Each summer, Public Assets goes on the road with its Summer Speaking Tour. Executive Director Paul Cillo and Senior Analyst Jack Hoffman visit five communities. This summer they visited Essex, Newport, Rutland, St. Albans, and Woodstock. A typical day includes a presentation to the local Rotary Club, an education finance seminar for local school officials and legislators, a stop at the local newspaper, if there is one, and meetings with a few community and business leaders to get their perspectives on the state of the state.
Paul Cillo’s 2012 Rotary Club presentation, “Health Care Reform: What does it mean for Vermonters?” begins with a brief introduction to Public Assets Institute and some examples of our recent work. What follows are Paul’s speaker’s notes on the focus of his presentation: health care reform.
Health care reform: What does it mean for Vermonters?
Over the last two decades, despite 60 percent real economic growth in Vermont, as measured by both gross state product and statewide personal income, median household income grew just 1 to 2 percent in 20 years—virtually zero. Where did the economic growth go? To the top. The share of Vermont income that went to the top 1 percent tripled between 1981 and 2005, leaving a much smaller share for everyone else.
Meanwhile, expenses like health insurance went up sharply.
Average Vermont family insurance premiums nearly doubled in just six years from 2003 to 2009, even as the average deductible doubled. This meant higher costs, less coverage.
Health Care Reform
That brings me to the main thing I want to talk about with you today: Health care reform. I assume you’ve all heard that Vermont is moving forward with health care reform. Most of the headlines have focused on Vermont’s goal of becoming the first state with a single-payer health care system. And single payer has been mostly what both opponents and supporters of health care reform have been talking about.
I’ll get to single payer later, but there is more to Vermont’s health care reform plans that hasn’t gotten much attention yet—probably because it’s not controversial and therefore doesn’t make the six o’clock news.
First, I want to point out the distinction between health insurance reform and health care reform. The federal Affordable Care Act—better known as Obamacare—was really about health insurance reform:
- It mandates that everyone have health insurance.
- It creates a new marketplace in each state—known as an Exchange—where individuals and businesses can do comparison-shopping when they go to buy health insurance from commercial health insurance carriers.
- There will be new regulations defining different levels of coverage in plans sold through the Exchange.
- And there are subsidies to certain individuals and businesses that purchase quality health care plans through the Exchange.
Unfortunately, health insurance reform doesn’t get at the real problem we need to address, which is the rapid growth in the cost of health care: the medical services we buy from doctors, hospitals, pharmacies, and all of the other health care providers.
We need health care reform for two reasons:
Some people will tell you that Vermont education costs are out of control. We would disagree, but just to provide some context, here (lower line) is Vermont’s education spending as a percentage of the overall economy (gross state product). It’s been virtually flat for nearly 20 years, sustainably growing at about the same rate as economic growth.
And here (upper line) are our health care expenditures as a percentage of the economy. Health care costs have been growing at about twice the rate of the state’s economic growth. This is unsustainable.
- And, second, too many Vermonters don’t have access to regular health care services, especially preventive services. Insurance is now the way that people get access to these services. And over 50,000 Vermonters don’t have health insurance, according to the Census. Another 160,000 are underinsured, which means they’re at risk of going bankrupt if they suffer a serious accident or illness. These aren’t just the poor; this is a third of the state’s population, including people who were once in the middle class.
Health care costs affect almost everything in our economy: taxes, business costs, employees’ earning power, retirees’ standard of living— everyone and everything.
In 2010, Vermont’s total health care expenditures on behalf of Vermonters were about $5 billion. The figure on the left shows who pays the bills now to keep our health care system going. Public funds already cover almost half of Vermont’s health care costs. If you include public funds that pay for health insurance for state and local government employees and teachers, public funds cover more than half of Vermont’s health care expenditures.
Like Obamacare, Vermont’s health care reform planning seeks universal access. But unlike Obamacare, Vermont is actually trying to find a way to slow the growth of health care costs.
It’s a tall order. And we don’t know yet what the Green Mountain Care Board, the state’s new health care regulator, is going to propose. But the governor has said he doesn’t want to move forward with single payer until he sees progress on slowing the growth of health care costs.
Without reform, Vermont’s health care expenditures are projected to double in the next 10 years, to $10 billion. According to projections done by the Joint Fiscal Office and the Department of Financial Regulation, various reforms can save between $1 billion and $2.5 billion. So it makes sense for the Green Mountain Care Board to try to bend the curve on health care expenditures before tackling the question of how best to raise the money to pay for our health care system.
Single payer means different things to different people. Opponents tend to focus less on the payment side of single payer and more on how money would be raised to support a new health care system. They are worried about raising taxes to pay for health care. Supporters of single payer tend to focus on the payment side. They see single payer as a way to reduce or eliminate the high administrative costs of health insurance companies compared to a government-run health care system like Medicare.
This is not to say that supporters of single payer aren’t concerned about how the money is raised for the health care system. They are, and they see the benefits of a tax-based system.
And opponents of single payer also have concerns about the payment side. They argue that a competitive market for health insurance will hold down costs—even though that’s exactly the system we’ve had in Vermont while costs rose at an unsustainable rate.
We don’t know yet what the Green Mountain Care Board will propose. A lot of the savings they are hoping for—including savings in administrative costs—can be achieved without moving to a taxed-based system. But here are some things to keep in mind as we start seeing recommendations for cost containment and alternatives for financing health care.
- We know how much health care will cost going forward. Because the Green Mountain Care Board is working on cost containment first and financing second, one criticism we hear from opponents is that the administration is moving ahead on health care reform before we know what the plan will cost. What they really mean is: “These supporters of socialized medicine want to switch to a taxed-based system without telling us how much taxes will go up.”
We know how much our health care system will cost if we do nothing: $10 billion by 2020. The governor has said the Green Mountain Care Board needs to come up with a plan to bend the curve on growth before moving to single payer. So we can expect health care costs will be below that amount.
- We’re already raising the money. If we go to a single-payer system with some tax component, it’s going to replace what we’re already projected to spend—not a new layer of cost (above the baseline projection). We’re looking to replace the money now raised through taxes (for Medicaid and Medicare), premiums, and out-of-pocket payments with something that’s more equitable and affordable for Vermonters—and provides new options for reducing health care costs, like payment reform. Unfortunately, “taxes” has become a four-letter word. Some people have such an aversion to taxes that given a choice between taxes and premiums for health care, they would rather pay premiums even if they have to pay more money.
- It would be better for us to put ideology aside and come up with a system that makes sense and brings us more in line with other developed countries in the world, where costs are lower, people are generally healthier, services are universally available, and people don’t face the prospect of financial ruin if they happen to get sick or fall down the stairs.
My purpose in talking with you today is not to propose or advocate for specific health care reforms. But I am here to caution you that in the next few years—and especially around election time—there will be lots of wild claims—both pro and con—about health care reform in Vermont. It will be important for you, for all of us, to separate the useful facts from the nonsense.
When you hear a claim about how much reform will cost, compare that to the cost without reform. When you hear claims about how much taxes will go up with reform, ask how much health insurance premiums might also be expected to go down.
We helped the Vermont Business Roundtable last winter analyze health insurance coverage and cost for their member businesses, which include many of the state largest employers. We found that three-quarters of the employees of VBR members work for employers that are paying at least 10 percent of payroll for health insurance. That is useful information, especially if Vermont decides to use a payroll tax to fund part of the new health care system. For many of these companies at least, a payroll tax of less than 10 percent would be a savings.
We would like to see more facts like this one brought into this public debate. We will help with that. But it’s also important that you demand it. Because unless this debate is based on facts, as best as we can assemble them, there will be no lasting solutions to the serious problem we face with health care costs.