No Single Payer? Shumlin Explains Why

Dec 18, 2014

The prospect of single-payer health care in Vermont is no more, at least for now.

Gov. Peter Shumlin announced Wednesday that he is backing away from his signature policy push that would have made Vermont the first state in the nation with a publicly financed health care system overseen by state government. The governor now says that the taxes required to pay for such a system would simply be too much for Vermont to bear.

Gov. Shumlin came to the VPR studios to talk with host Alex Keefe about his decision and what comes next.

Alex Keefe: You said yesterday that your decision not to continue with single-payer right now, as you put it, was “difficult and disappointing.” Help Vermonters understand exactly why you made it.

"My dream has been to move to a more sensible health care system where health care is a right, not a privilege, where you have it because you are a resident of Vermont, not because of how wealthy you might be or how lucky you might be. And that's the way it should be for the country." - Gov. Peter Shumlin

Gov. Peter Shumlin: My dream has been to move to a more sensible health care system where health care is a right, not a privilege, where you have it because you are a resident of Vermont, not because of how wealthy you might be or how lucky you might be. And that’s the way it should be for the country. Let’s not forget, when you turn 65 in this country you qualify for a single-payer government financed system. I wanted to do it in Vermont. We have been working very hard on this for as long as I’ve been governor. We’ve been getting numbers back for the last couple of weeks that really, we’ve done the most exhaustive drill into how this would actually work of any state in the nation. And, unfortunately because of headwinds that we’re facing right now, the financing package, frankly the 11.5 percent payroll tax, the 9.5 percent income tax at the top, without allowing even for a phase-in for small businesses that aren’t paying anything right now, would be too disruptive for Vermont’s economy. And, I can’t recommend that we go forward at this time. So, obviously it’s a huge disappointment to me and it’s a huge disappoint to so many who have worked so hard for single payer. But our time will come. This is the right thing to do. There are a number of factors that make it more difficult now than it would have been three or four years ago, and I’m convinced that if we can contain costs, take some other steps to help us take care of the uninsured, to move to a more sensible, affordable system, that we can eventually come to a publicly financed system.

AK: So even if it’s not possible financially right now, you’re saying possible in the future perhaps?

"What I find really discouraging is that financially, it’s very difficult for this little state to do it right now. Now, what’s changed? What has changed since we modeled this three years ago and started this conversation four years ago is the federal reimbursement that we’re currently getting for health care is lower than we thought, by about $150 million …"

PS: There’s not a question in my mind that this is the sensible way to do health care. Not only in Vermont, but in America. And I’ve always believed that. What I find really discouraging is that financially, it’s very difficult for this little state to do it right now. Now, what’s changed? What has changed since we modeled this three years ago and started this conversation four years ago is the federal reimbursement that we’re currently getting for health care is lower than we thought, by about $150 million. Second, because our economy is growing more slowly than all the economists told us it would a few years ago, any revenue that you raise doesn’t raise as much as it would in a more robust recovery. And third, because of the tight budgets, we were hoping to close the Medicaid and Medicare funding gap by 3 percent a year and we’ve been unable to do that. So we have to make all of that up in one big leap as we move to public financing. But the biggest challenge is that the federal funding that we currently use to support the health care system in Vermont isn’t as robust as we had hoped we were going to get from the feds.

AK: And these are these “fiscal headwinds” that you’ve been talking about. But there have been a lot of people who’ve been saying for months, or three-plus years, that this program would be prohibitively expensive for the state of Vermont. Why is your administration just figuring this out and making the announcement now?

Shumlin says that those who doubted his single-payer plan from the beginning "are the people who've always been against publicly financed single-payer health care."
Credit Angela Evancie / VPR

PS: Just remember, a lot of the people who have been saying it can’t be done are the people who’ve always been against publicly financed single-payer health care. So we knew we had our opponents. But, the challenge for us was to actually do the work that Act 48 required, which took an extraordinary team to come together, to come up with the smartest way that we thought we could do this, and then send it out to our economist who came back and said, “This will work, this won’t work.” Don’t forget, I’ve said 100 times – if not 1,000 – I will not push send unless a publicly financed system right now would gross jobs, gross economic opportunities, help our state, in a state where folks are struggling to pay their bills. I think logical people would conclude that it should work. If you’re in a system where you have some people who pay, a lot of people who don’t, and the folks that don’t pay, they get paid for by the folks who do, that you could move to a fairer, more reasonable system. So the premium system is not exactly fair either. It’s what we’re trying to move away from. The discouraging part is that, because of the slow economy, the federal reimbursement and other factors, it’s more difficult to do now than it would have been probably a few years ago, or certainly based on the numbers we had a few years ago. And I think it will be, going forward, when we curb the cost of health care spending. The biggest thing that’s holding us back as an economy, not only in Vermont, but in America, is that health care spending is going up faster than our incomes. That’s what’s hurting the middle class more than anything. We have to figure out ways to contain costs and Vermont is having the conversation on cost-containment that isn’t happening anywhere else in America. Where we really move our whole system from one that reimburses for quantity, fee-for-service, to one that moves to quality reimbursements. And if we can get that right, I believe a publicly financed system would be more affordable.

AK: I want to stay on the timing issue and the process for a moment, because a lot of folks have complained about the lack of transparency in this entire process. Your administration missed two deadlines to release a funding plan and you asked people to go to the polls to vote for you, and other people may have voted against you based on this issue, without all the information. What do you say to people who feel that they were misled or betrayed by the way that this has rolled out?

"Nobody has been misled and nobody has been betrayed. We just got the information this week that we needed to make the judgment. Had we had the information earlier, we would have shared it with Vermonters earlier. We have no interest in hiding anything from Vermonters."

PS: Nobody has been misled and nobody has been betrayed. We just got the information this week that we needed to make the judgment. Had we had the information earlier, we would have shared it with Vermonters earlier. We have no interest in hiding anything from Vermonters. This is very hard work. What we’ve been asked to do is the toughest public policy work that I’ve ever done on any issue, and I suspect that we’ve done more work on single-payer than any governor or government in America. So, it’s very complex to move a multi-billion dollar health care system that’s 20 percent of your economy from premiums to a publicly financed system. There’s an invention process there that requires all hands on deck. We hired the folks, we put the team in place, we got the data back. I got this information on Friday, the latest numbers, I asked us to drill down into it and make sure they were accurate. On Monday, when they were still accurate, I said, “We’ve got to share this with Vermonters.” I don’t think you could ask for a more transparent process than that.

Shumlin says that as governor, he has to make policy decisions "based on what's best for Vermont." He says that at this time, single payer would hurt Vermont economically.
Credit Angela Evancie / VPR

AK: So to your mind, you couldn’t have released this information sooner?

PS: How could we if we didn’t have it?

AK: You won the popular vote in November by a very close margin. I’m wondering if the outcome of that vote had anything to do with your decision to back away from single payer right now.

PS: It really had nothing to do with politics. This is about policy. I very much wanted to move to a publicly financed single-payer system. I’ve been very open with Vermonters about that. I’ve had a lot of support in that notion. I also have to responsibly only recommend that we go to a publicly financed system if it is going to help Vermont economically. I think that anyone that sees what can only be described as the “eye-popping numbers” that came back for the system that we want to put in place, that now is not the time responsibly to do that. So as governor, I’ve got to make policy decisions based on what’s best for Vermont. I will let the pundits deal with the politics.

AK: Let’s talk about some of those policy decisions now. Now that single payer is on the shelf, at least for the time being, what kind of reforms do you envision to try to meet the goals that you set out earlier?

PS: Well I made a number of recommendations yesterday. But the first, and most important, is we’ve got to figure out how we can spend less money on health care with better outcomes. We’re on track to really make the difference there. To be the first state that moves from a quantity-driven system to a quality-driven system. Second, there’s some changes that we’re going to ask the Legislature to make in terms of strengthening the authority of the Green Mountain Health Care Board, of ensuring that we start to close the gap of Medicaid and Medicare funding. Why should providers be working for 40 cents to the dollar for one customer and $1 to the dollar for another customer? Third, we want to make some real changes in the way we use health care technology to strengthen that and help us contain costs. But finally, what I’m saying to folks who’ve worked so hard for us on single payer is, let’s think of all the other ways that we can come together now to help us set the stage to move to the vision for health care that we all know is right.

"But finally, what I'm saying to folks who've worked so hard for us on single payer is, let's think of all the other ways that we can come together now to help us set the stage to move to the vision for health care that we all know is right."

AK: Do you see single payer, in the near future, anytime in the state of Vermont?

PS: I think that we will get a single-payer health care plan, not only in Vermont, but eventually in America. Every other industrial nation has figured out how to do this and there’s no reason why America won’t some day too. We do it now, if you’re lucky enough to be 65 years old. So the question is, why are we not doing this as a nation? And it’s tougher as a state to do it, but I will continue to pursue policies that put us on track for a more sensible and affordable health care system, where it’s a right, not a privilege, as it is in our current system. I’m incredibly disappointed that we can’t get there right now, but I do believe that if we can contain costs, find ways to spend less money, we can move from the system we’ve got to a more sensible one. Let’s not forget, we’re going to spend the money anyway, we’re just going to do it through the broken premium system that we’re used to, as opposed to the publicly financed system that we can’t get to right now, but our time will come.

"I think that we will get a single-payer health care plan, not only in Vermont, but eventually in America."

Shumlin distributed an op-ed piece about his "difficult" decision, reprinted below. 

Now is not the time to move to a publicly-financed health care system in Vermont

by Gov. Peter Shumlin

Earlier this week, I made one of the most difficult decisions of my public life when I announced that I cannot support a move to a publicly-financed health care system in Vermont at this time. I have advocated for such a system for much of my public life, but over the past two weeks it has become clear to me that the risks and economic shocks of moving forward at this time are too great.

To understand why I came to that conclusion, it’s important that Vermonters understand the plan we put together to replace private insurance premiums with a system of public financing. I asked my analysts to create a proposal based on the following principles: Every Vermonter should have coverage and all should pay according to ability; business should be out of health care decision-making but should continue to contribute to health care costs; employers that do not currently offer health care should be phased into the financing plan over a number of years; and out-of-pocket expenses should not exceed what most Vermonters currently pay.

The cost of that plan turned out to be enormous, requiring an 11.5% payroll tax on all Vermont businesses and a public premium assessment of up to 9.5% of individual Vermonters’ income. Further, the phase-in for smaller businesses and those that do not currently offer insurance would add an additional $500 million to the system. These are tax rates that I cannot responsibly support or urge the Legislature to pass. In my judgment, the potential economic disruption and risks would be too great to small businesses, working families and the state’s economy.

After receiving those numbers, I asked my team to reevaluate assumptions and consider policy choices to make the system more affordable, such as eliminating the phase-in for businesses and shifting more of the financing burden to out-of-pocket costs. Both choices had serious problems. The former would cause massive economic pain for many small businesses, likely leading some to close or lay off workers. The latter would require many Vermonters to pay more in out-of-pocket costs than they do now, leaving them with less disposable income. In the end, those choices are not only unacceptable to me; they also only slightly reduce the cost of the financing plan overall.

This is incredibly discouraging news. I know Vermonters will wonder why we did not know this six months ago or two years ago. Here is what has changed.

Although our economy is still growing, that growth is slower than expected and we have faced two revenue downgrades. Given this new reality, every percent of tax raises fewer dollars than we had anticipated, requiring higher tax rates than we had hoped to fund this system. In the last several months, we have also learned that the amount of federal funds available to Vermont for this transition is over $150 million less than we had anticipated. Additionally, the slow recovery from the Great Recession has tightened our state budget and caused us to not meet the goals we had set forth for increases in Medicaid provider payments, adding more than $150 million to the amount we would need to raise through public financing. Taken together, these issues and others added hundreds of millions to the bottom line and required tax rates that I cannot in good conscience ask Vermonters to pay.

I know this is a huge disappointment to many Vermonters. I know because I am one of those Vermonters who has fought for this to succeed. While the time is not right today, we must not give up on health care reform. We are doing transformational things in Vermont when it comes to the way we deliver health care. We must continue to pursue the goals of reducing the number of uninsured Vermonters and supporting primary care for all Vermonters. We must double down on health care reform by strengthening the Green Mountain Care Board so that we have better shot at long-term cost containment, pursuing a federal All Payer waiver so that we can be the first state in America to pay for quality not quantity, reducing the cost-shift to private payers, and bringing oversight of our statewide Health Information Technology program to the GMCB to better support integrated, unified health care delivery in Vermont.

Those reforms can and must continue, and our success will lay the groundwork for future efforts to implement a publicly-financed health care system. While now is not the right time for Vermont to take such a step, the time will come.