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Vermont Senate Passes Single Payer Bill

Yesterday, the Vermont State Senate passed a bill by a count of 21-9 that would establish a single payer system in the state. The bill has already passed the state House by a count of 92-49, so after a reconciliation process (the bills were slightly different), they can move them on to the Governor for his signature. Governor Peter Shumlin campaigned on establishing single payer in Vermont, so he’s clearly on board.

This is another of what will be several steps to achieve single payer in Vermont. The reconciliation, passage in the Legislature and signage by the Governor is in many ways the easy part. Vermont must then obtain a federal waiver allowing it to opt out of the Affordable Care Act; under current law, they would not be able to opt out until 2017, although a bill from Vermont’s representative in the House Peter Welch and Senator Ron Wyden (D-OR) would move up that date to 2014. The President has endorsed that approach, but that doesn’t mean it will pass. In addition, Vermont must circumvent ERISA laws which prohibits states from enacting legislation related to employee benefit plans. Insurers will almost certainly sue the state under ERISA, but Vermont for Single Payer believes this will not be an impediment.

ERISA has indeed been a problem for incremental band-aid health care reforms that continue to depend on employer-based insurance and use pay-or-play funding mechanisms because ERISA forbids states from making laws that “relate to” employer insurance.

A single payer plan would:

Provide publicly-financed, government funded health coverage care for everyone.
Be funded by broad-based taxes.
Put no health insurance related mandates on employers, who would be free from state government imposed insurance obligations. All they would have to do is pay their taxes like everyone else.

Thus there is no ERISA impediment to a state single payer system.

Medicare would not be integrated into this single payer system, though Medicaid may or may not be. It would be more efficient to include Medicaid, but that would require an additional waiver. Without it, services not covered under Medicaid would get additional funding through direct payments.

The final part of this is the funding mechanism. That has not yet been determined and would have to be figured out at a later date. As of February, the Shumlin Administration hadn’t yet figured out how to pay for the single payer system. They have focused on the program itself first.

Rader Wallack says there are a number of options beyond the payroll tax – “you can go with premiums, payroll tax, income tax, you name it,” she says. “Hsiao had his reasons for choosing a payroll tax and obviously we will look at those.”

Rader Wallack says choosing a specific funding mechanism isn’t as important as designing a system that actually contains costs.

“In large part it doesn’t matter how you pay for it,” Rader Wallack says. “How you pay for it is how you come up with the money. But system redesign is about how you make sure it costs less over time, and how you keep the rate of growth in costs reasonable over time.”

I think that’s a pretty good idea. One of the major reasons people have so many problems with taxes is that they don’t see them being put to use. But taxes for health care is a different animal entirely. Instead of a conservative reform dressed up as a liberal social welfare expansion, Vermont is going with the genuine article. I’m sure all the people who habitually say “I prefer single payer, but…” will cheer Vermont’s entry into the debate.

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David Dayen

David Dayen