Under Vermont’s existing system, individuals and their employers pay $2.2 billion each year, which will be reduced to just $332 million. Even with $249 million in federal funds for Medicaid, that leaves a $1.6 billion shortfall that must be made up with increased government revenues. And that’s the more conservative estimate. A recent report by Avalere, a healthcare advisory company, commissioned by Vermont Partners for Health Care Reform, a confederation of hospital, insurance, and business groups, found the UMass study may have understated the cost of the plan and estimates the state will need between $1.9 and $2.2 billion in new revenues. The Avalere report uses different assumptions for administrative savings and payment rates, arguing that the UMass estimate—that GMC will pay 105 percent of Medicare rates—may be too low and would drive providers to leave the state.
“The good news about the Avalere report is even if you take their assumptions, it still shows that we can cover everyone, bring everyone up to a better on-average benefit level as what they have today and spend the same or less money,” says Robin Lunge, Vermont’s director of healthcare reform.
While the national individual health market is both viewed as inefficient by experts and wildly unpopular with most users, its overhaul has still caused uproar. That could be a bad omen for Vermont, which is upending the far more popular employer-sponsored healthcare system.
But one of the advantages of Vermont’s small population may be a tolerance for disruption. “Vermont is a small state, says Sara Solnick, chair of economics at the University of Vermont. “There are very few degrees of separation so people are more willing to do something for everyone’s good for the good of the state.”
Testing the Public's Appetite for Change
Vermont’s plan is a bold experiment in whether the government can convince humans, naturally risk-averse, to drop their wariness about changes that might affect their access to healthcare.
“At the national level we haven’t had that discussion because it’s politically impossible,” says Jonathan Gruber, an MIT economist who worked with Hsiao during the early stages of the initiative, and who also worked on the Affordable Care Act and Massachusetts’ universal-coverage plan. “I am a fan of experimentation. We learned a lot experimenting with one model in Massachusetts and I think we can learn a lot experimenting with another model in Vermont.”
While the bounds of the ACA were tightly circumscribed by political realities, Vermont—a state with a homogenous and reliably Democratic population—has more latitude. But even now, Gruber says the proposals are still protean: “There is no Vermont plan. There are Vermont ideas, but there is no Vermont plan.”
That has led to major challenges on several fronts: medical providers, businesses, and most of all the general public.