Posted on August 30, 2006

Pros and cons of single-payer health care


By Nancy Remsen
Burlington Free Press
August 30, 2006

MONTPELIER — Vermont’s total health care bill would decrease by about $51 million if all residents except those on Medicare were covered under one state-financed health care plan, an Emory University researcher reported Tuesday to the Vermont Commission on Health Care Reform.

Supporters of a single-payer plan for all Vermonters have long argued it would produce significant administrative savings. This new analysis suggested reduced paperwork and processing at hospitals might shrink administrative expenses from 23.5 percent to 17 percent of total spending. Administrative expenses for doctors could drop from 27 percent of gross spending to 20 percent.

If such a statewide health plan were financed using a payroll tax, the rate would have to be 13.5 percent. That would raise $1.6 billion, the portion of the $2.7 billion total cost of a state health care plan that wouldn’t be covered by the state’s government-funded Medicaid program, said Kenneth Thorpe, researcher and consultant hired by the Legislature a year ago to assist with the analysis of health care options.

“The change in who pays for health care would be substantial,” Thorpe said Tuesday during a briefing on his research.

Employers who provide health insurance could pay less under a payroll-tax plan, especially if workers paid a share of the payroll tax, he said. Employers who don’t offer insurance — 9,282 mostly small businesses — would be hit with a new tax that would collectively cost them $388 million or more, depending on how the cost was split with workers.

John Tracy, co-chairman of the Legislature’s health reform commission, said Thorpe had provided analysis of just one option for organizing and financing health care. “There will be more,” Tracy said. “When you make a business decision, you have to look at all the options.”

Thorpe said he would look at other ways to pay for a statewide health insurance program and analyze their economic impacts. His next report is due in December.

Duane Marsh, president of the Vermont Chamber of Commerce, said he didn’t think the commission was considering all the options. He rejected the suggestion that a government-run and financed health care program would cost less in the long term. He said he believes high-deductible health insurance plans would encourage individuals to make better health care choices. Fewer mandates for coverage would make private insurance less expensive, too, he said.

“I would like Dr. Thorpe to see how that kind of system would work,” Marsh said.

Dr. Deborah Richter, longtime advocate for a single state-financed health insurance program, cheered Thorpe’s report as the start of an important conversation.

“This model would be a whole lot easier to practice under,” said Richter, a primary care physician with a practice in Cambridge. Vermont doesn’t have as many health insurance companies as other states, but those in business here offer dozens of plans. Richter said, “There is a huge amount of administrative complexity to what we do.”

Cornelius Hogan, who co-wrote a book with Richter about the state’s health care choices, also applauded the analysis of administrative savings, but criticized the selection of a payroll tax as an option to pay for a state-financed plan.

A payroll tax of 10 percent or more is a “non-starter,” Hogan said. “They ought to be looking at scenarios that take the burden off businesses.”

Craig Fuller, consultant for Business Resource Services, noted the impact of the payroll tax on workers. “The winner is the highly paid employee,” Fuller said, noting these people likely work for employers already providing insurance. They could pay less under the plan.

“The losers are the low-paid workers,” who would now pay a portion of their salary for health insurance, Fuller said. That wouldn’t be an easy sell in the Legislature.

“We waste an inordinate amount of time talking about this,” Fuller said of a single-payer health care system. The remedy for the problem of rising health care costs, he said, is to deal with obesity, chronic diseases and inappropriate utilization of expensive treatment.

Contact Nancy Remsen at 651-4888 or