Vermont’s Single-Payer System Funding Structure

Rationale

In the context of struggles and turbulence associated with the Adoption of the Affordable Care Act (Obamacare), some states across the United States decided to experiment with their own health plans and legislations. Vermont’s single-payer system was introduced under the rationale to guarantee its citizens universal insurance coverage, increase the rates of reimbursement to health care providers under the Medicaid system, compensate for patient’s vision and dental care, as well as improve the quality of benefits that uninsured citizens receive (McElwee, 2013).

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Adoption of the Reform

The single-payer plan (Green Mountain Care, H.202) was signed by Governor Peter Shumlin in May 2011. The program itself was a “culmination” of decades of work performed by the progressive politicians of Vermont (McElwee, 2013, para. 2). In many ways, Vermont’s single-payer system was similar to the Affordable Care Act; however, there was a prominent difference between the two: Vermont’s law implied ending the insurance provided by employers to their workers. Under the single-payer system, the state created one insurance fund that covered citizens’ basic benefits and payments by following a unified framework of rates and mechanisms.

It is noteworthy that the adopted system was completely different to the fragmented system that existed in the state and was characterized by several payers (employers, individuals, and governments), varying schedules and schemes of payments, and different benefits packages (Hsiao, Knight, Kappel, & Done, 2011). It was estimated that the first year of the plan’s operation would produce the annual savings of 25.3%, reduce the spending of households and employers by 200 million dollars, contribute to the creation of approximately 3,800 jobs, and increase Vermont’s economic output by 100 million dollars (Hsiao et al., 2011).

Vermont’s plan was a bold experiment for testing whether the local government could convince risk-averse citizens of the state to reduce their worries about policy changes that influence their access to healthcare services. It is important to mention that the state of Vermont was able to experiment with its healthcare policies due to the homogenous Democratic population, which gave the local government more latitude.

Funding Structure

The critical source of funding for Vermont’s single-payer plan was associated with tax increases. As mentioned by Bernie Sanders, the socialist senator from the state, tax increases would relieve businesses: while the tax burden was expected to rise, companies would not have to spend large sums to pay for their employees’ benefits and insurance (as cited in McElwee, 2013). Therefore, the plan was associated with the cost shift for Vermont businesses: what they used to pay in premiums, they would be expected to pay in taxes according to the forecast by Hsiao et al. (2011). It was estimated that the cost spent on each employee’s benefits would drop from $2,228 to approximately $332 (McElwee, 2013).

Analysts recommended that Vermont used a flat payroll tax on all wages, which had to be split 75% and 25% between employers and workers respectively; the taxable wages had to be “capped at the Social Security level and with exemptions for wages earned in families whose income is below 200% of the federal poverty level” (Hsiao et al., 2011, p. 1235). Small and vulnerable businesses in Vermont were promised to receive protection as a result of the exemption for low-wage workers.

Impacts

Despite the optimism to improve the overall access to health care services for the population, the single-payer plan failed. The inadequate use of finances was the primary reason for failure. Because Vermont’s governor and his allies insisted on keeping the insurance value as high as 94%, the cost of the entire program increased significantly. As mentioned by Darcie Johnson (president of Vermonters for Health Care Freedom), leaving the insurance value between 83% and 85% could have contributed to the success of the single-payer plan (as cited in Solheim, 2015). Another point that led to the failure of the legislation was the attempt of the government to impose taxes on those who never paid for their health care. Therefore, it was complicated to determine the appropriate way to scale taxes for individuals whose employers usually paid for their health care needs.

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Apart from the inadequate management of funds, the single-payer plan failed due to the contribution of several economic factors. For instance, Vermont over-anticipated the number of federal funds the state would receive for the implementation of the program by $150 million, which led to the $75 million of shortfalls in the budget, as reported by Solheim (2015). Furthermore, the income tax reserves of the state were not enough to cover the expenses of the plan because they fell short by $18 million below the government’s projections.

To conclude, state strategies to improve citizens’ access to health care are difficult to achieve and require decades of careful planning to reach successful outcomes. Nevertheless, a more rational and sustainable way to pay for benefits and insurance of citizens is always worth discovering through hard work and collaboration between the public and the government.

References

Hsiao, W., Knight, A., Kappel, S., & Done, N. (2011). What other states can learn from Vermont’s bold experiment: Embracing a single-payer health care financing system. Health Affairs, 30(7), 1232-1241.

McElwee, S. (2013). Can Vermont’s single-payer system fix what ails American healthcare? Web.

Solheim, N. (2015). Why Vermont’s single payer system didn’t work. Web.

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StudyCorgi. (2021, January 4). Vermont’s Single-Payer System Funding Structure. Retrieved from https://studycorgi.com/vermonts-single-payer-system-funding-structure/

Work Cited

"Vermont’s Single-Payer System Funding Structure." StudyCorgi, 4 Jan. 2021, studycorgi.com/vermonts-single-payer-system-funding-structure/.

1. StudyCorgi. "Vermont’s Single-Payer System Funding Structure." January 4, 2021. https://studycorgi.com/vermonts-single-payer-system-funding-structure/.


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StudyCorgi. "Vermont’s Single-Payer System Funding Structure." January 4, 2021. https://studycorgi.com/vermonts-single-payer-system-funding-structure/.

References

StudyCorgi. 2021. "Vermont’s Single-Payer System Funding Structure." January 4, 2021. https://studycorgi.com/vermonts-single-payer-system-funding-structure/.

References

StudyCorgi. (2021) 'Vermont’s Single-Payer System Funding Structure'. 4 January.

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