Vermont’s Shumlin Uses Obama Health Law to Build Bridge to State-Run Care

Vermont Governor Peter Shumlin kicks off a drive today to create a publicly financed health-care system for all residents in the second-smallest U.S. state by population, building off of the 2010 national health overhaul.

By signing a bill that lays a framework for a single-payer insurance system for Vermont’s 625,700 residents by 2017, Shumlin will begin creating the first state-financed universal health plan in the U.S. The measure initially creates an insurance exchange authorized by the federal law.

The health-care overhaul led by President Barack Obama provided the basis for the bill sought by Shumlin, a first-term Democrat who beat his Republican foe by fewer than 5,000 votes last year. Vermont may produce a national health-care model, in contrast with 25 states that have joined Florida’s challenge to the U.S. law as an unconstitutional overreach of federal power.

“We are the first state that is affirming that we are going to implement a single-payer health-care system,” Shumlin, 55, said in a telephone interview this week. The measure asserts that “health care is a basic human right for all,” he said. “This is a really significant step.”

Almost 50,000 state residents lack insurance while another 150,000 have insufficient health coverage, according to a government assessment, said Shumlin, whose two-year term began in January. He said the bill also sets up a board seeking to cut health-care costs by changing the way patient care is paid for.

Exchange Participants

The state still needs to determine which insurers will be included in the exchange, which is set to open in 2014. Under the U.S. overhaul, individuals and businesses can begin claiming federal tax credits for their health-insurance costs in that year. Vermont’s single-payer plan also requires a federal waiver, which it can’t get until 2017 under current rules.

“The legislation is really more an announcement of intention rather than an accomplishment,” said David Himmelstein, a City University of New York public-health professor. Himmelstein helped start Physicians for a National Health Program, a Chicago-based group that advocates for a nationwide single-payer insurance system.

“If they actually follow through on it, it would be historic,” Himmelstein said.

Vermont policy makers still haven’t figured out how to pay for universal coverage, said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, an industry association based in Washington. The group opposes changes that will exclude private insurers operating in the state, which includes Philadelphia-based Cigna Corp. (CI), Blue Cross and Blue Shield of Vermont and MVP Health Care Inc. of Schenectady, New York.

Soaring Costs

“There needs to be a viable private sector that has a track record of offering the programs and services that everyone agrees are needed,” Zirkelbach said. “One of the biggest challenges in Vermont is that health-care costs are soaring. This approach isn’t going to do anything to address that.”

Per capita spending on health care in Vermont grew by 9.4 percent a year between 1998 and 2004, compared with 6.3 percent nationally, according to a report from Arrowhead Health Analytics in Fall River, Massachusetts. The research company is run by Anya Rader Wallach, Shumlin’s special assistant for health reform.

‘Incredibly Important’

Shumlin, a former state Senate president pro tempore who succeeded Republican Jim Douglas in the top job, campaigned on a pledge to create a single-payer system. Dealing with health-care costs has been an issue in Vermont and nationwide since the 1990s, said former Governor Howard Dean, a medical doctor. He said the Green Mountain State’s plan may become a prototype.

“If we’re successful and our cost per capita is limited, then I think people will copy it,” said Dean, a former Democratic National Committee chairman and 2004 presidential candidate.

“This kind of experimentation is incredibly important because it does allow a varied approach to these things,” Dean, now a senior strategic adviser at the Atlanta-based law firm McKenna, Long & Aldridge LLP, said in a telephone interview.

The intent in the law is for the state to partner with a private company to operate the single-payer system, as opposed to the government running it, said William Hsiao, a professor of economics at the Harvard School of Public Health in Cambridge, Massachusetts, who was hired by the Vermont Legislature last year as a consultant. Hsiao said he has been approached by six other states seeking information about setting up a single-payer system.

‘Power Grab’

The measure Shumlin signed today passed earlier this month in Vermont’s Legislature, where Democrats control the agenda. Most Republicans voted against the bill.

“We oppose it as a power grab,” said Darcie Johnston, a Republican political consultant in Montpelier, the state capital. She formed Vermonters for Health Care Freedom to oppose the single-payer measure.

The measure will be used by the government “to seize control over all aspects of health-care spending in the state without the input or consultation of doctors, businesses, or employers,” Johnston said.

To contact the reporter on this story: Michael McDonald in Boston at mmcdonald10@bloomberg.net;

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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