How Vermont could have made single payer work, part 2: Green Frankenstein Care

Image: Frankenstein was grafted together of different parts of different cadavers and reanimated into a sentient being. Since single payer is apparently a political nonstarter in the United States, let's do the social policy equivalent and find a way to stitch together the component pieces of single payer.




This is a follow-up to an earlier post written in response to Vermont's decision to abandon their efforts to create a state-wide single payer health care system, which would have been called Green Mountain Care. I argued that that single payer in the United States isn't dead, though a pure single payer health care system might not be possible in the unique political and legal environment of the United States. That's not a problem, however, because single payer advocates don't care about single payer per se; they are only interested in attaining the universal coverage and mammoth administrative savings offered by a single payer system. Fortunately, there are ways to reach these goals without single payer.

As Vermont's single payer advocates unfortunately found out, any health care reform proposal will end in failure if it doesn't camouflage its cost as well as the current system. Americans generally don't have a good conception of how atrociously expensive the American health care system is--because the cost is well concealed. Since the American system splits the costs of health care so many ways, it's not immediately obvious how much health care truly costs. For example, employer-sponsored insurance premiums are paid for in part by generous federal subsidies most Americans don't even realize exist, and by employer and employee contributions. Further masking cost, private insurance doesn't cover the elderly or long term care. And, private insurers deliberately design cost sharing (deductibles, copays, and coinsurance) to be be difficult to understand and therefore obscure the true out-of-pocket cost of health care.

Due to it's simplicity, Green Mountain Care couldn't provide this level of cost camouflage. The entire program was financed by simple, direct payroll and income taxes. Because the cost of the premiums weren't split up several ways and cost sharing was simple and transparent, the extraordinary cost of health care in America became unbearably obvious.

Thus, Vermont abandoned Green Mountain Care because it was too expensive--even though it was less expensive than the system it was supposed to replace. The irrationality of this decision is impossible to overstate.

Clearly, any attempt to achieve universal health insurance coverage will fail if it doesn't conceal its cost at least as well as the current system.

I suggested that single payer advocates could look for inspiration in the German and Japanese health care systems because--as in the United States--health insurance is heavily linked to employment. Yet with a few straightforward regulations, the German and Japanese systems attain universal coverage and all of the administrative savings of single payer. As I outlined in the previous post, these regulations are:

• Government regulations set prices of all types of office visits and procedures
• Only a single insurance plan can be sold
• All insurers must be not for profit
• Redistribution of medical loss imbalances to spread risk across insurers
• Employer mandate to provide all employees with health insurance (with employee contribution)
• Health insurance companies must continue to cover enrollees who lose their job or stop working for any reason 

Together, these regulations would allow our employer-based system to attain the cost savings and universal coverage of single payer.

It's worth noting that a single payer system isn't automatically better than other systems. Norway, for example, has a single payer health care system, yet per capita health care spending is far higher than Germany and Japan. Clearly, single payer is a great model for health care reform, but it isn't the only model, nor is it necessarily the best model, either.

Of course, this last post was fairly abstract, so here I intend to ground it by explaining how these reforms could be implemented--step by step--at a state (or possibly city/county) level.

Green Mountain Care would have been a pure single payer system. It would have been elegant and simple. This new system would work equally well, but only after boorishly stitching together seemingly unrelated reforms into a functioning--if ungraceful and confusing--whole. Such a system does not deserve the elegant name of Green Mountain Care. Instead, meet Green Frankenstein Care.

How Vermont could have made single payer work

Image: Vermont Governor Peter Shumlin signed Vermont's single payer bill into law in 2011, only to scrap the plan in the final days of 2014. (source)



Vermont's attempt to establish a single payer health care system was killed by irrationality, as Sarah Kliff explains:

Another strike against single-payer systems, compared to other American health-care arrangements: they're financed in an unusually transparent way. And arranging that financing, from scratch, often proves impossible.

Right now, most Americans get their health insurance through an employer. That employer, unbeknownst to us, typically puts thousands of dollars into our policy alongside the money we kick in. According to the Kaiser Family Foundation, employers, on average, pay more than 80 percent of an individual worker's premiums. But Americans usually don't notice their employer subsidy for health insurance; it doesn't show up on their paycheck anywhere.

Or take Obamacare, which is funded partially by taxes on the rich, partially by fees on various players in the medical industry, and partially through cuts to Medicare. The cost is spread across many groups, and many government functions.

But by moving all the financing to the government, a single-payer health plan like the one Vermont considered would lay naked the incredible costs of our health care system. Vermonters would certainly notice the 9 percent income tax hike and 11.5 percent payroll tax that the Shumlin administration concluded would be necessary to raise enough funds.

In so many words, single payer is very expensive. But single payer would have been slightly less expensive than the current system in 2015 and far less expensive in the long run. In other words, single payer was killed because of its cost, even though it would have saved money--and it's difficult to overstate the irrationality of this decision. It would be like spending $100 on a hammer because the $90 hammer is too expensive.

As I've written before, societal resistance to new social policy is inevitable. Even the phenomenally popular Social Security program experienced widespread skepticism and resistance when it was first implemented. Social democratic policy was unpopular even in Scandinavia when it was first implemented. Good social policy anticipates societal resistance and finds a way to work with it. Only policies that can win over a skeptical public survive. And Vermont's single payer--despite its many strengths--was unable to win over enough popular support. In a perfect world, PR wouldn't matter. But we don't live in a perfect world, so having the best policy isn't good enough.

Wikipedia has a useful summary of the efforts of single payer advocates. A bill passed in 2010 provided state funding for a commission to study health care reform. This commission made three recommendations: two of the three explicitly demanded single payer, and one suggested a public option. Then, based on this study, a 2011 bill mandated the creation of Green Mountain Care, single payer health care system for Vermont.

The real problem is that Vermont locked itself into a pure single payer system and didn't allow itself any room to maneuver. The goal of single payer advocates isn't a single payer system, but universal health insurance coverage and cost savings through administrative simplicity. Single payer is the most direct way to accomplish these goals, but it's not the only way.

Obtaining single payer's benefits without single payer
I wrote previously about the many administrative strengths of single payer here and here, and don't need to repeat those arguments on this page. However, throughout those pieces, I kept obliquely referencing a "workaround" used by Germany and Japan to get all the benefits of single payer, even though Germany has over 200 payers and Japan over 2000.

Links worth reading

How's that whole Obamacare thing going?

"I want to cover everybody.  Now, the truth is unless you have what's calle d asingle-payer system in which everyon'es automatically covered, you're probably not going to reach every singel individual."
-Barack Obama, July 22, 2009

We seem to get new information every week confirming the worst fears of opponents of Obamacare from the left--it's a massive sellout to the health insurance industry at the expense of the uninsured.