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April 08, 2013 10:27 AM An Update on Vermont’s Single Payer System

By Aaron Carroll

I’ve covered Vermont’s efforts to achieve its own style of health care reform. As a reminder, Vermont is the state where candidates for governor tried to show that their opponents were less in support of single-payer than they were. The most recent issue of NEJM has an update.

Governor Shumlin signed Green Mountain care into law about two years ago. Since then, the government has made efforts to engage residents and stakeholders through active engagements, town hall-like events, and advisory groups. They created an independent board with oversight over the entire health care system, including “jurisdiction over payment reform, insurance exchanges, rate setting, hospital-budget authorization, resource and workforce allocation, state formulary establishment, regulation of insurance carriers, and maintenance of a statewide quality-assurance program.” They’ve been working hard on their exchange, which they believe could function as the needed infrastructure for a single-payer system.

Most importantly, though, they’ve been working hard on figuring out how to finance their ideal system:

Vermont will also gain substantial federal funding through its Medicaid expansion ($249 million) and attract federal financing through a 2017 innovation waiver ($267 million). While many states continue to debate expansion, Vermont has expanded its Medicaid program well beyond the ACA’s proposed income-eligibility threshold of 138% of the federal poverty level. With the expansion, Vermont will save 10.9% in state Medicaid funding. States that now have high eligibility levels will see decreases in spending, whereas those with low eligibility levels will have to increase their spending. Overall, experts predict that the national impact of Medicaid expansion will be a net increase of 0.3% in states’ total Medicaid expenditures but an overall decrease of 0.4% in spending, thanks to a 0.7% decrease in uncompensated care. Even though some states will see an eventual increase in spending on Medicaid if they expand their programs, they will still generate net savings in health care spending.
Revenues from taxes (payroll, personal income, sales, cigarettes, tobacco, insurance, and more) will also finance GMC, but administrators believe that the eventual cost savings from the single-payer system will be greater than what will initially be needed from tax revenues. In 2017, claims costs are projected to be $87 million higher than they would have been without health care reform because additional health care services will be provided, but administrative costs will be $122 million lower, which will result in net savings of $35 million in the first year.

As everyone else continues to argue about whether expanding Medicaid will cost states too much, Vermont is going above and beyond what others are doing. Should they save what they expect to, other states may follow. It would be ironic if, after denying that Obamacare would lead to single payer for so long, it actually wound up proving that single payer can work beyond the Medicare population.

[Originally posted at The Incidental Economist]

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Aaron Carroll ,MD, is an associate professor of Pediatrics and the associate director of Children’s Health Services Research at Indiana University School of Medicine.