Editor’s note: This commentary is by Seth Henry and Heidi Spear, who have worked for many years as leaders in successful high technology and consulting businesses. They moved their residency to Vermont 10 years ago to enjoy the mountains and raise a family. They live in Fayston.
For context, we routinely vote Democratic in national elections and we must confess that we actually voted for Gov. Peter Shumlin. We are aware that the data clearly shows our peers in Europe with single payer health care systems have better health outcomes at half the cost of our system. We even believe that if the U.S. had the will to make the shift to single payer it would be a far better and more sustainable system for our country. With all that said, it is also clear to us that Vermont’s self-imposed mandate to go it alone and implement single payer is certain to do great harm to Vermonters.
There are inescapable and not at all philosophical reasons why single payer at the state level is destined to fail at serious expense to the citizens of our state. Unlike in the systems we aspire to emulate, there are zero mechanisms to contain costs in the single payer plan that has been enacted into law in Vermont. Single payer works abroad at a lower cost than our system for two principal reasons, neither achievable in any statewide model.
First, administrative costs, 30 percent of our total health care costs according to the New England Journal of Medicine, are almost entirely absent in the single payer systems abroad that have no claims processing. Vermont will not realize these savings because we will continue to process claims. We propose to play some musical chairs, displacing current payers with Green Mountain Care (GMC) and then contracting out claims processing, but the entire process and associated expense remains.
Claims processing must remain because our providers will continue to submit claims for care for out-of-state residents and our residents will require care from out-of-state providers. In fact, not only will we not eliminate this extraordinary overhead, these costs will likely increase as GMC, an entirely novice entity, will not be able to handle administration as cheaply as well established not-for-profit insurers with their experience and infrastructure. To think otherwise is delusional, as we are well outside our core competency in a magnificently complex field. Exhibit A is the state’s health exchange website, a no more complex venture.
The second area where our foreign peers save money compared to us is in the actual costs of care. Providers earn far more moderate salaries in single payer countries. General practitioner compensation in the U.S. was more than double the average of general practitioners in all of the 21 countries in the OECD in 2007, according to the Congressional Research Service. There is no reason to believe the gap has narrowed.
Also, according to the Commonwealth Fund, a nonpartisan, trusted source of data on health care spending, pharmaceuticals comprise roughly 12 percent of our total health care costs, and we pay significantly more for them than other countries. Canada pays approximately 77 percent of what we pay for medications and overseas single payer countries pay less than 50 percent. Given that Vermont participates in a national labor and drug market we cannot realize those efficiencies in our statewide single payer scheme. In short, no money will be saved in any of the areas that comprise the premium we pay for our health care.
We can only hope that our legislators will awaken, consider the facts and look more than one step ahead, before we pass the point of no return.
With no greater efficiency in Vermont’s mandated single payer model and no structural mechanism to make it more affordable, we must come to the realization that this scheme solely implements cost shifting.
With the current political discourse nationally about inequality, we can understand why it might be perceived as a good idea to have wealthy individuals and corporations fund health care for all citizens. And we have to say that we agree that at the national level the wealthiest among us, and very profitable corporations to boot, are not always paying their share. However, ideology only takes you so far in the real world.
In the real world of Vermont, we don’t have many wealthy individuals and corporations, and the vast majority of them pay a significant premium to stay invested in Vermont already. Sen. Peter Galbraith, D-Windham, recently reported that funding GMC through income taxes would raise the top bracket for state and federal combined tax to 78 percent. Does anybody really think that highly mobile earners would not relocate residency to save themselves nearly half of their income tax bill? Their options to realize these savings would include, to be clear, every other state in the U.S.
Sen. Galbraith clarifies that if we fund GMC through a payroll tax, as an alternative funding approach, we would pile an additional 17 percent in payroll taxes on all businesses. Seventeen percent is more than the profit margins of nearly every public company operating in Vermont. We would not wager that our average private employer in Vermont clears that margin. So, does anyone think that large or small employers are willing — or should be willing — to run operating losses to support GMC?
Following these market dynamics to their inevitable conclusion, high-earning individuals, corporations and/or all business owners will have very good reasons to stay out of Vermont and those here will have strong incentives to leave. The result, of course, would be further erosion of our tax base. At that point, there will be no place to shift costs to.
As we have seen in recent years, with a shrinking tax base the burden on regular working people inevitably increases. You don’t have to talk to too many people to be apprised of the fact that most of our middle class feels under tremendous financial pressure, is on the brink of not being able to make it here in Vermont, or have already left. Anybody not catch that glimmer of real life at Town Meeting this year? We need actual cost reduction, not short-term cost shifting, to safeguard our middle class.
Simply put, single payer at the state level is both impractical and self-destructive. Given the magnitude of the issues, it is surprising that no other Democrats are supporting Sen. Galbraith’s and Rep. Cynthia Browning’s, D-Arlington, reasonable efforts to ensure an immediate dialogue about the realities of funding GMC, particularly since the legal due date for this information has passed. It is not surprising, however, that Gov. Shumlin has been basking in the national attention of being the first, and only, governor to pass single payer legislation, rather than getting down to the harsh realities of implementing his ill-conceived plan.
We can’t see any justification for the risks our elected leaders are exposing Vermonters to in their pursuit of universal coverage and lower health care costs. There is nothing to be gained this way that can’t be gained through less risky means, but there is much to be lost down the statewide single payer path.
We can only hope that our legislators will awaken, consider the facts and look more than one step ahead, before we pass the point of no return. The only constructive path to single payer is one pursued through our national delegation and advocates lobbying our federal government.
Meanwhile, the work urgently needed in Vermont is to stop the glory seeking and start delivering improved care at lower costs to our citizens through practical measures. We can start by improving management of our exchange implementation, broadening enrollment supports and increasing attention and support for cost containment through Accountable Care Organization efforts. All are deprived of the emphasis they need, as is Vermont itself, as they lay in the shadows of the governor’s stage lights.
