by Anthony Robbins, MD, MPH
When my colleagues here at The Pump Handle asked me if I would like to comment on the recent demise of “Single Payer” health insurance in Vermont, I hesitated because my Vermont hands-on experience is so dated. I moved on from being Vermont State Health Commissioner almost 40 years ago. But on second thought, I may have learned some things during my time in Vermont (and from 1970 to 1972 in Quebec) that can contribute to understanding health insurance in Vermont and in the US more generally.
How did I happen to move to Montreal? Canada had just authorized provincial health insurance programs, more aptly named in French–l’assurance maladie (sickness insurance). The plans were tax-financed programs to pay for medical services. I thought national health insurance was just around the corner in the United States, so I went to Montreal to get some practical experience. A foolish optimist I was.
In the early 1970’s, under the leadership of Alan Gittelsohn and Jack Wennberg, Vermont had created a universal hospital services database. (Hospital care was then, and is now, the most expensive part of the medical services sector.) Every Vermonter who was discharged from a Vermont hospital, also from big hospitals in surrounding states and Quebec, became part of the database. Hospitals provided information including the town of residence, age and sex, plus the discharge diagnoses, procedures, and length of stay.
US Census data helped complete the picture of hospital services for Vermonters. Both hospital data and census data recorded the town of residence. Vermont has 251 towns and two “gores”. No longer just counting numbers of discharges, by the early ‘70s, Vermont could consider rates of use. Population denominators made it possible to generate per capita rates of hospital use, town by town. In maps that displayed the rates, the towns clustered around the medical center in Burlington had far higher hospitalization rates than distant and rural towns.
Almost everyone in Vermont was insured, and Blue Cross, chartered under state law, provided most of the hospital insurance to Vermonters. Blue Cross priced coverage using “community rating” where everyone in the state paid the same premiums, irrespective of where he or she lived. It was easy to see that people away from Burlington were subsidizing hospital care for people living in the metropolitan area. I was reminded of what my teacher, Rashi Fein , had taught me: Look at the income transfers in the medical care system. He meant that that medical expenditures were such a large a part of the US economy that they were capable of moving huge amounts of money among parts of the population.
If private insurance companies captured a greater share of the market in Vermont, they might have introduced competition and shifted prices to reflect “experience rating”. Discrimination, such as refusing coverage for pre-existing conditions, would surely have become more common. But, because insurance company earnings are a percentage of their throughput (the claims they pay), there was never any reason to think that health insurance companies, even when competing, were eager to reduce total expenditures.
In Vermont, many of us began to think of health insurance as another tax. And a big one! It ranked after federal and state income taxes and real estate taxes, and ahead of the state sales tax. Health insurance transferred income from poorer residents in rural parts of the state to residents of wealthier towns nearer hospitals and particularly to those near the medical center in Burlington.
It is not surprising that Vermont became one of the first states to consider a tax-financed health insurance system. Such a program might have been able to reduce hospital expenditures and eliminate unfair income transfers.
(A few years later, when I directed the Colorado Department of Public Health, I explored a state takeover of the troubled Colorado Blue Cross plan to create a state insurance program. Community rating was losing out to commercial insurers with experience-rated prices. Employers wanted to take advantage of the fact that their workers were healthier than other people who did not work. Colleagues at Blue Cross of America sensed movement toward national health insurance. They wanted to test in Colorado whether the creation of a state health insurance authority using an existing Blue Cross plan could be the national model.)
By the time that Dr. Howard Dean, a primary care doctor by training, became governor in 1991, Vermonters had learned far more about medical care than citizens of most states. The idea of state health insurance was increasingly popular and Governor Dean explored how to create such a plan.
But what looked attractive to well informed Vermonters did not look as good when perceived as baggage to carry into a national campaign for President. The powerful insurance industry hated national health insurance. Governor Dean abandoned state health insurance for Vermont and ran for President in 2004.
Why, ten years later, has another Democrat, Vermont Governor Peter Shumlin, followed a course not unlike Howard Dean? Shumlin has recently announced that he will no longer pursue a state health insurance program that has been given the awkward appellation, “single payer.”
My own view is that for a state health insurance program to work will require that its advocates recognize two truths, that:
- It will eliminate private health insurers that now make a tidy profit on every dollar spent on medical services. A public authority will pay bills, just as Medicare does. (Many people will surely find employment working for the public authority.)
- Health insurance is a tax that causes large income transfers. It will need the same kind of analysis to which we subject taxes: how progressive or regressive do we want it to be. From whom does it take income and wealth and to whom does it provide services they could not otherwise afford?
President Obama was not up to recognizing these truths and the Affordable Care Act, as enacted, leaves the insurance industry in the drivers seat. ACA’s principal accomplishment, and not an insignificant one, is to make health insurance available to more Americans.
Governor Shumlin looked at his prospects in Vermont and evinced no more courage than our President. He no longer had a dominant Blue Cross plan and taxes had become an even dirtier word. Although the cost to Vermonters would have been no higher, expenditures would have appeared in one place, more or less “on-budget”. Shumlin came to see tax-funded medical care, like Medicare, as an evil rather than, as the rest of the world knows, an important step forward.
Anthony Robbins, MD, MPA is co-Editor of the Journal of Public Health Policy. (Facebook page here.) He directed the Vermont Department of Health, the Colorado Department of Health, the U.S. National Institute for Occupational Safety and Health, and the U.S. National Vaccine Program.