Lessons for Maine in Vermont’s Failure

December 24, 2014 Posted by Patrick Marvin - 1 Comment

The argument against expanding government run health care in America just got a lot stronger – thanks to the unlikeliest of sources.

Last Wednesday, Vermont Governor Peter Shumlin announced that he was abandoning his plan for a single-payer health care system for the state, finally admitting in an unexpected news conference that it is “not the right time.”

As one most liberal states in the nation, Vermont has faced years of internal pressure to adopt government-run health care. Shumlin made single-payer health care a major feature of his recent re-election campaign, and until last week, seemed to be blazing a trail towards the first single-payer system in the U.S.

His plan, which was designed partly by controversial Obamacare architect Jonathon Gruber, would have pushed for a single-payer – the state of Vermont – to pay health care costs, instead of private insurance companies. Nearly every Vermonter would have been required to be insured under “Green Mountain Care,” a state-run agency funded primarily through taxes rather than insurance premiums.

However, after receiving the latest figures on the enormous cost of instituting his plan, Shumlin wisely backed down and conceded that “the risk of economic shock is too high at this time.”

The cost for Green Mountain Care was estimated to be approximately $2.6 billion, an astounding $300 million more Vermont’s entire budget for FY 2015. The state would have needed an overwhelming 11.5% payroll tax on businesses and a new sliding-scale income tax of up to 9.5% just to get the program off the ground. Given that Vermont already boasts a top income tax rate of 8.95%, a 6% sales tax and 8.5% corporate income tax, these new taxes would have made Vermont the highest taxed state in America, by a significant amount.

But sadly, even with those new taxes, Shumlin’s administration predicted that Green Mountain Care would be drawing a deficit by at least 2020, meaning additional revenue or tax increases would be needed in the near future.

Perhaps the most ominous piece of information to come out of this disaster is the fact that Shumlin’s plan did not even achieve a true single-payer system, and in the eyes of many liberal activists, did not go far enough.

While Vermont would have had enormous control over the health insurance market, it would not have been the only payer of health care related costs. The state couldn’t take over Medicare or Medicaid without being given a waiver from the federal government, which was unlikely to happen. Vermont also could not force military members to switch their coverage, nor could they compel residents who work in neighboring states to abandon the coverage they receive from their out-of-state employer.

If Vermont were to achieve a bona fide single-payer system, it would need an even bolder proposal, a larger state-funded insurer, and a much bigger price tag.

While Shumlin’s administration saw the writing on the wall and recognized that Vermont’s economy and taxpayers do not have the means or the will to stomach this type of health care model, many proponents of single-payer health care still have not come to this realization.

Supporters assert that despite the huge tax increases, a single-payer system is ideal and could actually save money. They maintain that a single-payer system would lower health care spending by way of decreased administrative costs, discounts for buying bulk insurance, and lower reimbursement rates for hospitals.

However, there’s plenty of evidence to suggest that none of the above would or could happen in America. Medicare and Medicaid (government insurers already in existence) do not have significantly lower administrative costs. Large insurance companies already buy in bulk and purchase more plans than entire countries that utilize the single-payer system. And while slashing reimbursement rates may sound good for taxpayers, it would also mean drastic pay cuts for hardworking doctors, nurses, receptionists, and technicians. No politician in their right mind would ever cut health care reimbursements, or at least not to the point where taxpayers would see any benefit.

Another major issue that Vermont encountered is the level of coverage to provide in a single-payer system. Instead of having consumers purchase health insurance based upon their needs or income, the single-payer model favored by Vermont forces everyone to pay for the same amount coverage, regardless of health care requirements. With all citizens reduced to a single coverage level, Vermont was faced with the catch-22 of choosing between a low or high coverage level, and deciding whether they wanted to decrease or increase coverage for many of their residents.

In the end, Vermont chose platinum level coverage for all, reasoning it wasn’t fair to force anyone to decrease the quality of their insurance plan. While this was a polite gesture, it was nonetheless an expensive compromise, and a definite factor in the plan’s eventual failure.

Given the enormous costs and the many negative consequences of a single-payer system, it’s no wonder that even Vermont, one of the bluest states in the nation, pulled the plug before it was too late.

Vermont rightly recognized this type of a structure is expensive, impractical, and a potential precursor to economic collapse. It allows a massive government takeover of an industry that relies on competition and development in order to keep costs down and allow consumers to receive the highest quality for their dollar. Given the massive amounts spent by the U.S. on health care, and the improbability of government jamming down health care costs, taxpayers just cannot afford to foot the bill for a single-payer system.

But while Vermont’s Executive Branch is starting to come to its senses, the battle for expanding government health care is continuing to rage on. Although a single-payer system is highly unlikely to appear anywhere else (by all accounts, Vermont had the best chance to institute this type of structure) advocates and officials around the country are still pushing for government to eat up even more of the health care market.

Here in Maine, many still support expanding Medicaid and forcing taxpayers to pick up the tab for more health insurance consumers. They seem to ignore the higher costs associated with this type of a move and are completely unwilling to look at the numbers.

We can only hope that like Vermont, they glance over the figures and see that expanding government health care just isn’t the best option.