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Economist confirms need for single-payer system

By Peter Hirschfeld
Times Argus (Barre-Montpelier, Vt.), Feb. 19, 2011

MONTPELIER — Three weeks after unveiling a draft version of his single-payer health care proposal, Harvard economist William Hsiao returned to the Legislature Friday to submit a final copy that reaches exactly the same conclusion.

Hsiao’s draft report drew comments and criticisms from nearly 200 people. Their input did little to change the final recommendations, in which Hsiao says Vermont should use a payroll tax to fund a single-payer system that provides basic health care benefits to every resident of the state.

“Vermonters as well as people outside Vermont have sent us more than 170 comments. It kept us busy and sleepless for a couple weeks but we really benefited from these comments,” Hsiao told the House Committee on Health Care Friday afternoon. “Let me come to the bottom line: Our conclusions and recommendations did not change.”

Hsiao, commissioned by the Legislature to produce the $300,000 report, said many of the comments voiced skepticism over the financial savings he projects in the single-payer framework. Hsiao says the state would save $580 million in the first year of implementation, largely as a result of administrative efficiencies that result from the elimination of multiple insurance plans. He proposes plowing $400 million of those savings into improvements in health care infrastructure.

Hsiao assured lawmakers that the savings forecast in his nearly 200-page report are conservative.

“Our approach was to underestimate savings but also to overstate costs. Our basic premise is we do not want to mislead the Vermont Legislature and governor to do something that’s highly risky,” Hsiao said. “So if things did not work out so perfectly, you still have a margin there, and you would not face a fiscal crisis.”

For proponents of a single-payer system, Hsiao’s findings cement their commitment to pursuing a reform path that leads to publicly financed, universal care.

“Even after asking people to criticize the report in every way possible, his final recommendation doesn’t have a change in direction,” said Rep. Mike Fisher, a Lincoln Democrat.

But the path toward single-payer remains fraught with political land mines. Large businesses, including IBM, have already voiced their distaste to any health-care system that imposes a mandatory payroll tax on employers. Opposition has been particularly strong from self-insured companies, whose health plans are protected by federal law from influence by state regulations.

Hsiao proposes overcoming federal restrictions on self-insured companies by assessing a payroll tax on those employers regardless of whether their employees enroll in the state-offered benefits.

“So it’s up to employers and workers, who may not want to have double insurance,” Hsiao said.

Critics say the strategy uses the state’s broad taxing authority to strong-arm companies into submission.

Hsiao proposed the payroll tax. But the Legislature and Gov. Peter Shumlin, who began work last week on a health care bill that lays the foundation for a single-payer system in three to six years, have opted to disregard the issue of funding altogether. For now at least, lawmakers and Shumlin say the state needs to focus on cost-containment and health-care design, leaving issues of how to pay for it for later down the road.

Rep. George Till, a Jericho Democrat and practicing obstetrician, said Friday that it will be difficult to move the debate forward without broaching the issue of funding early on. Till said his concerns were confirmed by Hsiao, who on Friday said that health care delivery and health care financing need to go hand in hand.

“I don’t see how the business community buys in without knowing the financing mechanism and the financing amounts,” Till said. “And I don’t understand how the provider community buys in without knowing what they’re going to get paid.”

Rep. Mark Larson said financing the system will be an important conversation, but one that must wait until the state has a better handle on precisely how the new health care system will operate.

Larson said the biggest obstacle to health care reform is people’s fear of change, a sentiment echoed Friday by Hsiao.

“I think there’s a level of distrust and fear out there that this won’t work,” Larson said.

Larson though said the status quo — health-care expenditures are expected to rise by more than $1.2 billion over the next three years — will be far more devastating to businesses and health care providers than anything proposed in the Hsiao report.