Eric Davis: Single-payer plan must be explained
The Shumlin administration plans to launch a single-payer health care system in Vermont on Jan. 1, 2017. The administration needs to provide Vermonters with more information on those plans, preferably before the November 2014 elections.
The administration is currently devoting most of its time on health care to resolving the difficulties that have marred the launch of Vermont Health Connect. While over 70,000 Vermonters are now covered by VHC, small businesses are still unable to enroll their employees online, and no participants are able to pay their premiums online.
With businesses between 50 and 100 employees required to provide coverage through VHC as of Jan. 1, 2015, fixing the current problems soon is important before a larger group of participants enters VHC next year. The difficulties launching VHC also raise questions about whether state government has the administrative and technical capacity to enroll over 600,000 participants in a completely new single-payer system.
The administration has not been very forthcoming with information about how a single-payer system would be financed, or what sort of coverage would be available in the new system. The governor himself, and other officials, have indicated that a payroll tax would be one of the principal sources of revenue for single-payer’s estimated cost of $1.8 to $2.2 billion.
However, the shrinking size of the state’s labor force means that a payroll tax could not be realistically expected to cover the full cost of the system. A payroll tax at the level being discussed — somewhere around 10 percent — could also be burdensome to small businesses that cannot currently afford the cost of health care for their employees.
The administration has said almost nothing about how the rest of the revenue needed for single-payer would be raised. Some in Montpelier have said that a “luxury tax” could be used to raise these funds. This sounds very much like a tax on assets or wealth. However, a tax on assets could result in a large number of high-net-worth individuals, especially retirees, deciding to leave Vermont for other states, thus reducing the revenue available for health care.
The administration has provided very little information about the benefit structure in a single-payer plan. Would the benefits be somewhat limited, similar to those in Medicare, a program in which many participants feel the need to purchase a supplemental insurance policy? Or, would the single-payer plan provide a more comprehensive level of benefits, similar to those in many plans now offered by larger private, public, and nonprofit employers? To what extent would a single-payer plan cover dental and vision care, and services provided by practitioners such as physical and psychological therapists?
Would the single-payer plan reimburse providers for the full cost of covered services, or would participants be expected to pay some of those costs through co-pays and deductibles? If the latter, would the co-pays and deductibles be uniform for all participants, or would they be based on a sliding scale?
The more complex a system of co-pays and deductibles is established, the more administrative costs will be borne by providers, thus defeating one of the goals of single-payer. However, a system with no, or simple, out-of-pocket costs would require more revenues to be raised through taxes.
Finally, will the voters have enough information about the proposed benefits and financing structure for single-payer to be able to make informed decisions about candidates’ positions on these issues in the November 2014 election? If the administration keeps to its current schedule, the November 2016 election will be too late to make these decisions, because that election would come less than two months before the start date for single-payer.
Eric L. Davis is professor emeritus of political science at Middlebury College.
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