First contractor for single payer financing plan backs out; proposal on track for January report to the Legislature

October 13, 2012

Jeb Spaulding, secretary of the Agency of Administration, talks to reporters at a press conference called by Sen. Randy Brock, the GOP candidate for governor. Photo by Anne Galloway

The Shumlin administration said this week that a financing plan for a single-payer health insurance system is still on track to be completed by Jan. 15, 2013.

Lewin Group, a health policy research firm, was originally slated to draw up the plan. But when its parent company, United Health Group, realized that arrangement might create a conflict of interest, it pulled out. Robin Lunge, director of health care reform for Vermont, said United Health Group had another subsidiary that wanted to bid on state projects, and the group didin’t want to jeopardize such opportunities.

In May, the state received bids from Brandeis University and the University of Massachusetts Medical School (UMass). At the beginning of July, the state hired UMass to create two health finance plans: one for financing single payer and another for the state’s health benefit exchange, which goes into effect on Jan. 1, 2014.

The state capped the contract with UMass at $300,000, and the contract’s estimated costs are just shy of $298,000. The plans are funded in part by federal funds, but Lunge wasn’t available by publication time to give the exact amount and provide a reason for why the state chose to hire UMass instead of Brandeis.

The finance plan for the health benefit exchange will look at ways to fund and run various facets of Vermont’s new health insurance market.

One area it will explore is how to provide extra assistance to those individuals who are currently covered by state-subsidized insurance plans, like the Vermont Health Access Plan and Catamount Health. In 2014, many of those individuals, who are over 133 percent of the poverty line, will be required to enter the exchange. Medicaid will cover those below that threshold.

The benefit exchange plan will also look at how to fund the state’s “navigator program,” which will provide in-person assistance to help Vermonters use the exchange.

Jeb Spaulding, secretary of administration, expects the Legislature will use this plan to form policy in the upcoming legislative session. He does not, however, expect the Legislature to make any big decisions about financing a single payer system.

“What we won’t be doing is asking the Legislature to pass the financing system for where we want to be in 2016 or 2017 this year,” he said. “We’re not going to be able to execute on the single-payer, universal, publicly financed health care system that we’re intent to achieve by Jan. 2014, probably not by 2015, maybe in 2016 and hopefully by 2017.”

Lunge and Spaulding are on the same page.

“Since we have time to be thorough and thoughtful,” said Lunge, “I think we should.”

When Harvard economist William Hsiao presented his Vermont single payer analysis in early 2011, a lot of businesses were concerned about the 11 percent payroll tax it recommended for employers to help fund the system. Spaulding’s hope is that UMass can help the administration craft a finance plan that doesn’t place as large of a burden on businesses.

“There is some skepticism about whether it’s really possible to develop a single payer finance system that’s practical and workable,” said Spaulding. “I believe it is, and I think this report should not only allow for good dialogue but put some people at ease.”

Right now, Lunge said UMass is ironing out the numbers and preparing to analyze the different financing scenarios that could exist under a single-payer system. Once researchers have done that, they will be tasked with conducting economic analyses of these options.

When UMass submits the report, Spaulding expects intense dialogue. But if the state and UMass can figure out how to implement a publicly financed health care system without weighing too heavily on taxpayers, Spaulding thinks Vermonters will be more prone to accept the administration’s proposal.

“If we can do this without overburdening any particular tax source or having a negative impact on our competitiveness, then I think we’ll be OK,” he said.

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