Analysis: Single Payer Could Be Collateral Damage In Botched Exchange Rollout

Dec 12, 2013

The Vermont health care exchange came out of the starting blocks this fall limping badly and it’s not clear yet how long it will take Gov. Peter Shumlin’s bureaucrats to get it back on track. It’s not too early, however, to try to assess the effect the troubled launch will have on state politics in 2014 and on the fate of the Shumlin reform initiative out into the future.

Will Shumlin pay a significant political price in his reelection campaign in the coming year? Could he actually lose? Could the exchange difficulties cut into the big Democratic majorities in both the Senate and House? And what do they portend for the fate of the single payer legislation itself?

Of course, the Republican opposition is salivating over the opportunity to reverse their fortunes of the last few years. They hold just one statewide office, the lieutenant governorship held by Phil Scott. They have just 48 of 150 members in the House, less than a third. They have just seven of the 30 seats in the Senate, less than a quarter.

Perhaps the problems with the launch of Vermont Health Connect will rebound to the benefit of Republicans here in the same way that problems with the federal launch of Obamacare appear to have shifted the political momentum nationally, at least in the short term.

In the so-called “generic ballot” for seats in the Congress, for example, Democrats led on Oct. 13 by 44.8 percent to 39.1 percent. By Dec. 2, Republicans led 41.5 to 36.8. That’s an eight-point swing, clearly driven by the federal rollout problems.

The political price

Numbers such as these are very bad news for Democrats nationally, but it is highly unlikely that the Vermont Democrats will pay a political price for the Exchange launch problems.

The Republicans just plain don’t have assets to compete seriously in the near term. In the gubernatorial contest, they have no viable candidate. Former Franklin County State Sen. Randy Brock ran against Shumlin in 2012, and got blown away. His percentage of the vote didn’t crack 40 – he got 37.7 percent – which is pretty much the credibility threshold in Vermont.

Brock has begun to speak out on Shumlin’s health reform initiative, but he is unlikely to actually run again, although he is probably the best the GOP could come up with. Brock reportedly spent north of $300,000 of his own money in the 2012 contest and even doing that again wouldn’t make him competitive with Shumlin, who has a huge war chest. And the national Republican party is unlikely to put any money into a state as blue as Vermont.

As for state legislative races, their outcomes seldom rest on a single issue. Something like civil unions could drive a major shift in power, but health insurance is very complex and by late spring or summer the exchange almost certainly will be functioning normally. When it does, the Republicans really have nothing to offer in the way of proposals to improve the system.

Sticker shock?

None of this is to say, however, that there will be no political fallout from the launch difficulties. There will be, but it will be farther down the road, when the Legislature – and the public – begin to deal with the issues contained within the single payer initiative itself.

The most critical issue will be how to pay for it. The working assumption at this point is that the Legislature will have to pass a payment mechanism in the 2015 session with a starting-point amount of $1.6 billion. That number was developed by a consulting group at the University of Massachusetts.

Some of the players believe that the real number is more like $2 billion, and they assume that it will be raised mainly through a payroll tax. In fact, none of them really knows the number and in any event the financing mechanism is unlikely to be simply a payroll tax; the administration will begin to discuss potential alternatives early in the upcoming legislative session.

The thing that will hang over them, however, will be the existential dread in the Legislature that accompanies any huge expenditure, as well as in this case a major shift in the whole basis of the health care delivery system.

In political terms, however, there is no way to argue with the size of the gap that has to be filled. Even the starting number of $1.6 billion would nearly double the current state budget ($1.8 billion) and is plenty large enough to be a huge leap for state legislators. It was just such a leap that it sank the first major health care reform effort in the mid 1990s.

The trust factor

So, how do the exchange travails affect that process? It does so because it casts doubt on the ability of state government to take over the management of one of the most important, complex and expensive social institutions that we have. 

The Shumlinites will be able to argue that it wasn’t really their fault – that the consultants blew the early stages of the program, that computer rollouts are always problematical and that, in any event, the Exchange will be working fairly smoothly at some point in 2014. They will also be able to argue that the state funding will not be new money for health care – that it will be a shift from private payment to public.

The thing that will hang over them, however, will be the existential dread in the Legislature that accompanies any huge expenditure, as well as in this case a major shift in the whole basis of the health care delivery system. That doesn’t mean that it can’t be done, but the reality is that the thrashing around on the exchange this fall has made it considerably harder.

The evidence for this conclusion is already showing up, albeit in subtle ways. The health care committee in the House is clearly restive about the way the administration has communicated with them about reform: Lawmakers got a series of reassuring reports on progress leading into the October launch and they felt blindsided when the troubles showed up.

That problem got even more severe this week with the reports that the administration had very strong warnings through the spring and summer that the launch was in trouble from the start.

Moreover, there have been clear indications that House Speaker Shap Smith is unhappy with the whole effort. The House has a huge Democratic majority, but that is an asset to Shumlin that needs to be cosseted and no one is more important in that effort than Smith, the most effective speaker to serve since Ralph Wright.

Smith was moved to say publicly recently that he wanted the House to have more “oversight” over the reform process, which really means that he is feeling left out of the process.

Shumlin and the big Democratic majorities in the Legislature are going to get elected next November. But the bill for the governor’s single payer initiative will be known just a few months later and the events of the last several months have hurt the odds for its success. The judgment on whether and how to pay it will be the biggest decision most legislators will ever make. And the outcome will depend in significant measure on how confident the legislators are that the governor and his team can handle the job