05/06/2011 04:57 pm ET Updated Jul 06, 2011

Vermont to Go Single Payer -- Do I Hear a Second?

The Vermont House of Representatives voted 94 to 49 this week to establish a Green Mountain health insurance exchange, the first step in establishing a single payer program in that State. The bill now goes to Governor Peter Shumlin's desk, who is a strong supporter of the idea.

But wait. The bill does not propose a single payer program in Vermont just yet. The bill actually directs the State to set up a health benefits exchange as required by the Affordable Care Act. Only after Green Mountain Care is up and running will the State petition the federal government to grant a waiver to establish a single payer system in the State. Much can happen between now and 2017 when the waiver request is submitted. There could be a new Governor or a new legislature in Vermont, and there will be a new administration in Washington DC by that date. The single payer community is following this legislation very carefully and urges advocates to stay involved to support the program and strengthen it.

Both supporters and the opposition voice concerns about the bill. Single payer advocates note that the cost control mechanisms are weak and not very clear; the bill allows private insurance companies (there are three currently operating in Vermont) to bid on pieces of the administration; there is cost sharing which single payer advocates oppose; there is no prohibition on investor-owned facilities. Opponents criticize the budgetary features as well, wondering how costs will be controlled; some fear the consolidation of power in an unelected board; and of course there is always the charge of "socialism". Still, the bill proposes to cover all "residents", not just citizens; make mental health services available on an equal basis with other medical care services; and allows bulk purchasing of drugs and devices to save money.

Vermont is a small state with big ambitions. Given the relative lack of feasibility in the state for true "competition" among providers or insurers, and the strong populist and independent streak of Vermonters, a single payer option makes a tremendous amount of sense. Why burden the health care system with competing, expensive, and overlapping programs if a single entity can perform all the functions required of an insurance program?

If Vermont can do it, can other states? Is size an important factor in the implementation of single payer? Actually, a little known fact is that single payer style programs for Medicaid (Medi-Cal in California) are already up and running in twelve counties in California, and these programs are incredibly successful, both in terms of their ability to deliver quality care as well as contain costs. They are called "County Organized Health Systems" and they are covering half a million MediCal beneficiaries, with local boards that include doctors, patients, elected officials and others. (The five COHS cover about the same number of members as the State of Vermont.)

The (nonprofit or quasi-public) COHS programs receive a fixed amount of money for their beneficiaries from the State (single payer) and they carry out all the features of an insurance plan in their geographic area, including claims processing, network development, and quality assurance. There would undoubtedly be more COHS in California but for a federal law that has limited their expansion. Having worked at a COHS myself, I can tell you that the ability for a member to walk in the door and talk to a real person, go to a board meeting and vent concerns, choose their own doctor, and hold people accountable for care is a very big plus. Size of the organization is important in the sense that there should be enough members to spread the risk, but there should also be the ability to know and confront the people who are making the decisions about your health care.

Would one statewide program in California be as successful as the county-based programs? Probably not. Thus the question, "Can other states do it?" involves thinking about the size of the risk pool as well as the location of the central headquarters for the organization. The California COHS "experiment" is now many years in the making and is no longer an "experiment". We know it can work and we know why and when it does not.

Hopefully, Vermont will be able to set up a program that builds on the experience of other counties and states of similar size and characteristics.

UPDATE:For those of you who are interested in learning more about how Vermont plans to run this single "payment" system, here is a great interview with Kevin Outterson conducted by Ezra Klein of the Washington Post that explains in more detail how the plan would work. Apparently the largest insurer in the State, Blue Cross/Blue Shield of Vermont, which has 70% of the private market, supports the bill, as do many hospital and physician representatives.

UPDATE #2: Sen. Bernie Sanders of VT is introducing another national single payer bill in the Senate, joined by Rep. Jim McDermott in the House. The bills won't pass but the discussion will heat up.