Single Payer and Professor Hsiao

Vermont’s Governor elect ? Peter Shumlin ? promised during his campaign this year to deliver single payer health insurance to state’s residents.

And also earlier this year, the government of Vermont called on Harvard School of Public Health Economics Professor William Hsiao to come up with three health care plans.

Plan one ? a pure single payer plan.

Plan two ? a public option plan.

And plan three ? what Hsiao calls “a viable and practical single payer plan.”

We reached Professor Hsiao last night working late at his office.

Hsiao says he plans to deliver the three plans to Vermont sometime around January 15, 2011.

We wanted to know why Professor Hsiao would develop plan one ? a pure single payer plan ? and then plan three ? what he calls “a viable and practical single payer plan.”

Aren’t they the same thing?

“In the Vermont first plan, the Vermont legislature calls for comprehensive coverage of services,” Hsiao said. “That includes prevention, ambulatory care, in-patient hospital, drugs, and nursing home. That’s one form of single payer. Besides universal coverage, plan one calls for covering everything.”

Hsiao calls this “pure single payer.”

Taxpayer funded.

Get rid of the health insurance companies.

Cover everyone.

Cover everything.

Hsiao says that in putting forth a pure single plan, the Vermont law “ignored reality.”

The first reality that it ignored ? the legal barriers.

Take, for example, ERISA (the Employee Retirement Income Security Act of 1974.)

ERISA prevents states from enacting legislation if it is “related to” an employee benefits plan.

Then there are political barriers, Hsiao says.

But isn’t a pure single payer plan the one Hsiao helped developed for Taiwan?

Isn’t it the same plan that was featured in the April 2008 PBS television special ? Sick Around the World?

The PBS special that featured Hsiao?

And if he doesn’t recommend a pure single payer plan, won’t Vermonters ask ? why pure single payer for Taiwan and not for Vermont?

There are obvious differences between the situation in Taiwan in the 1990s and Vermont today.

Before single payer arrived in Taiwan in the mid-1990s, fifty percent of the people in Taiwan had no health insurance.

In Vermont, only seven percent have no health insurance (it’s ten percent nationally.)

“Eighty-five percent of employed people in Vermont are covered with employer insurance,” Hsiao says.

“Let’s take a hypothetical case where health insurance premiums for an employed individual is $4000 a year.”

“The employer right now pays $3000 of that, the worker pays $1000.”

“In a pure single payer system, you have to raise that $4000 through income tax,” Hsiao says. “The whole $4000 through income tax.”

“In a pure single payer system, more than half of the employed people in Vermont will be paying more in taxes than they currently pay in premiums,” Hsiao said.

And Hsiao says that the Vermont pure single payer proposal is even more pure than Taiwan’s single payer.

“The Taiwanese plan doesn’t cover institutional long term care,” Hsiao says. “Vermont’s pure single payer system would.”

And Vermont’s plan calls for a government agency to run the single payer insurance plan.

Taiwan’s is a quasi-government agency.

This was done, Hsiao says, because Taiwan’s civil service rules would make it difficult for physician experts, for example, to be hired by the agency.

If it were a government agency, the physician experts would have to pass a series of tests.

“The starting position in Taiwan was different from the United States,” Hsiao says. “The United States has multiple insurance companies offering insurance and employers already providing insurance. For 85 percent of the employed people in Vermont, they already have employee provided insurance. And on average, the employers provide roughly about 75 percent of the premium.”

So, are you saying that pure single payer is viable in Vermont, or not?

“That is what we are investigating,” Hsiao says. “If it is not viable, we would have to change the features.”

If Hsiao determines that plan number one ? pure single payer ? is viable, there is no plan number three, right?

“They will be the same,” Hsiao says.

But during the interview, Hsiao clearly signaled that pure single payer for Vermont is not viable.

So, plan three ? what Hsiao calls “viable single payer” ? will be Hsiao’s recommended plan for Vermont, right?

“That is the likely outcome, yes,” Hsiao says. “We will show the state what a pure single payer system will cost, how that will impact on households, the different income levels.”

It’s clear that Hsiao is leaning away from a pure single payer model.

He challenges every assumption about “pure single payer.”

I ask ? what about the most basic definition of single payer ? one public single payer?

“You mean one public payer to providers?” he asks.

“Yes,” I answer.

“Well, Germany has a single payer to providers,” Hsiao says. “But Germany has several hundred non profit insurers. So, is that a single payer or not?”

“We have to disentangle all of that for Vermont,” Hsiao says. “I did not know what I took on when I agreed to this.”

“But we want to do what is best for the people of Vermont as well as for the American people,” Hsiao says. “I can assure you. My heart and mind are devoted to that. I don’t even get paid for this project. The people I hire, the people who are doing the modeling ? yes they are paid. But personally, I do not get a penny on this.”

And Hsiao said that he does not do outside consulting.

Vermont’s health insurance market is dominated by one non profit ? Blue Cross and Blue Shield, which takes in 70 to 75 percent of premiums.

The rest of the market is split between two for profits ? CIGNA and MVP.

Can Hsiao conceive of a single payer system that would keep those three health insurance companies in business in Vermont?

“I don’t know,” Hsiao says. “That would not be the ideal situation, but there are legal restrictions.”

“If you look at ERISA, you will see how difficult it is.”

Hsiao says that legislatures in states like California that have passed single payer laws “just assumed they could get a waiver from ERISA.”

“Well, that’s a big assumption,” Hsiao said. “No state or no political jurisdiction has been able to get a waiver yet from ERISA.”

“I can tell you I can reduce my workload by half,” Hsiao said. “I can assume away a lot of real world problems.”

There has always been an underlying debate in the single payer community over whether it is more feasible to get single payer at the national level or the state level.

Could it be that the state level single payer is not possible?

“When our report comes out, you will see what is possible and what is not possible,” Hsiao says.

RUSSELL MOKHIBER edits Single Payer Action.


Russell Mokhiber is the editor of the Corporate Crime Reporter..