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By Adam Gaffney, M.D.
Dissent, Spring 2014

Less than two years after the fall of Nazi Germany, a bankrupt Britain – reeling from the most destructive war in history and living under conditions of stark austerity – elected to create an extraordinary system of universal health care, the National Health Service (NHS). Aneurin Bevan, the Labour Party minister of health who played a crucial role in its creation, famously remarked that the NHS would “last as long as there are folk left with the faith to fight for it.” Subsequent developments, it seems, have put his challenge to the test.

In 2012 David Cameron’s Conservative-led government passed the Health and Social Care Act, legislation that opens the NHS to privatization like never before. Building on a series of neoliberal health care “reforms” dating back to the Thatcher era and coinciding with the dictates of our age of austerity, Cameron’s law could very well mark the beginning of a slow end for the English NHS (the largely autonomous Scottish NHS has been going in a much different direction). To be clear, the law is not meant to privatize the system entirely; after all, caring for a whole population – including its poor, elderly, and chronically ill – is messy, complex, and frequently unprofitable, and so historically uninteresting from a commercial perspective. Instead, the law will allow – indeed, it will require – the competitive “tendering” of health care services to corporate providers, which can then pick off the profitable parts, bit by bit. Its provisions end the fundamental legal requirement that the secretary of state ensure comprehensive care throughout the country. The law encourages NHS facilities to provide uncovered services for cash, while at the same time reductions in funding force cuts in covered services. The law may even ultimately open new opportunities for fees to be charged at the point of service, in direct contradiction of the service’s founding principles.

The Health and Social Care Act, in other words, will not end the NHS. It will fragment and commercialize it, while the demands of austerity will continue to stretch it thin. At some point, though the NHS will continue to exist, we may no longer be able to recognize it.

I. 1948–1980: ‘It Is Not a Charity’

Shortly after the NHS went into effect in 1948, a leaflet was distributed to all homes to explain the function and purpose of the new system:

It will provide you with all medical, dental, and nursing care. Everyone – rich or poor, man, woman or child – can use it or any part of it. There are no charges, except for a few special items. There are no insurance qualifications. But it is not a charity. You are all paying for it, mainly as taxpayers, and it will relieve your money worries in times of illness.

Though its organizational structure may have been considerably complex, such a simple and straightforward summary spoke to the truly radical – and fundamentally universal – nature of the new service.

Its first few years in action revealed the great, unmet medical needs of the country, with the sudden surge in the use of health care resulting in substantial initial over- spending. This precipitated, in the early 1950s, the introduction of fees for medications, eyeglasses, dentures, and eventually all dental treatment. Still, other care remained free at the point of service, and the NHS’s general structure remained largely intact over the next few decades, protected by strong public support and by a consensus between Labour and Conservatives on the importance of the welfare state. Yet at the same time, the NHS was often starved of resources.

The NHS is frequently touted for its success at keeping the cost of health care low, easily beating not only the United States but also most of its continental peers with respect to efficiency. (In 2008, for instance – after a period of historically high spending – the UK was still only spending $3,129 annually per capita on health care, compared with $3,737 in Germany, $4,079 in Canada, and $7,539 in the United States.) Yet its frugality has time and time again gone too far, and the end of the 1970s – when the United Kingdom was facing anemic growth, marked inflation, and persistent deficits – was one such time. 

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By Bob Herman 
Becker’s Hospital CFO, April 9, 2014

A new report from nonpartisan advocacy group Public Citizen said a publicly funded healthcare system that guarantees universal coverage would not only reduce healthcare costs — it would also be an economic relief for employers and businesses.

Public Citizen analysts said a single-payer system, commonly referred to as a “Medicare for all” option, could benefit businesses and the general public in three ways:

• Universal healthcare would end “job lock.” Job lock is a term used for when employees do not want to switch jobs or pursue new ventures out of fear of losing health insurance.
• Universal healthcare would likely reduce healthcare costs. Several healthcare researchers and physicians have conducted studies finding that annual savings from moving from a multipayer to a single-payer system could be in the billions, most of which would be gained from less spending on administrative and billing functions.
• Universal healthcare would equalize healthcare costs for businesses. Competitive U.S. businesses already pay large sums of money to offer health insurance to their employees, the report stated. Financing a single-payer system would require different taxing mechanisms on businesses, but reports indicate businesses would not likely pay more than they already do — and many may actually pay less. This would especially help small business owners, the report said.

Taylor Lincoln, research director of Public Citizen’s Congress Watch division and author of the report, said in a news release the issue is nonpartisan, but it has been absorbed by partisan factions at both ends of the aisle.

“Small businesses have rated the cost of health insurance as their top concern for a quarter century, and large businesses struggle with healthcare obligations that their international competitors do not have to worry about,” Mr. Lincoln said. “If it weren’t for entrenched partisan alliances, business leaders would have demanded that Congress relieve them of healthcare burdens long ago.”

Public Citizen’s report comes roughly eight months after Gerald Friedman, PhD, a professor of economics at the University of Massachusetts at Amherst, released a similar study. Dr. Friedman found if the U.S. adopted a single-payer system, the healthcare system could save $1.8 trillion over 10 years.

http://www.beckershospitalreview.com/finance/report-universal-healthcare-would-be-boon-to-businesses.html

By Neil H. Buchanan
Justia (Mountain View, Calif.), April 10, 2014

To the surprise of many people, and to the great consternation of Republicans, the Affordable Care Act (ACA, or the dreaded “Obamacare”) failed to fail. Last week, to much fanfare, the Obama Administration announced that the ACA’s enrollment target had been met, which means that the health care law will not collapse from lack of adequate participation.

This was surprising, of course, because of the early software problems that emboldened the ACA’s opponents, and which raised the possibility that technical problems would doom the new law before it could even get started. Now, however, we know that we will proceed to the next stages of our national experiment with a broad expansion of profit-oriented, subsidized health care.

Despite this success, we must now plan to get rid of the ACA, and replace it with something much better. The ACA is inherently incapable of solving the larger long-term problems that our country faces in providing health care to all of our citizens. It was an important step forward, and we should be happy that it did not die a premature death, but we cannot now allow ourselves to believe that the current system is sustainable, or even acceptable.

That is why it is essential to say, clearly and unambiguously, that the United States needs to adopt a system of universal, single-payer national health insurance, as soon as possible. The ACA is as good as it gets, when it comes to basing a health care system on private insurance, and it is simply not good enough. Even as the ACA takes effect, therefore, we need to start planning to make it disappear.

The success of the ACA, and the importance of its component parts

The reason that the ACA was at risk of failing to launch is actually a somewhat complicated story, but the explanation is ultimately about the nature of private insurance. If, against all logic, we decide to continue to run our health care system through competition among private insurers, the system must be designed with several key elements, in order to avoid what economists call a “death spiral.”

Insurers, even those that are not-for-profit companies, need to make sure that they do not ultimately have to pay out more in benefits than they take in from customers’ premiums. This means that insurers will try to separate people into different categories, on the basis of how expensive they are likely to become in the future. Smokers, for example, are treated differently from nonsmokers, for obvious reasons.

It is this simple logic that causes insurers to refuse to insure people with pre-existing conditions. If, for example, you have late-stage cancer, and you want to be covered by a health insurance policy, it would make no sense for the insurer to agree to take you on as a customer. Short of charging you exactly as much as you would have to pay directly for your cancer treatments, the insurer cannot help but lose money on you.

If you fail to disclose to the insurer that you have a late-stage cancer, then the insurer would need a way to protect itself from the economic loss that your deception would create. That is why insurance contracts generally exclude coverage for treatments related to pre-existing conditions. The problem is that insurers, over time, perfected increasingly aggressive ways to define what counts as a pre-existing condition, such that too many people who were insured suddenly found (after paying premiums year in and year out) that their insurers were canceling their coverage because, for example, a cancer patient had failed to disclose that she once had an unrelated illness (such as psoriasis).

Public outrage against such abuses grew, and the result was that even most opponents of President Obama understood that the insurers had overplayed their hands regarding pre-existing conditions. This meant that, when serious discussions began in 2009 regarding health care reform, one of the fundamental elements required of any such plan was that Americans could not be denied coverage due to pre-existing conditions.

This, however, raised a further difficulty. If everyone were to know that they could never be denied insurance coverage for an illness, then there would be no reason to take out insurance in advance of getting sick. This meant that people needed to be required to sign up for insurance in advance. Healthy policyholders, in particular, are an essential part of the economic model of private insurance. Without them, no private company could stay in business for long, because it is the currently healthy people’s premiums that finance the benefits that are paid on behalf of currently sick people.

The so-called mandate, which was the subject of the much discussed NFIB v. Sebelius Supreme Court decision two years ago, was thus an inextricable part of the ACA, because without it, no one would have any reason to sign up for health insurance in a world where they could not later be turned away, no matter how sick (and thus expensive) they became. Without the mandate, the entire insurance system would collapse. Hence, the term “death spiral.”

Finally, in order to allow everyone to become part of the insurance pool, the law had to recognize that some people could not afford to pay for their insurance. They would need to receive subsidies, allowing them to sign up, and thus to make the system nearly universal.

When this was all turned into law, however, it turned out that there was still some possibility that a large number of people would choose to pay the tax (or penalty) that was designed to push them into the insurance pool. Hence, the drama leading up to March 31’s enrollment deadline, which was entirely a matter of seeing whether the insurance pool would be large enough – and include enough currently-healthy people – to avoid the death spiral. Happily, it worked.

The system is inherently wasteful, even when the ACA is running as planned

The success of the ACA will, ultimately, be seen in its expansion of coverage to people who were otherwise uninsured (a long-standing national shame), as well as its elimination of the risk that people will lose their insurance coverage due to abusive practices by insurance companies. This is no small accomplishment, because health-related tragedies have long been one of the leading causes of personal bankruptcies and family ruin.

Even so, the very difficulty of explaining why the ACA had to include its three component parts – (1)universal coverage, (2) mandated participation, and (3) subsidies – gives us some sense of what is still wrong with our system now. Private insurers are still in the business of sorting customers, and trying to get them to take on more of their own health care expenses, so that insurers can spend less money on benefits.

However, this effort to get people to take on more of their own costs up front, and to bear more risk of higher expenses later, is itself an expensive proposition. Even if insurance companies can no longer kick people who become sick off of their rolls, insurance companies still have every reason to try to extract more money from people.

The most direct way in which we can see these additional costs in action is, in fact, in the sign-up process itself. The insurers were allowed to create different types of plans (Gold, Silver, and Bronze) on the basis of costs, deductibles, and so on, for people who were willing to take on different degrees of risk. People then needed to figure out which of the available options was best for them.

Every step of this process involved needless expense. Designing the choices was expensive. Building the website was expensive. Advertising the coverage was expensive. Helping people navigate the exchanges was expensive. And, going forward, insurers will spend a great deal of money trying to poach their competitors’ best customers, by spending money on promotional materials, hiring attractive representatives to talk to the public about why Insurer A is better than Insurer B, and so on.

Why is that expense “needless”? Because, if there were only one insurer, there would be no need to get people to sign up for one insurance company rather than others, and there would be no reason to spend money and resources getting people to choose insurance as if they were choosing among different brands of breakfast cereal.

The potential savings from adopting a single-payer system

How much extra money do we spend in the U.S. because of our commitment to keeping private health insurance companies in business? In 2012, we spent nearly 18% of total U.S. gross domestic product (GDP) on health care, or about $2.8 trillion. The Congressional Budget Office estimates that this amount will rise to 22 percent of GDP by the year 2038.

By comparison, the next most expensive health care system, among our economic peers, is France’s, which devoted less than 12 percent of its GDP in 2012 to health care. If the U.S. had been able to accomplish that feat, we would have spent almost one trillion fewer dollars on health care in that year.

The United States government could take on the role of “insurer” in the sense that it would use revenues to pay doctors, hospitals, and others for providing treatment to all Americans. It would, like other advanced countries’ governments, become the single payer, making it unnecessary to have private insurers engage in destructive competition that wastes so much of the nation’s resources.

We already have such a system for a sub-group of Americans. It is called Medicare, and it is extremely popular. It is true that Medicare faces possible financial difficulties, but any such problems loom only because we insist on treating Medicare as a stand-alone system financed by payroll taxes, rather than admitting that it is simply a well-run government program that provides insurance for nearly everyone over age 65. It has extremely low administrative costs, and its costs for paying for medical care have risen more slowly than those for private insurers.

Is Medicare’s success expandable, such that we could cover the entire U.S. population? There is, in fact, a proposal in Congress that would put the United States on the road to a single-payer system. The Expanded & Improved Medicare For All Act (H.R. 676) would expand our current elders-only single-payer health care program into a universal program, available to all regardless of age.

But would such a program actually save money in the United States? The economist Gerald Friedman, of the University of Massachusetts, has studied H.R. 676. He estimates that, by 2023, the U.S. could shave 7 percent of GDP off of the costs of our health care system, compared to the costs of continuing current law. At that point, that will amount to almost one and a half trillion dollars.

There are many subordinate questions regarding the adoption of a single-payer health care plan for the United States, which are beyond the scope of this column. For now, however, it is important to remind ourselves just how much we are wasting because Republicans as well as Democrats (very much led by President Obama in this regard) peremptorily ruled out any consideration of transitioning to a single-payer system.

People who oppose single payer thus need to confront a simple question: Do your reasons for protecting private insurers justify the diversion of over one trillion dollars per year, rising every year in perpetuity, from other productive uses into unproductive health care expenses?

As happy as we should be that we now have moved our country forward, coming closer to the laudable goal of universal health care coverage, we cannot let that accomplishment obscure just how absurd our health care system is, at its core. It is expensive and wasteful, and we have the means to change it. It is time to get started.

Neil H. Buchanan, a Justia columnist, is an economist and legal scholar, a professor of law at The George Washington University, and a senior fellow at the Taxation Law and Policy Research Institute, Monash University (Melbourne, Australia). He blogs at DorfonLaw.org.

http://verdict.justia.com/2014/04/10/now-affordable-care-act-working-time-adopt-national-single-payer-health-care#sthash.CcoAvYGj.dpuf

By James Besante    
Common Dreams, April 9, 2014

While much has been made of the 7.1 million people who bought new private health insurance policies under the Affordable Care Act, and the additional millions who newly signed up for Medicaid, two big questions hover over these figures.

Even if they’re insured, will people be able to get the care they need? And what about the 31 million people who the government says will remain completely uninsured?

Medical students are acutely aware of the continuing barriers to health care that our patients face, and I can tell you – based on firsthand experience – that my fellow students are not about to give up the quest for truly universal, comprehensive care that’s readily accessible to everyone.

Their convictions owe a great deal to the late Chicago Cardinal Joseph Bernardin, who fought tirelessly on behalf of the powerless and downtrodden.

In 1995, one year before his death from pancreatic cancer, Cardinal Bernardin said, “Health care is an essential safeguard of human life and dignity, and there is an obligation for society to ensure that every person be able to realize this right.”

But nearly two decades later, the realization of the “right to health care” remains elusive, despite the passage of the ACA.

As a medical student, every day I work with patients who have delayed getting medically necessary care because they were worried about the costs of treatment. In many cases their condition has worsened as a result.

They may have been uninsured. Or they may have had a health insurance policy, but their plan’s high copays and deductibles kept them away.

Such worries are understandable. Studies show the leading cause of bankruptcy in America is medically incurred debt. Impressively, 78 percent of those individuals and families so bankrupted had health insurance when they first got sick.

The ACA doesn’t change this picture as much as some might think. People who signed up for private coverage in the exchanges are finding they have substantial cost-sharing, i.e. high deductibles and copayments, proven barriers to seeking care.

Patients are also finding themselves squeezed into “narrow networks,” which significantly limit their choice of doctors and hospitals. Accidentally step out-of-network, and your costs soar.

The sad truth is that for many health insurance is an umbrella that melts in the rain—when you need it most, it isn’t there.

One thing that’s clear: the business of corporate medicine is doing very well under the ACA. Health insurer profits, stock value, and CEO salaries are all up. In fact, the entire law was written around preserving the gluttonous bottom lines in American health care. The ACA handed private insurers $500 billion in taxpayer subsidies to continue profiteering off illness in our country.

Health insurers profit by avoiding the sick, collecting premiums, denying claims, and shifting more and more costs onto the patient.

And for-profit insurance companies aren’t the only ones with a financial incentive to withhold care. “Nonprofits” play the same game. For example, the CEO of the parent company operating Blue Cross & Blue Shield Illinois, a nonprofit, made $16 million in 2012.

In addition, the insurers afflict patients and physicians alike with the highest paperwork burden in the world. Big private insurance companies consume 13 percent of premiums in overhead compared to traditional Medicare’s overhead of less than 2 percent.

Providers are forced to spend tens of billions more dealing with insurers’ billing and documentation requirements, bringing total administrative costs to 31 percent of U.S. health spending, compared to 16.7 percent in Canada.

That difference represents hundreds of billions in unnecessary, wasteful U.S. overhead costs – money that should be going to care.

We have a dysfunctional health care system built around restricting access to care, rather than providing it.

This picture is unjust and unacceptable. That’s why an increasing number of students are calling for a streamlined, publicly accountable health care system such as “single payer,” also known as “improved Medicare for all.”

Cardinal Bernardin declared the “affront to human dignity that is occasioned by the lack of universal insurance coverage for even basic care” as the paramount issue of our time. For our nation’s health and dignity, we need to go beyond the ACA to a single-payer system – sooner rather than later.

James Besante is a third-year medical student at the University of New Mexico School of Medicine and a board member of the Chicago-based Physicians for a National Health Program.

https://www.commondreams.org/view/2014/04/09-5

By Sarah Kliff
Vox, April 9, 2014

Saskatchewan is a vast prairie province in the middle of Canada. It’s home to hockey great Gordie Howe and the world’s first curling museum. But Canadians know it for another reason: it’s the birthplace of the country’s single-payer health-care system.

In 1947, Saskatchewan began doing something very different from the rest of the country: it decided to pay the hospital bills for all residents. The system was popular and effective — and other provinces quickly took notice. Neighboring Alberta started a hospital insurance plan in 1950, and by 1961 all ten Canadian provinces provided hospital care. In 1966, Canada passed a national law that grew hospital insurance to a more comprehensive insurance plan like the one that exists today.

Saskatchewan showed that a single-payer health-care system can start small and scale big. And across the border, six decades later, Vermont wants to pull off something similar. The state is three years deep in the process of building a government-owned and -operated health insurance plan that, if it gets off the ground, will cover Vermont’s 620,000 residents — and maybe, eventually, all 300 million Americans.

“If Vermont gets single-payer health care right, which I believe we will, other states will follow,” Vermont Gov. Shumlin predicted in a recent interview. “If we screw it up, it will set back this effort for a long time. So I know we have a tremendous amount of responsibility, not only to Vermonters.”

When Shumlin ran on a single-payer platform in 2010, it was unprecedented. No statewide candidate — not in Vermont, not anywhere — had campaigned on the issue, and with good political reason. Government-run health insurance is divisive. When the country began debating health reform in 2009, polls showed single-payer to be the least popular option.

Shumlin just barely sold Vermont voters on the plan (he beat his Republican opponent by less than one percentage point). Then, he got the Vermont legislature on board, too. On May 26, 2011, Shumlin signed Act 48, a law passed by the Vermont House and Senate that committed the state to building the country’s first single-payer system.

Now comes the big challenge: paying for it. Act 48 required Vermont to create a single-payer system by 2017. But the state hasn’t drafted a bill that spells out how to raise the approximately $2 billion a year Vermont needs to run the system. The state collects only $2.7 billion in tax revenue each year, so an additional $2 billion is a vexingly large sum to scrape together.

Shumlin knows what he’s up against. “I don’t underestimate the challenge,” he said. “I know how hard this is, getting to the finish line. There are a thousand swords that could stab us in the heart. My question to the folks who wish for that to happen is, what’s your idea?”

Vermont’s case for single-payer health care can be summarized in one number: $82,975.

That’s the amount a 2011 study in the journal Health Affairs found the average American doctor spends on dealing with insurance companies. Across the border in Ontario, doctors spend about a quarter of that amount — $22,205 per physician — interacting with the province’s single-payer agency.

American doctors spend lots of money dealing with insurers because there are thousands of them, each negotiating their own rate with every hospital and doctor. An appendectomy, for example, can cost anywhere from $1,529 to $186,955, depending on how good of a deal an insurer can get from a hospital.

_{The amount of money spent on health care averaged out per person has more than doubled since 1999 in Vermont, from $3,421 per person each year to $7,876 per person each year. The gap between the US’s per-person spending and Vermont’s per-person spending has decreased. Source: The Green Mountain Care Board}

That doesn’t happen in single-payer systems. When the government owns and operates one health insurance plan for all residents, it sets a single price for each medical procedure. It’s that simplicity that tends to be single-payer’s biggest selling point, and the reason at least a dozen countries around the world use that type of system.

Single-payer systems can vary dramatically from country to country. “It’s a label that gets applied as if you could put a bunch of countries under it, and they would all look similar,” says Cathy Schoen, a senior vice president at the Commonwealth Fund, a nonprofit that focuses on health policy research. “But there actually aren’t very many health-care systems that look the same.”

Some countries, like Canada, own the health insurance plan but contract with private hospitals and doctors. They pay claims in the same way American health insurers do. Others, like the United Kingdom, own the health-care providers themselves.

Countries make different decisions about which medical services they’ll cover — and how much they’ll ask citizens to chip in. New Zealand and Norway’s programs include co-payments for trips to the hospital; Italy and Denmark do not. Some plans include prescription drug coverage, while others stick residents with the tab.

Overall, single-payer systems tend to be especially good at two things: increasing health coverage rates and holding down health care prices. Getting people covered is, unsurprisingly, a much easier task when the government is running a health insurance plan. When Taiwan implemented a single-payer system in 1995, the insured rate went from 53 to 96 percent in nine months.

Single-payer systems also tend to have lower prices because the government is negotiating one rate for all citizens. Think of it as a bulk discount: when the government can promise to deliver loads of patients to a given hospital or doctor, they have lots of leverage to insist on a lower price. Administrative costs tend to be lower, too. Instead of dealing with dozens of insurers who set hundreds of prices, doctors only need to send bills to the federal government.

The administrative savings of a single-payer system do come at a price. Single payer requires the government to make difficult decisions about what benefits they will and won’t cover — and often leave out pretty standard medical services, things like prescription drugs or dentist visits. Vermont, for example, is still working through whether its plan will include dental coverage, a service that would add at least $218 million to the system’s annual price tag.

The United Kingdom has had especially high-profile fights over what its National Health Service will pay for. The National Institute on Health and Care Excellence (known, funnily enough, as NICE) decides which benefits the national system covers, sometimes setting criteria based on a resident’s age or health status. Women over 40, for example, are only eligible for one cycle of infertility treatment, while younger women get three — a guideline based on research finding younger women have greater odds of conception. NICE has dozens of guidelines, all meant to steer a limited set of health funds to the most effective treatments.

Single-payer countries are often associated with longer wait times, a perception that stems from Canada’s system. One recent Commonwealth Fund survey found 36 percent of Canadians say they wait six days or more to see a doctor when they’re sick, compared to 23 percent of Americans. Long wait times don’t appear to be systemic to single-payer systems, though. Australia and the United Kingdom, for example, have shorter wait times than the United States.

Worries about rationing and wait times make single payer a polarizing term, even in deep-blue Vermont. It’s often used in attacks on government-financed health care, conjuring up images of long wait times and rationed care. Supporters of single-payer don’t like to use it, instead preferring to discuss “universal coverage” or “publicly financed health care.” Shumlin is among the rare few who will use the term liberally, mostly out of convenience. He hasn’t found a better term that describes what he wants to bring to Vermont: a system where a single entity (the state) pays for everyone’s health care. And he doesn’t care to spend much time thinking up a better description.

“I don’t care what you call it,” he says. “I care that we get it right.”

Vermont prides itself on passing bills first. It was the first state to abolish slavery in 1777 and, in more recent history, pioneered same-sex civil unions with a 2000 law. It’s a tiny state that’s fiercely independent: Montpelier’s 7,000 residents like to boast that they are the smallest state capital, and the only one without a McDonald’s.

Vermont wasn’t satisfied with the health reform law that Washington passed in 2010, the Affordable Care Act. That law expands health coverage by growing the existing health care system. Americans who already had health insurance have seen barely any change. Uninsured people have gotten covered through two existing programs: the individual insurance market (where millions of Americans now receive subsidies to help buy coverage) and Medicaid, a public program for low-income people.

Shumlin had a different idea. He didn’t want to build on what existed. He wanted to blow up what exists and replace it with one state-owned and operated plan that would cover all of Vermont’s residents — an example he hopes other states could follow.

So in 2009, when he was serving as President Pro Tempore of the Vermont Senate, he got in touch with William Hsiao, an internationally renowned expert who has worked with 10 countries building such systems. Shumlin invited him to Montpelier to discuss his experiences. Hsiao — who helped Taiwan build its single-payer system to cover 23 million people — politely declined.

“I was very busy, and I said, ‘I can’t really take the time to drive up to Vermont and talk you through this,’” Hsiao says of his first conversation with Shumlin. “But I told him I would set up a phone conversation.”

One phone call led to others, and finally a visit to Montpelier, where Hsiao testified before the legislature about his experiences–and became convinced that, if single-payer health care had shot in the United States, it would be in Vermont.

“My opinion about single payer in the United States is that there are so many powerful political groups, like the American Hospital Association and the American Medical Association that dominate Washington, that it can’t really happen,” Hsiao says. “In Vermont, there’s much more grassroots activism.”

Shumlin surprised local activists by running for governor in 2010 on a single-payer platform. While most Democrats across the country shied away from health care in that election, reassuring angry constituents that they didn’t support a government takeover of health insurance, Shumlin was on TV expressly endorsing that idea.

“It was the first person I ever heard in politics who was a serious candidate, said the words ‘single payer,’ and weren’t using them in an attack ad,” recalls Deb Richter, president of Vermont for Single Payer. “It was amazing.”

Shumlin wanted to move quickly. He continued to work with Hsiao, who wrote an outline for Vermont on what their plan could look like (the document is ubiquitous in the state house, known simply as the “Hsiao report”). On May 26, 2011, Vermont passed Act 48, the first law in the nation that provides health coverage to all residents of a state. Act 48 established Green Mountain Care, a health insurance plan that all Vermont residents would gain access to, by virtue of being Vermonters.

Green Mountain Care cannot start until 2017 because the Affordable Care Act requires states to hew to the federal health reform model for the next three years. This is frustrating for Vermont’s single-payer supporters, who want to put the new system in place sooner.

“When I ran for governor, I had it in my mind…I could find a way to get around it,” Shumlin. “My team finally convinced me — and it took some convincing — that it couldn’t be done without losing all our federal funding, which would be suicide. So my goal is to get this done as close to January 1, 2017 as we possibly can.”

Between now and then there are two big questions that Vermont has to answer: how much will single-payer cost, and can the state find a way to pay for it?

Putting a price tag on Vermont’s single-payer plan has been a maddening task for health economists. The state hasn’t yet decided which benefits it will cover or how much it will ask Vermont residents to chip in. Then there are other, difficult-to-predict factors like how much, exactly, single-payer will reduce administrative costs or drive down prices.

But getting this right is crucial. There’s a political imperative not to ask for too much money from the state’s citizens, especially when the new system is supposed to save money. But ask for too little and the system might not have enough to cover all their medical bills.

“There are so many different factors and you could end up with a gazillion options,” says Katharine London, a health economist at the University of Massachusetts. “When you make choices on some of these things, they all have repercussions in terms of cost.”

The Shumlin administration contracted with London and a team of economists last year to estimate the cost of Vermont’s plan. Their report estimates that Vermont will need to raise an additional $1.6 billion in tax revenue in 2017 to pay for a single-payer system.

The Shumlin administration is quick to point out this isn’t the same as increasing healthcare costs by $1.6 billion. When there’s a single-payer system, lots of people who currently pay private insurance premiums won’t. Instead, Shumlin and his team expect the system to cut $36 million in statewide health spending in its first year, largely by reducing administrative spending.

_{Total estimated statewide health care costs, 2017-2019 (in Millions). Source: State of Vermont Health Care Financing Plan}

Vermont’s doctors and hospitals are skeptical of this estimate–and generally protest the idea that the single-payer system will lead to administrative savings. They contracted with Avalere Health, a D.C.-based research firm, to publish a report that estimates the single-payer system will require $2.2 billion in new revenue to start.

Hospitals don’t think that Vermont’s single-payer system will significantly reduce administrative costs. Right now, they see lots of patients from neighboring states, people who won’t be part of the state-run plan. And that means they’ll still need to deal with multiple payers, and all the different prices they set. Fletcher Allen, Vermont’s largest hospital, estimates that about a quarter of patients are not Vermonters.

“In Vermont we’ll go from four to five commercial payers to one,” Fletcher Allen chief executive John Brumsted says, “But we still have a dozen or so more than we’re negotiating with and interacting with in Northern New York and New Hampshire. We still have to have the infrastructure in place to support multiple payers.”

In the Vermont legislature, most people ballpark the cost of single-payer somewhere around $2 billion–and spend even more time worrying about how to raise that money. Single-payer opponents have already begun framing it as the largest tax-increase in Vermont history, which worries those trying to shepherd it through the legislature.

“You are raising $2 billion, and that’s just such a significant amount of money,” Shap Smith, the speaker of the Vermont House, says. “Even if it’s not new money and just a different way of raising it, that’s still a tough transition. There’s so many people who have a stake in the way things are currently done, and getting them to see that a different way would be better is difficult.”

Vermont isn’t alone in its money problems. Single-payer countries around the world have regularly struggled with figuring out the best way to pay for the system. Countries take different approaches to funding single-payer systems. Some pull the funds from a general revenue stream while others create a specific “premium tax” that goes towards health care. Hsiao had suggested the premium tax approach for Vermont, but the legislature didn’t include a financing plan in the 2011 legislation.

“We recommend that Vermont have a payroll tax contribution designated for health specifically,” he says. “Canada doesn’t have such a system, so during a political recession they may decide to cut health care to support education. We designed a system for Vermont where you can’t get into that situation and protect revenue for health care.”

Whatever way Vermont ultimately pays for the single-payer system, it will be a noticeable tax increase for Vermonters. There are only four taxes in Vermont right now that bring in more than $100 million annually–the largest of which, the payroll tax, nets $624 million.

“If you look at the landscape of taxation here, there’s no one place to go to raise the money,” says Steve Kappel, a Vermont consultant who worked on the Hsiao report. “You’d have to raise the sales tax by something like 146 percent, which is not going to happen.”

About half of countries who attempt to build single-payer systems fail. That’s Hsiao’s estimate after working with about 10 governments in the past two decades. Whether he’s in Taiwan, Cyprus, or Vermont, the process is roughly the same: Meet with legislators, draw up a plan, write legislation. Only half of those bills actually become law. The part where it collapses is, inevitably, when the country has to pay for it.

“Sadly to say, half of them were never able to pass legislation or once they passed legislation, like Cyprus, the president changes and the new president never really implements the plan,” Hsiao says.

Vermont is now in that middle ground. Legislators are worried that they might be losing momentum and are clamoring for the governor to releasing a financing plan.

The state needs to secure a waiver from the federal government for their single-payer plan. Vermont leaders worry that, if they wait too long, they may no longer have a sympathetic president in the White House. And even writing the waiver request means that Vermont has to explain to the Obama administration how they’ll pay for universal coverage.

“We’re running up to the end of an administration that is sympathetic to the reasonable chance of one that is unsympathetic,” Peter Galbraith, a member of the Vermont Senate’s finance committee, argued at a hearing in late March. “If this doesn’t go into effect in 2017 it will never happen.”

The Shumlin administration had initially said release a financing plan this spring, but has since pushed the deadline back to the end of the year. The governor says he’d rather have a plan that’s right than one that’s rushed. “We haven’t figured this one out yet,” Shumlin says. “Every time you think you have the answer, there are ten people who will point out the flaw with that particular answer. And they’re usually right.”

When Shumlin thinks about Canada’s system as it is today, there are certain parts of it that he likes–mainly that it covers everybody. “Canada has many virtues of their health care system, mostly that its universal,” he says.

But right now, he sees Canada more as a cautionary tale than an inspiration. The government has found it increasingly difficult to pay for its health care system, which has grown from 7 percent of the economy in 1975 to 11.4 percent in 2011. Over the same time period, Canada’s system has grown to rely slightly more on private funding, asking citizens to pay a bit more of their overall costs.

“The problem is they haven’t gotten costs under control,” Shumlin says. “They’ve got a publicly financed system that is on steroids sucking up dollars because it relies on the same failed fee-for-service model as American health care. I believe we’re going to have to come up with our own way of doing this in America.”

Editor: Eleanor Barkhorn 
Designers: Georgia Cowley, Warren Schultheis 
Developer: Yuri Victor 
Special thanks: Josh Laincz

http://www.vox.com/2014/4/9/5557696/forget-obamacare-vermont-wants-to-bring-single-payer-to-america