Study: Vermont’s Universal Health System Will Significantly Slow Health Care Spending
The implementation of the new universal health care law adopted by Vermont earlier this year will result in system wide health care savings there of between 5.5 percent and 18.3 percent in the year 2020, according to a new report (PDF) by the Vermont Legislative Joint Fiscal Office. Vermont’s new health care system will be modeled on a single payer system.
From the report’s executive summary:
The analysis indicates that without reform, Vermont health care spending will more than double from 2009 to 2019, from $4.7 billion to $10 billion. Our estimates, based on national trends, indicate that average growth in Vermont will be about 7% a year. However, we conclude that it is possible to reduce this rate of growth through a wide range of policy initiatives. The actual savings will be determined by decisions yet to be made by the Green Mountain Care Board, the Executive Branch, and the General Assembly, as well as the impact of national initiatives and policy changes, including the amount of federal financial support that we can anticipate.
Savings will be dependent upon the types and scope of cost-containment measures that are implemented, such as regulation, payment reform, or delivery system changes. System-wide savings that result from reductions in provider costs (e.g., simplified administration) will also be affected by the mechanism by which those cost reductions are passed on to payers.
If action is taken in each area of potential savings discussed in this report, savings will begin in 2014 and rise rapidly for the next several years. In 2020, savings are estimated to range from $553 million (5.5%) to $1.8 billion (18.3% of total spending). The table below shows estimated low- and high-range savings in each category discussed in this report.
In order to achieve these savings, substantial investments will be needed. While total investments, including projects already under way, could be higher, in this report, we estimate the portion of those investments attributable to Act 48 to be from $50 to $150 million.
Having read through the report’s analysis of the areas of potential savings, I think the overall estimates seem reasonable, even fairly conservative. The report projects that even with the new system, health care costs in Vermont will continue to grow. But with the reforms in place, costs will grow at a significantly slower rate.
It is important to keep in mind that most of the state’s new system will not start until 2014, and the new system will not be fully implemented until 2017, unless the state can’t get needed federal waivers to start the full reform earlier. This means the 5.5 to 18.3 percent savings projected for the year 2020 only reflect the benefits expected from a few years of full implementation. In the years beyond 2020 the total savings will be even larger thanks to the compounding effect of a slower growth rate.
If the federal government provides the Vermont with the many waivers it will need to implement its new system, the state has the potential to become a strong example to the rest of the country about the benefits of adopting genuinely progressive health care reform instead of corporatist legislation like the Affordable Care Act.