Vermont Single-Payer Healthcare Fails

Single-Payer healthcare is the liberal nirvana. Every national Democratic leader is on the record in favor of single payer healthcare. President Obama, Senator Harry Reid, Rep. Nancy Pelosi, you name it; they’re all outspoken advocates of single payer healthcare. The only reason ObamaCare is not single payer healthcare is because it was politically impossible to make it happen – so far.

Why do they favor this type of healthcare system? Because it vests complete control of the delivery of healthcare in the hands of the government. There is one single payer – the government. That gives the government complete control when it comes to determining who gets what type of medical treatment and how much providers are paid for that treatment. Canada has such a system of healthcare.

To be sure, this is not true socialized medicine. In a socialized medicine model, all the providers of healthcare would also work for the government. We have such a system already in this country – it’s called the VA. If you think that system works, you weren’t paying attention last summer. For more on the VA system scandals of 2014, read my blogs VA Hospital Scandal Harbinger of ObamaCare and VA Scandal Gets Worse.

Vermont Single-Payer

Vermont is the bluest of states. Senator Bernie Sanders is a self-described socialist and Senator Patrick Leahy is a leading liberal in the Democratic Party. When Republican Governor Jim Douglas stepped down in 2009, the Democratic Party had five candidates to replace him.

Progressive activists demanded that each candidate promise to enact single-payer healthcare if nominated; all five complied. The winner was Peter Shumlin, who went on to become the new governor. Shumlin began his term of office in January 2011 and has been working hard to implement a state-run single-payer system in Vermont ever since.

One of the beauties of our federalist system is that states can serve as laboratories for experimenting with new government programs. Often times they produce ideas that prove beneficial on a state level and are eventually incorporated into the federal system. Other times the states learn their new ideas are a disaster and the federal government learns what to avoid. Single-payer healthcare falls into this latter category.

Governor Shumlin spared no expense in hiring high-profile experts. None other than the recently notorious MIT economist Jonathan Gruber, ObamaCare architect, and William Hsiao of Harvard, architect of Medicare’s RBRVS system of price controls, were hired to implement the single-payer system for Vermont. Gruber’s contract with the state was for $400,000.

The editorial board of The Wall Street Journal reports all 625,000 residents of the state were to be automatically enrolled in the new system, with the same benefits for all. Just as in Medicare, employers would be subject to a payroll tax that would reduce wages, and workers would pay a premium based on a sliding income scale. In theory, businesses were allowed to continue to sponsor insurance or buy more generous supplemental benefits, but in practice few could have afforded to do so.

The Governor Admits Defeat

In the end – which came in a recent press conference held by Governor Shumlin – the plan was unaffordable. The state accountants estimated the plan required an 11.5% tax on worker payroll, with no exceptions. Individuals would have paid 9.5% of earnings, which would have applied to everyone making more than four times the poverty level, or $102,220 for a family of four. The state required $2.59 Billion in additional revenue – a 151% increase in state taxes – in 2017.

Even a die-hard enthusiast like Governor Shumlin had to admit to the truth. He called such a tax wallop “in a word, enormous” and “the risk of economic shock is too high at this time to offer a plan I can responsibly support.” He called his retreat “the greatest disappointment of my political life so far.”

The editorial board of The Wall Street Journal summed up the situation thus: “At least the Governor deserves credit for admitting failure. His ideological comrades are rarely dissuaded by the prospect of economic damage, as ObamaCare proves. But Mr. Shumlin has succeeded in making Vermont a national model: By admitting that single payer will make health care both more expensive and less efficient, he has shown other states what not to do.”

 

(Next post we will discuss some of the reasons for the failure of the Vermont single-payer experiment.)

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