Will Vermont Ever Get a Single-Payer System?

money-rollsJust two small issues need to be resolved before the state gets to all systems go: First, it needs the federal government to grant waivers allowing Vermont to divert Medicaid and other health-care funding into the single-payer system. And second, Vermont needs to find some way to pay for it.

Although Act 48 required Vermont to create a single-payer system by 2017, the state hasn’t drafted a bill spelling out how to raise the additional $1.6 billion a year (based on the state’s estimate) the system needs. The state collected only $2.7 billion in tax revenue in fiscal year 2012, so that’s a vexingly large sum to scrape together…

Paying for this program would likely make Vermont the highest-taxed state in the nation, by quite a lot.

Megan McArdle.

Comments (21)

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  1. Matthew says:

    “And second, Vermont needs to find some way to pay for it”

    Wouldn’t this most likely cause taxes for Vermont to skyrocket? Good luck finding people to live there and pay for their single payer system.

    • James M. says:

      I don’t see this happening. They would need to nearly double their tax revenues. Moving to a single payer system is simply too costly.

  2. Tom B says:

    Well it seems that they have pretty big challenges to overcome in order to establish the new system. I don’t think they will be able to make it. Politics will delay the first issue and the funds to get the program going will be always hard to acquire.

  3. Buddy says:

    “This should be instructive for those who hope — or fear — that Obamacare has all been an elaborate preliminary to a nationwide single-payer system.”

    It is assuring to know what financially, the country cannot move to a single payer system. However, with ObamaCare, it feels we are stuck in limbo.

  4. Thomas says:

    “…its population consists of longtime Vermonters, some of whom vote Republican (at least for governor) and are not super-tax-friendly, and transplants from Massachusetts and New York state, who, last time I looked, had moved to Vermont partly because the taxes were lower.”

    This pretty much explains why Vermont shifting health care that way is unlikely. Not enough tax revenue and little support to increase taxes to pay for it.

  5. Bill B. says:

    “…the state hasn’t drafted a bill spelling out how to raise the additional $1.6 billion a year (based on the state’s estimate) the system needs.”

    I don’t see how Vermont can swing that much of an increase in revenue.

  6. Peter A says:

    Vermont will have to increase their revenues from taxes by about 60 percent in order to fund the single-payer system. I believe it is an unrealizable amount of money and will jeopardize the implementation of the system. I don’t know if when Act 48 was approved what were they thinking off?

    • Jay says:

      Sounds like they were taking crazy pills in Vermont.

      • Rafa says:

        They are smoking the marijuana that the state should legalize and tax. That way from the revenues fund the single-payer system that the voters believe they need.

  7. Felipe R says:

    McArdle concludes the article highlighting the problem with the nation’s health system “The politics are impossible, and even if they weren’t, the financing would be unthinkable”, reason why we will never have a viable health reform.

  8. Samuel R says:

    It would be simpler for Vermonters to go and receive healthcare in Canada. It seems as a better alternative than having to pay more taxes for a worse healthcare.

    • Matthew says:

      Very true, it isn’t too far away from distance wise, and they can stop trying to bring single payer to America.

  9. John Fembup says:

    “Vermont needs to find some way to pay for it.”

    Now, hmmm . . . Megan McArdle is usually very clear and thorough. But she ever gets to the core question – at lease it’s the core question for me.

    Single payer advocates yell and scream that it will save gobs of money, far more than it will cost.

    So, what’s to “pay for”??

  10. Bob Hertz says:

    I would bet that a fair number of the persons who have moved to Vermont are on Medicare or have good corporate coverage, as either senior employees or early retirees.

    They will be in no mood to pay higher taxes of course.

    The ‘sales pitch’ of single payer has been that your taxes would go up but your insurance premiums would essentially disappear. This would in fact be a good deal for Americans under 65 whose incomes are too high for subsidies.

    But that is not a huge number of people. For persons on Medicare, their premiums have already almost disappeared. (no cost for Part A, $104 a month for Part B, maybe $25 a month for Part D or $90 a month for Medicare Advantage.)

    This group will go ballistic in response to income and sales taxes to pay for Medicare for all.

    • Barry Carol says:

      Any health insurance reform plan will create winners and losers. There will be nothing in VT’s single payer plan for existing Medicare beneficiaries. They won’t want to pay higher taxes to bring a single payer Medicare for All system to the rest of the population. The public sector unions have much better coverage now than traditional fee for service Medicare offers. They will see switching as a step down and will likely oppose it.

      Traditional Medicare does not cover long term custodial care. That presumably will have to be carved out and remain means tested. Medicare also doesn’t pay for most dental care. Other healthcare spending including public health initiatives, medical research and hospital construction are largely paid for outside of health insurance. Finally, Medicare’s vaunted low administrative costs expose taxpayers to more fraud.

      Even if we assume that employers raise wages to the full extent of the cost of health insurance premiums they were previously paying net of the employer’s share of FICA taxes on the increased wages, employees will also have to pay FICA taxes on the increased pay plus existing federal and state income taxes plus a huge new tax to pay for the new single payer system. At the end of the day, it’s less than clear that employers will wind up with lower compensation costs and most employees may not see any net new money in their paychecks.

      For providers, even if their administrative life gets easier by only having to deal with one payer and one set of rules, Medicare still has plenty of documentation requirements and recovery audit contractors can come in and audit bills up to three years after the date of service. Moreover, they will still need to keep some of the old administrative infrastructure in place to deal with out of state patients and their insurance as those patients won’t be covered by Green Mountain Care.

      The bottom line is that this will be a mighty tough sell especially since the other single payer systems around the world have largely failed at controlling healthcare utilization. There hasn’t really been any innovation on the delivery side. Basically, they just pay bills.

  11. Joe Barnett says:

    Maybe they’ll ban Ben & Jerry’s….ice cream consumption is worse for one’s health than sodas, surely.

  12. Bob Hertz says:

    There is a school of thought which says that other single payer systems do in fact control expenses even though they do not control utilization. In fact I believe that most Germans, Japanese, et al have more doctor visits per year and more hospital days per illness than do Americans.

    These countries appear to control expenses by just paying a heck of a lot yes for each treatment.

    If American private insurers and private patients pay $1200 each and get 1 million MRI’s, then these nations pay $200 per MRI and get 2 million MRI’s. Their overall spending is less due to harsh price controls and a budget-driven national fee schedule.

    Not saying which system is best, but just trying to highlight the importance of unit costs.

    • Barry Carol says:


      I’m not arguing the lower unit cost issue in other countries. I’m suggesting that, from their baseline, their healthcare costs are growing faster than GDP as well. Unit cost is very important obviously but it’s not the same as annual growth in utilization.

      One reason the Japanese spend a lot less per MRI than the U.S. does is that they are willing to accept equipment that has somewhat inferior resolution but costs one-tenth the price of U.S. machines. That would never fly in our litigious society. You can think of it as another hidden aspect of defensive medicine coupled with Americans’ desire for the best almost regardless of cost.

  13. Bob Hertz says:

    “Paying a heck of lot less…..” sorry

  14. Bob Hertz says:

    You are correct that other nation’s health care costs are growing as fast or faster than ours.

    A few years ago, Health Affairs ran an article on the period from about 1980 to 1998 when America’s baseline went bonkers.

    On the MRI machine…..in all walks of life, Americans cut costs by using substitute goods that are a little worse or a little used. Millions of people live in used houses, drive used cars, and wear used clothes.

    Health care instead has the Cadillac effect. If every American had to drive a Caddy or its equivalent, we would have a car crisis no different than the health care crisis.