Commentary: Health Care Financing Slides Toward Chaos

by John McClaughry (May, 2013)John McClaughry

“Gov. Shumlin has stupendous plans for taxpayer financed health care, but is having a serious problem figuring out how to raise the money, without anyone knowing.”

In his 2011 inaugural address Gov. Peter Shumlin declared “we must create a single-payer healthcare system that provides universal, affordable health insurance for all Vermonters that brings these skyrocketing costs under control. Let Vermont be the first state in the nation to treat healthcare as a right and not a privilege…”

From that moment on Gov. Shumlin has directed a large part of his political capital to bringing that vision to reality. So, how are we doing?

The great goals of Canadian-style single payer health care are to abolish health insurance, guarantee that all Vermont residents will get “affordable and appropriate care at the appropriate time in the appropriate setting” (as determined by a government board), enforce cost-saving efficiencies, “payment reforms”, and “global budgets” on medical providers, and finance the $5 billion enterprise with tax dollars from one source or another.

Early in the legislature’s 2011 session Dr. William Hsaio of Harvard delivered his blueprint for achieving all these objectives. His cost projection for Option 3, the one selected by the governor, projected an astonishing “savings” of $580 million in the first year of single payer operation (2017).

In May 2011 the governor proudly signed Act 48, built on 13 principles that have achieved mythic status among advocates. Notable among them is (11): “The financing of health care in Vermont must be sufficient, fair, predictable, transparent, sustainable, and shared equitably.”

The Shumlin team was supremely confident that it knew just how to do this. The Governor’s health care guru Anya Rader Wallack set forth the coming Vermont program in an article in the New England Journal of Medicine. When it was pointed out that much of what Act 48 hoped to do required waivers from the Federal government, our equally confident governor informed the media that “we can outsmart the feds”.

Act 48 required a detailed financing plan for Green Mountain Care, to be delivered by January 15, 2013 (conveniently after the 2012 election). In July 2012 the Shumlin administration contracted with the University of Massachusetts to perform the specified work.

As the emails and documents obtained by Vermonters for Health Care Freedom later revealed, in November 2012, with the presentation deadline two months off, the Shumlin people suddenly got a serious case of the vapors. UMass was told to never mind explaining where Shumlin should find the $1.6 billion in new tax dollars needed to pay the Green Mountain Care bill (above and beyond current Medicaid spending.)

When the administration released the sanitized UMass report in late January 2013, the governor triumphantly claimed that Green Mountain Care would achieve $34 million in first-year “savings”. (What became of Hsiao’s $580 million?) But on inspection, the Vermont Medical Society discovered that almost all of the claimed “savings” “appear to be achieved solely by reducing provider payment rates” by $155 million.

A month later Shumlin supported the formation of a special legislative committee to figure out how to get Vermonters to agree to paying $1.6 billion in new taxes in 2017 – larger than the entire present day General Fund. A month after that the governor announced a “Governor’s Business Advisory Council on Health Care Finances”, composed of hand- picked GMC supporters. A month later Administration Secretary Spaulding endorsed a “Joint Legislative-Executive Commission on Health Care Financing” to give Vermonters the bad news in 2015 – after yet another election.

While all this was going on, the Administration has been eating through a $125 million Federal grant to create a health insurance exchange called Health Connect, that beginning in 2014 will offer a small menu of Federally-subsidized but comparatively unaffordable insurance plans to individuals and small groups. Health Connect (costing Vermont taxpayers $18.4 million the first year) will disappear in 2017 when Green Mountain Care replaces health insurance. Also, last February, the Administration pocketed another $45 million Federal grant to design workable “payment reform” models that the single payer advocates thought they knew all about just two years ago.

On March 28 Anya Rader Wallack, the governor’s health care guru who he appointed to head the all-powerful and supposedly “independent” Green Mountain Care Board, announced her departure in September, leaving the yet unborn Green Mountain Care to fend for itself.

Hamilton Davis, a longtime single payer advocate, recently cast a critical eye on this financing saga. He concluded that “Shumlin’s performance on this dimension has been pretty much a mess.” Not even the profusion of new study committees is likely to keep this grandiose but completely unworkable scheme from a monumental crash and burn.

— John McClaughry is vice president of the Ethan Allen Institute (


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