Are these "savings" just the result of a clever accounting trick?

by Rob Roper

Last year, legislators appropriated $300,000 to hire Dr. William Hsiao, architect of Taiwan’s single payer health care system, to come up with three options for implementing a single payer system in Vermont. Today, Hsiao offered his draft presentation and recommendations.

The hour-long plus PowerPoint presentation gave rise to numerous questions, particularly around the findings, which “identified 15 major fiscal, legal, institutional, political and operational barriers that must be overcome to achieve the goals outlined in act 128.”

Among them: “There must be no increase in overall health spending…,” “No option could result in an overall increase of the health care cost burden faced by employees or employers,” “No option could yield a reduction in the overall net income received by physicians, hospitals or other heath care providers,” and “No option could entail changes for Medicare beneficiaries in Vermont.” All this, while giving new coverage to an additional 30,000 people.

Common sense says these goals are irreconcilable. You can’t buy more health care for more people for less money, yet that’s the claim.

There appears to be an accounting catch.

The baseline number from which the transition to a single payer system will “save” money is the total amount Vermonters currently spend on health care – public money, private money, state, federal and personal dollars. Everything. By pooling all of these sources into “one pipe” as Dr. Hsiao describes it, providing all Vermonters with a recommended “essential care” package that will save through efficiency an estimated 3% of employee/employer costs by 2015 and 6.6% by 2019.

However, the “essential care” package everyone gets is more bare bones.

The essential benefits package… provides coverage for prevention, medical care, including primary and specialty services, mental health services, other allied health services, prescription drugs, some vision and dental care…. [It does not] cover nursing home or home health care. In addition, the essential benefits package calls for more significant cost sharing relative to specialty services, surgical procedures, the use of brand name prescription drugs, and high-technology tests. The essential benefits package also provides lower amounts of coverage for dental and vision care.

All who currently receive better coverage than this average will have poorer coverage under the new single payer system. To make up for these deficiencies, Hsiao’s recommendation allows for people to supplement with private insurance.

How much supplemental insurance Vermonters ultimately buy with the single payer system – and it could be massive amounts – does not appear to be calculated into the total estimated future cost of health care in Vermont. In other words, current private purchases of health care are calculated into the current baseline costs, but future private purchases of healthcare beyond the “essential package” are not calculated into the  projected “savings,” even though the new system would likely create considerable demand for such purchases.

This becomes an apples to oranges comparison that could end up leaving Vermonters spending many more total dollars on health care despite, as Dr. Hsiao said in his presentation, “In our stakeholder analysis, we heard from every group – business, labor union, grassroots, public – they all say we are spending enough for heath care. It’s taking away our spending for education, for environment, for creating jobs, or just to enjoy other parts of living.”