States in the Spotlight as Single-Payer Resurfaces in Mainstream Discourse

May 2012

Public Citizen Health Letter

The past year has seen single-payer health care in the news more than usual. May marks the first anniversary of Vermont’s health reform bill, which was widely touted as the first state single-payer law in the country — albeit only by those who had presumably not read the bill. Following closely on the heels of the Vermont law was one of the most high-profile U.S. Supreme Court cases in decades. The Obama administration’s controversial 2010 health reform law, the Affordable Care Act (ACA), came before the Supreme Court this March over a challenge to its constitutionality.

Both Vermont’s law and the court hearings have put a renewed spotlight in establishment circles on single-payer. The mainstream press usually focuses on single-payer only to ridicule it as a fringe cause lacking “political will” (a revealing term, given that a majority of the public has long supported a national health insurance system along the lines of single-payer), and this has largely remained the case in the current debate. But the possible repeal of the ACA, combined with efforts by many states to opt out of the reform, has led many who were formerly enamored with the ACA to ask what’s next and has forced a surprisingly frank discussion of the possibilities and merits of a U.S. single-payer health care system.

Saskatchewan’s example and Obama’s obstructionism

With just over 1 million residents, the sparsely populated Canadian province of Saskatchewan is not often in the headlines. But 50 years ago, the rural province was a staging ground for one of the most significant social justice achievements of the last century. The province’s pioneering, publicly financed health insurance system, first enacted for hospital care in the aftermath of World War II and gradually built upon over the next two decades, guaranteed medical coverage to all residents regardless of income and laid the groundwork for Canada’s single-payer health care system.

This milestone did not come without resistance from entrenched interests, most notably the province’s medical community. In a prelude to the American Medical Association’s opposition to Medicare a few years later, Saskatchewan’s physicians staged a 23-day strike in 1962 to protest the plan, which they thought would weaken their socially privileged positions within the health care system and, especially, their inflated salaries. In the end, the provincial government won (though not before agreeing to keep the physician-friendly, costly fee-for-service payment arrangement), and the success of its system led to universal health insurance in Canada within 10 years.

Fast-forward half a century, and Canada’s southern neighbor has yet to enshrine health care as a right instead of a privilege that remains out of reach for 50 million uninsured Americans. While Tommy Douglas, the man most responsible for bringing national health insurance to Canada, is feted as a hero, in the U.S., even tepid movements to increase health care access have met with extreme hostility from corporate interests. Despite the Obama administration’s best efforts to portray the 2010 ACA as a step toward universal health care, the law actually further entrenches the private insurance industry at the heart of the health care system, while leaving 27 million uninsured and tens of millions more underinsured when fully implemented.

A government-financed national health insurance system would, as noted by most commentators across the political spectrum, achieve the purported goal of an individual mandate — universal coverage — while being unquestionably constitutional. Justice Anthony M. Kennedy (widely seen as the swing vote in this summer’s decision on the ACA) most notably articulated this point when he observed during the Supreme Court hearings that the government could simply “use the tax power to raise revenue and to just have a national health service, single payer.”

A simple option in theory, perhaps, but one that was unacceptable to the Obama administration. President Barack Obama systematically excluded the single-payer option from consideration early in the process, ignoring high-profile protests from organizations such as Physicians for a National Health Program and Healthcare-NOW. With his approval ratings at their peak and a Democratic Congress at his back, Obama chose not to put single-payer on the table — though he acknowledged it as the only way to cover all Americans and there was majority support for single-payer among the American public.

Vermont’s misleading 2011 law: single-payer in name only

Single-payer activists were not deterred by the subsequent gift to the private insurance industry that was the core of the ACA, instead turning their efforts to the states, with Saskatchewan’s precedent in mind.

Vermont was the first battleground for single-payer following the ACA, and it seemed an ideal place to focus the movement’s efforts. The state is decidedly progressive and has a long history of implementing progressive health legislation, such as a pre-ACA prohibition on denial of coverage for pre-existing conditions, a generous Medicaid system and a more recent ban on gifts from pharmaceutical manufacturers to physicians. In 2010, the election of a new governor, Peter Shumlin, committed in principle to single-payer, raised expectations that Vermont might be the successful laboratory from which to build a national “Improved Medicare for All” system.

When Shumlin was still in the Vermont Senate, local single-payer advocates such as Deb Richter put him in contact with William Hsiao, the Harvard economist who designed Taiwan’s single-payer system in the 1990s. Following Shumlin’s election as governor, the state formally enlisted Hsiao to design a health care system that would accomplish three overarching goals: 1) universal coverage with sufficient benefits, 2) an equitable financing mechanism yielding long-term cost savings and 3) a more integrated delivery system focused on prevention and primary care.

Hsiao’s team presented three options to the state legislature in 2011, only the first of which was a true single-payer system. The latter two would still allow multiple private insurance payers to operate. In its report, the team recommended a so-called “public/private” non-single-payer option as the “most feasible because it is likely to be accepted by the broadest cross-section of stakeholders in Vermont.”

The most powerful stakeholders were undoubtedly the state’s private insurers, who had no desire to go quietly into the night as their Canadian predecessors had done 40 years ago. The insurers, including the largest, Blue Cross/Blue Shield (BCBS), positioned themselves firmly against the true single-payer option.

The opposition was subtle: BCBS presented itself to the public as a neutral observer, while by its own admission it worked behind the scenes to water down the bill as much as possible. As Leigh Tofferi of BCBS put it, “[W]e didn’t oppose it” but “wanted to make sure it was worded so as to be workable.” The company’s support of the final bill was explained in Tofferi’s brazen statement that “if there’s a single-payer system, we’d like to be the single payer.”

The Vermont Chamber of Commerce, meanwhile, lobbied against enacting any substantial reform until health care costs could be brought under control through various business-friendly solutions — a catch-22 because any serious cost controls would require the kinds of reforms the Chamber opposed.

In the face of this opposition, the state adopted Hsiao’s public/private non-single-payer option as Act 48 in May 2011. The new law’s stated mission was to ensure “universal access to and coverage for high-quality, medically necessary health services for all Vermonters.”

However, much of the plan is more a mission statement than a tangible reform of the existing system. The core of the plan aims to gradually merge existing payers (for example, insurers) into a single “independently” administered payer, Green Mountain Care. But this central provision depends on new legislation and a federal waiver and, even if successful, would not be fully implemented until three to five years from now.

Although service through Green Mountain Care will be paid for with public funds, it will not be administered by the government but by representatives from existing payers and beneficiaries, such as employers, the state government and consumers. The plan will not be universal — initially incorporating only plans represented in the ACA-mandated state health insurance exchange in 2014, such as Medicaid and, possibly, the individual and small-group private insurance markets — and will exclude Medicare beneficiaries, state employees and school employees. The Vermont system will also contract out to private insurers’ tasks such as claims administration and other services.

The bill does contain some good provisions. For one, all Vermont residents (except undocumented immigrants, whose eligibility will be determined at a later date) would be eligible, insurance status would not be linked with employment, prevention and primary care would be prioritized and more efficient payment methods would be promoted to replace the inflationary fee-for-service model, which rewards higher and more expensive health care utilization.

More importantly, however, the plan’s weaknesses go to the core of the legislation. The failure to enact a single-payer system may prove decisive in preventing the plan’s survival, because it relies on long-term cost savings. The presence of multiple payers would prevent the system from realizing the vast administrative savings that would immediately come from a true single-payer system. The continued operation of private insurers, in particular, will undermine the law’s intent to create an equitable system. Private companies will be allowed to provide supplemental insurance to those able to afford it, thus creating a two-tier system based on wealth — precisely what single-payer is designed to avoid. The contracting out of tasks such as claims processing to these same insurers will undoubtedly add additional expenses.

The lack of a single payer with centralized claims processing may also prevent the state from achieving Canada’s and Medicare’s successes in creating comprehensive databases on health outcomes. Canada’s single-payer system has allowed provinces such as Ontario and British Columbia to track data on interventions and health outcomes for every resident. This tracking has facilitated an enormous amount of vital research. More importantly for Vermont, such data would have also enabled the state to evaluate whether the new system improved care for the state’s residents over time, one of the goals of the law. Whatever the cost, there is, as yet, no plan to pay for the new system. If funded at all, the most likely outcome would be a flat payroll tax on employers and employees on the first $106,800 of income, replicating the regressive Social Security tax.

Other states take tentative steps

Vermont is obviously unique both politically and, with a population of only around 600,000 residents in the state, demographically. Even its partially successful example cannot be readily applied to other states. However, the common perception that single-payer is more possible in Democratic states is too simplistic. The real dichotomy is between Republican and Democratic leaders on one side, backed by the same financial interests, and the majority of the public on the other. Medicare’s overwhelming popularity contrasts sharply with the unpopularity of private insurance companies and makes a single-payer option possible across the political spectrum, even one narrowly defined in partisan terms.

Framed this way, even Republican state officials have espoused single-payer as a policy option, with the Republican attorney general of Louisiana recently calling for a single-payer model nationwide and telling the Think Progress blog that he trusted “government more than insurance companies.” Hawaii and California are two states that have already taken steps in the direction of single-payer or state-based public options.

Similarly, Montana, usually a Republican state but currently with a Democratic governor, has invoked the model of Saskatchewan, its neighbor immediately to the north, citing demographic and economic similarities to the Canadian province. Last year, Gov. Brian Schweitzer asked the federal government for a waiver from all funds for federal health programs (including Medicare, Medicaid and the Veterans Health Administration) in favor of a block grant to build what amounts to a state-run public option.

Under this plan, private insurers would still be allowed to operate, but Schweitzer predicts all residents would eventually opt for the superior government plan. He told Great Falls, Mont., KRTV News, “It’ll be a lonely place over there at Blue Cross/Blue Shield, I’m afraid.” He is not alone in his prediction. The federal “public option” failed because private insurers feared they would be out-competed by a more efficient government plan.

Repeal and replace?

Meanwhile, what effect a repeal of the individual mandate would have on the prospects of state or federal single-payer plans remains to be seen. Some single-payer advocates submitted an amicus brief to the Supreme Court calling for a repeal of the ACA, apparently with the expectation that the collapse of the law would pave the way for a nationwide single-payer system. Others have highlighted the positive provisions in the law as a reason to preserve it while continuing efforts on the state level.

What isn’t in question is the obvious equity of a single-payer system. In the March hearings, Justice Kennedy hinted that it may have been more honest for the Obama administration to have enacted a single-payer plan rather than require Americans to purchase a product in the distorted marketplace that is private insurance. More honest? Perhaps. More just? Without a doubt.