Lessons from Vermont

What does Vermont's failed single-payer plan tell us about future reform efforts?

Harris & Ewing / Library of Congress

Has the tide of health care justice turned — in the wrong direction? Last month, Vermont Governor Peter Shumlin announced that he could no longer “responsibly support” a funding plan for his long-awaited “single-payer” plan for the state. It wasn’t long before some on the Right claimed a historic victory.

“As crises of faith go,” the Wall Street Journal editorial board gloated, “this is Mikhail Gorbachev circa 1991 territory.” After all, single-payer health care, according to the Journal, is not merely “the polite term for socialized medicine,” but nothing less than “the ultimate goal of the political left.”

Now, inapt historical analogies aside, it is fair to concede the Journal’s point that universal health care has long been on the left and progressive agenda, from the “[f]ree medical care, including midwifery and medicines” called for by the 1891 Erfurt Program onward.

But the meaning and roots of Vermont’s about-face are more complicated than the dominant narrative now emerging in the mainstream media — as is even characterizing the Vermont plan as “single-payer.” For those of us who see real universal health care as foundational to an egalitarian society, a deeper analysis of the still-evolving events in Vermont is critical. So what has happened in the Green Mountain state, what has changed, and where do we go from here?

To some extent, events in Vermont can be seen as yet another chapter in the long story of failed efforts at health care reform in this country. The “state-based” approach to reform is also nothing new: in the 1910s, Progressives sought to pass “compulsory health insurance” laws in several state legislatures, which would have created insurance systems restricted mainly to industrial workers.

This effort was ultimately defeated by the “convergence of economic and political power with the ideological force of the Red Scare,” as the historian Beatrix Hoffman puts it (analogous forces have arguably forestalled progress ever since).

Skipping ahead to 2010, the Affordable Care Act (ACA) was passed with much celebration (and apocalyptic groaning). However, as 2015 unfolds with the law largely in full force, a right to health care remains only an aspiration in America.

It’s not just the estimated thirty-one million who will be left uninsured by the ACA in coming decades — it’s the many, many more who face rising out-of-pocket health care costs (e.g. copays and deductibles), premium increases that are outpacing meager wage growth, and ever-looming “medical bankruptcy.” Such facts only amplify the calls for true universal health care, in Vermont and across the country.

A single-payer health program would accomplish this goal by replacing our current fragmented system with a public system of universal national health insurance, eliminating uninsurance together with out-of-pocket health care expenses. But the daunting political obstacles to enacting such a system at the federal level (including the potent insurance and pharmaceutical lobbies) have led many to work towards reform at the state level.

The Canadian road to single-payer is frequently invoked as a possible model in this regard: after the leftist Co-Operative Commonwealth Federation (CCF) came to power in the province of Saskatchewan in 1944, it enacted a system of universal hospital insurance — “the first important step,” as political scientist Jacob Hacker calls it, to the nationwide, provincial-based Canadian single-payer system.

Elsewhere, change came differently: after the Labour Party took control of the British Parliament in the wake of World War II, it legislated the National Health Service into existence in one fell legislative swoop.

More recently, in Vermont, it was years of determined advocacy — from the single-payer organizing of physicians like Deborah Richter to the “tireless activism” of the Vermont Workers’ Center and some unions — that set the stage for serious state-level health care reform. In conjunction with the Vermont Progressive Party — which, according to historian Molly Worthen, “promised not to play spoiler [in the 2010 gubernatorial election] if the Democratic candidate supported single-payer health care” — such work helped contribute to the election of pro-single-payer Democrat Peter Shumlin in 2010, followed by the passage of Act 48 in 2011.

This legislation was supposed to put Vermont on the road to a “universal and unified,” publicly funded system. But it also left much undone, most notably a mechanism for financing.

Additionally, though “Green Mountain Care” could’ve been an improvement, it didn’t go nearly far enough: indeed, as has been noted for some years, the term “single-payer” itself was ultimately omitted from the final legislation. “Vermont’s public failure,” as Sarah Weaton recently put it in Politico, “is especially frustrating to single-payer advocates because, they note, the Shumlin framework… wasn’t really a true single-payer plan.”

Its shortcomings speak, in part, to the constraints imposed by our political structure, as well as the complexities of several federal laws. The potential “roadblocks” to state single-payer-like systems, as outlined in a 2013 report by Public Citizen, can briefly be summarized.

First, the ACA prevents single-payer experimentation on the state level, at least until 2017, when states may apply for waivers from the law (which might be used for good or evil). Similarly, Medicaid requires a waiver from a cooperative administration to be incorporated into a state single-payer system. Medicare, on the other hand, is not authorized to issue such grants, though several alternative approaches might permit some degree of incorporation into a state system.

Finally, the report discusses the difficulty of integrating federal health programs (like TRICARE for military families) into a state program, as well as the somewhat uncertain legal ramifications of the 1974 federal Employee Retirement Income Security Act (ERISA), which limits the ability of states to regulate health insurance offered by businesses.

Why does any of this matter? The Shumlin plan, for instance, didn’t integrate either Medicare or TRICARE into its “Green Mountain Care” plan, and was set to allow “ERISA employers” (big businesses that self-employ their workers) to continue providing private health insurance (albeit while still having to pay taxes for the public system, which they didn’t seem to like).

As a result, Vermont would have still had multiple insurers, or “payers,” and hence, it wouldn’t have “single-payer”; the plan would have additionally accommodated other private plans, like Medicare Advantage and “Part D” drug plans.

Unfortunately, this is a profound problem, for the administrative simplicity of single-payer plans is the crucial source of the large savings these systems can achieve. The Harvard School of Public Health study that put forth the original “public-private single-payer” reform proposal for Vermont, for instance, estimated some $580 million in savings from a Vermont single-payer-like system for 2015, savings which the Shumlin administration now asserts are not “practical to achieve.”

Additionally, a national single-payer program would reduce expenditures on pharmaceuticals by allowing direct negotiations over drug prices, a reform that would be highly problematic at the state level (Medicare, for instance, is currently prohibited by federal law from doing so). Separately, the Vermont plan would also have permitted out-of-pocket “cost sharing” (though reduced compared to the ACA) at the time of health care use.

And yet, the Vermont plan could still have constituted progress. So it came as a major shock to many when, on December 17, after multiple delays, Shumlin announced that his financing plan for the system was finally complete, that the necessary taxes were too high, and that he would be dropping it altogether. As the result of various reductions in expected revenue, he explained that his plan would require what he labeled an “enormous” 11.5% payroll tax, on top of an income tax that would range from 0 to 9.5%.

There seemed to be more at work than simply changed revenue estimates, however. In the wake of Shumlin’s decision, Richter criticized “vested interests,” including “institutions with a commercial interest in health care, out-of-state PAC money and large businesses too miserly to provide decent health care to their employees…”

Vermonters for Health Care Freedom, a conservative group with unclear financial backing, ran ads criticizing the Shumlin “scheme.” During a single-payer fight many years back (as the labor journalist Steve Early reported), some six thousand workers at a Vermont IBM plant were gathered together and warned that employers would have to exit the state if the bill was passed.

Another factor may have been the unpopularity of the ACA itself. Ironically, for conservatives who fear that the ACA is a “slippery slope” to single-payer, the seemingly refractory dysfunction of the ACA exchange website may have actually had the opposite effect in Vermont: as Shumlin described (according to his prepared remarks), “Vermonters have good reason to question the ability of state government to deliver on this [law] after the painful rollout of the exchange.”

And the increasingly recognized onslaught of out-of-pocket health care expenses faced by families across the country — trends accommodated by the ACA — may likewise be increasing the public’s skepticism of government health care initiatives.

At the same time, whatever the difficulties in achieving state-level reform, we shouldn’t be too quick to agree with those who’ve concluded from all this that funding single-payer through taxation is unattainable. Consider, for instance, some of the figures in the administration’s full fifty-seven-page financing report released last week: even with the new individual tax, and even despite the fact that the Vermont plan was not a single-payer plan, Vermont residents would “over time … have higher net family income on average” as a result of the system — the exception being those making more than $150,000:

Income Class Average Change in Net Family Income
<$10000 1,203
$10k – $19,999 952
$20k – $29,999 909
$30k – $39,999 2,012
$40k – $49,999 1,677
$50k – $74,999 2,645
$75k – $99,990 2,452
$100k – $149,999 739
$150k – $249,999 -2,120
>$250,000 -5,841

Additionally, according to the report, this change in net income was expected to increase over time under the plan.

The new payroll tax would seem to increase the overall health expenditures of private employers. And yet, the report estimates that “[m]ost classes of firms that offer health insurance today would spend less” overall on health care under the plan, the exception being businesses with more than one thousand employees.

Small businesses that currently provide no health benefits would pay significantly more, and the report and Shumlin contended that this was a major problem from the financing perspective. But again, for a system that had some of the costs but basically none of the efficiencies of a single-payer system, none of this sounds particularly earth shattering.

In sum, the discourse that is now emerging in the media — that Vermont has proven that single-payer health care is impractical or unaffordable — must be fiercely countered. Complementary organizing for single-payer on both the state and the national level not only should continue, but can succeed — with the ultimate goal being a single, inclusive program for the country.

Such a system would not resolve all health injustices in the nation. But in its true and full form, it would wholly abolish uninsurance; it would facilitate the rational, equitable allocation of health care capital investments; it would turn back the tide against the ever-encroaching “medical-industrial complex” of corporate health care; and it would — critically — eradicate “underinsurance” by removing all financial barriers to care. In doing so, it would make for a far more just, happy, and equitable society.

For that very same reason, it will not easily be won. No one can precisely predict the pathway to success, but it is clear that progress is only possible if true universal health care remains a principal demand of labor and left political movements. Recent retreats notwithstanding, a national health program remains on the political horizon.