fairly few people who has actually read the 141-page single-payer bill that the governor is poised to sign. Earlier this afternoon, he walked me through what he�s learned.

Ezra Klein: What is Vermont passing, exactly? My understanding is that they�re not going to sign this legislation and wake up with single-payer health care the next day. So what�s in this bill, and what does it do?

Kevin Outterson: This bill is more of a framework. For example, they left out all the financing. But it sets a planning process for a single-payer � or what they�re calling a �single-payment� � system. If you read the various reports and presentations they�ve released so far, you can get a sense of where that�s going. Their plan is to roll every payer they can into one system. It�s easy to do with state and municipal employees. They might be able to do it with the individual and small-group markets that they regulate under the terms of the Affordable Care Act. They are going to ask the Obama administration for waivers for Medicaid, so they�d get the Medicaid money and use it in this system, and they also want a waiver for Medicare, which I�m not sure anyone has ever done before. And the last group they�re trying to woo in are the large, national employers who are regulated by ERISA. Their plan is to tax these employers whether they pay in or not, and then these employers have to ask themselves, �We�re already paying this tax, why wouldn�t we just put our employees into Green Mountain Care?�

EK: So all these different players remain part of the health-care system. But now their payments run through the Vermont state government.

KO: Right. So employers would still be paying in, the Vermont state government would still pay in, the federal government would still be paying in, but all the money would then flow through Green Mountain Care, the single-payment system. And for all providers, there�d just be one contract. It�d equalize payment rates between private insurance and Medicare and Medicaid. It�ll dramatically reduce their paperwork. That�s why they�re supporting it. And Blue Cross/Blue Shield of Vermont, which is the biggest insurer in the state, supports it.

EK: Wait, Blue Cross/Blue Shield supports it? Why? Won�t this put them out of business?

KO: You would think. But this is one of those Blue Cross plans that never sold out to Anthem. They�re still nonprofit. And they�ve got 70 percent of the market in Vermont. So the theory is they would administer the payment system. But they�re not alone. The Vermont Medical Association and the Vermont hospitals are supporting this legislation. The most vocal opponents are the state association of insurance agents, and the drug companies are about to descend in force, because there�s a lot in there the drug industry won�t like.

EK: How quickly could something like this be up and running in Vermont?

KO: They can do a single-payment system fairly quickly for the state and municipal employees and the individual and small-group exchange markets that they regulate under the ACA. So that�s the core. And it�s pretty substantial. And if they get Blue Cross in, then they get Blue Cross�s customers. Then there�s Medicaid and Medicare, which will be a long process going back-and-forth with the Center on Medicaid and Medicare Services. And then the discussion with the big employers is happening now, as Vermont can toss this tax into place pretty quickly, which will force those guys in.

EK: But there�s no financing mechanisms in the bill yet, right? That seems like a pretty big omission.

KO: Vermont has a study group that�s been working on financing for a while and that�s been negotiating with these big employers to join the party. And they need them there: If they don�t tax the big guys, they don�t have the money, and if they don�t get buy-in from the big guys and they move their offices to New Hampshire, Vermont has a problem. But let�s say you�re Wal-Mart. You might be willing to take a risk on paying a bit more in Vermont because if it works and spreads, this might fix your long-term problems nationally. If I was a national employer with 3 or 4 million lives in my care, I might be willing to invest a little money to see if Vermont can do this.

EK: That national question seems like the interesting one. In Canada, single payer began in a single province and then spread across the whole country. If Vermont pulls this off successfully, it seems like the sort of thing that, in 10 or 20 years, could lead to very large changes in America�s health-care system.

KO: The first thing I posted on was the incredible power of Vermont�s version of the Independent Payment Advisory Board to control costs. If they do this and they�re successful, there are a number of other states that will want to try it. It�s a 20-year time horizon, but if you think national single-payer is a political nonstarter, this is where the action is. But that�s the question: whether they can control costs. That�ll be everything.