Analysis: Dueling Single Payer Consultants

Jun 6, 2014

Both the Vermont legislature and the Shumlin administration are quietly gearing for next year’s single payer health care reform financing challenge by hiring consultants to provide an unprecedented level of detail about the way we pay for health care now and how a new system might recast that structure.

The legislature’s Joint Fiscal Office is seeking a consultant to determine “who is paying what portion” of the $5.1 billion that Vermont now spends on health care annually. The JFO wants to know not just what Vermonters are paying directly, but how much they are paying indirectly in the form of federal, state and local taxes; tax revenue spent on public programs like Medicaid; and preferential tax treatment of employer provided health insurance.

The data obtained in the study will be available to the legislature so it can evaluate the funding proposal that the Shumlin administration is pledged to bring forward when the legislature convenes in January.

According to Steve Klein, the joint fiscal office chief, the consultant will be required to submit a draft report by Nov. 11, and then be prepared to make a full presentation to the new legislature by mid-February. Klein said that he anticipates that the JFO will commission a second study to compare the way the current financing structure would change under whatever plan Shumlin brings in.

The Joint Fiscal Office is looking to hire either an individual economist or a second consulting company to manage the whole job of assessing Shumlin's single-payer plan. Meanwhile, Michael Costa, on behalf of the administration, is seeking to hire a consultant to build an economic model that will undergird the Shumlin plan.

The JFO is also looking to hire either an individual economist or a second consulting company to manage the whole job of assessing the Shumlin plan. The JFO has issued a request for proposal for such a person or company, although Klein said that his office might not fill that post if they don’t find the person or group they want.

The goal, Klein said, is to find someone to match up with Michael Costa, who is the tax expert who is designing the financing aspect of Shumlin’s single payer plan. “If we can’t find someone who fits, we just won’t fill it,” Klein said.

Meanwhile, Costa on behalf of the administration is seeking to hire a consultant to build an economic model that will undergird the Shumlin plan. Costa will need to know the basic information on current spending for health care in Vermont, but the consultant will have to go well beyond that to determine how various groups in Vermont are likely to react to the huge shift in financing patterns that will be necessary to fund a single payer plan in the state.

As they finalize their plan over the next six months, Costa and ultimately the governor will have to consider how the reaction of big business will differ from that of small business, or medium sized business. And how will low income, middle class, or wealthier individuals react.

The total amount of data that should flow from these studies will be invaluable in the design phase for Costa and the assessment phase by the legislature. It will be particularly relevant when the administration has to show, and the legislature has to believe, that the plan will meet the requirements that the plan be sustainable, and that it will not have an adverse effect on the Vermont economy.

The total cost of these parallel studies, however, will amount to at least a million dollars or so and it is worth asking whether the JFO and the administration couldn’t have fused their efforts and saved a significant portion of the money. In fact, both Costa and Klein emphasize that they hope and expect that the two consultants will cooperate.

It seems clear the insistence of the legislature on having its own consultant reflects some residual mistrust of the Shumlin administration owing to the administration's handling of the federally-financed health insurance exchange.

Still, it seems clear the insistence of the legislature on having its own consultant reflects some residual mistrust of the Shumlin administration owing to the administration’s handling of the federally-financed health insurance exchange. The material being sought by the JFO on current spending, for example, will have to be duplicated in significant measure by Costa’s consultant.

Moreover, the real need for detailed, highly expert analysis of the Shumlin plan can’t be carried out in any case until the legislature actually sees the plan, and that won’t be possible until next January. The reason is that the final plan can’t be constructed without the second part of the administration study.

An obvious conclusion is that the dueling consultants are meeting two different needs. Costa needs hard data on the current system, as well as the data on the various demographic groups, to finish his design.

The JFO could share that, but their overriding concern is to be seen as independent politically. Hence the need for their own consultant. The money the JFO spends between now the first of the year will be mostly wasted, which isn’t the end of the world. The $40,000 the legislature spent on the  Georgia-based consultant Ken Thorpe also yielded, not very much, if anything.

The only reason for JFO to hire a consultant over the next six months is that the leadership of the legislature, primarily the House Speaker Shap Smith and the chairs of the House and Senate money committees, has made the decision that maintaining an independent analytical capability is essential for ultimate approval of a single payer financing plan.

There will be a substantive need for that capability once the Shumlin administration makes its plan public next January. In fact, the JFO request for proposals from the consulting community appears to be aiming at that when they wrote, “We encourage vendors who respond to this RFP to consider an outline of how they might provide a resource for the broader research goals.” Broader research in this context means assessing the Shumlin plan when it comes in.

The JFO could have collaborated with the Shumlin team in gathering the data on the current system and saved some hundreds of thousands of dollars in the process; but the political imperatives took precedence.