Work on health care payment plan begins
By Peter Hirschfeld
Vermont Press Bureau | July 15,2012
MONTPELIER – Since assuming the governor’s office in January of 2011, Peter Shumlin has skillfully deflected questions about how exactly he plans to finance a first-in-the-nation single-payer health care system.
Now, as his Republican challenger looks to foment electoral anxiety over the prospect of “socialized” medicine, high-ranking officials inside the Shumlin administration are ramping up efforts to identify what kind of public tax will be used to support a $5 billion system.
At a kickoff meeting this week, cabinet-level appointees will sit down with a team of economists, actuaries and health care experts from the University of Massachusetts Medical School to embark on a months-long process that will yield at least two financing plans.
The academic institution won a $300,000 state contract to perform the work.
“We thought we needed to get input from people who had not only the health care but economic experience, to make sure what we present has the credibility that taxpayers would expect,” Secretary of Administration Jeb Spaulding said last Tuesday.
Republican gubernatorial candidate Randy Brock has sought to put the issue of health care financing front-and-center this campaign season, sponsoring legislation earlier this year that would have required Shumlin to propose a single-payer tax in advance of the November elections.
But despite the onset of internal financing deliberations, Spaulding says the plan won’t arrive before January of 2013 – a reporting deadline passed into law by the Democratically-controlled Legislature.
“The job of developing a financing plan is in some ways, you could say, not that complicated, because how many possibilities are there?” Spaulding says. “But you need to have a more sophisticated ability to understand things like, what are trends in cost? What are the expectations over time for different sources of revenue? And that takes time.”
While Spaulding says it’s still too early to discuss the benefits and pitfall of various funding options, he said for the first time last week that the 14.5-percent payroll tax proposed by Harvard economist William Hsiao in 2010 is a nonstarter.
Hsiao, whose controversial study has been referred to by administration officials as a “roadmap” to single-payer health care in Vermont, identified the double-digit payroll tax as the most favorable financing option.
Hsiao’s proposal – the fruit of a $200,000 study – stirred unrest in the business community, and has been used by opponents of single-payer, Brock among them, to try to block political momentum for Shumlin’s signature policy issue.
Republican candidate for treasurer Wendy Wilton used the 14.5-percent figure for a 2011 fiscal analysis that has been seized by single-payer opponents as proof of Shumlin’s folly. The report, dismissed by administration officials as political propaganda, forecast a multi-billion-dollar deficit in Shumlin’s single-payer program.
But Spaulding says a payroll tax of that magnitude would inflict undue harm on Vermont businesses.
“If there’s a payroll tax involved, it better be pretty small so we don’t put our businesses at a competitive disadvantage,” Spaulding says. “Anything in the range of the Hsiao report would be totally off the table for the Shumlin administration.”
So if not a large payroll tax, then what?
Robin Lunge, director of health care reform for the Shumlin administration, says the contract signed with the University of Massachusetts will help provide the answers.
“This is the deep dive, building something based on an actual benefits package as well as really trying to dig into pros and cons of financing options,” Lunge says.
The contract enumerates the scope of services that will be provided by the university, beginning with a tally of estimated costs for the new system.
The financing team will then examine projected federal revenues, money that will arrive in Vermont in the form of Medicare, Medicaid and tax subsidies rolled into Obamacare.
Finally, contractors will explore financing options, including “taxes, fees, assessments, premiums and any cost-sharing,” according to language in the contract.
The establishment of a new health care financing system could have far-reaching impacts on the whole of Vermont’s tax code, and the contract stipulates that the financing plan shall include an “analysis of the interaction of new provisions with Vermont’s current revenue structure, including income, property and sales tax, and recommend possible complementary reforms to the overall tax code.”
Lunge says the state needs to weigh carefully the impact of the financing plan on the broader economy.
“We need an analysis of the macroeconomic impacts, so we know that if we change financing in one way, we have a sense of how that flows out into state’s economy,” Lunge says.
While the state will honor its statutory obligation to present a financing plan to lawmakers by Jan. 15 of 2013, Spaulding says they won’t necessarily be asking lawmakers to adopt it.
Under current law, Vermont won’t be eligible for single-payer waivers until at least 2017, and Spaulding says it will likely be premature to adopt a financing plan next year.
That means that while the financing package will generate plenty of debate and discussion in Montpelier next year, Shumlin’s single-payer push won’t face any life-or-death votes.
“We recognize that whatever the plan is next year, it will need to be modified as circumstances change after 2014,” Spaulding says. “It would be unusual to say the least to ask the Legislature to pass a financing plan a couple of years before the plan was to go into effect.”
Spaulding says transitioning to the new public-financing regime “won’t be like flipping a switch.”
“And we might not separate fully from an employment-based system in the first year,” he says. “And in the beginning at least, there’s a good possibility that premiums will still be involved.”
Whatever the financing system looks like, Lunge says it will incorporate the values that Vermonters shared with government officials during health care reform “listening sessions” earlier this year.
Those sessions were derided by single-payer opponents as political theaters designed to lend a false legitimacy to Shumlin’s reform initiative.
Lunge, however, says lessons learned during those meetings will ensure that Vermont’s new health care system is tailored to meet the needs of the population it serves.
“We’re paying (UMass) a lot of money and we need to make sure the product is aligned with Vermonters’ values,” Lunge says. “It won’t be them off, on their own, doing their own thing, because quite frankly they probably wouldn’t come back with a useful product.”