Some Vermont single-payer math

12/22/2014 08:23:00 AM
It looks like Vermont's bid to implement single-payer health insurance is dead. Sarah Kliff has the details.

According to Kliff's sources, the cost of implementing the single-payer insurance system Vermont wanted would have been $2.5 billion in the first year. I'm not totally clear what that is supposed to mean--is that $2.5 billion per year to give everyone insurance, or $2.5 billion in set-up costs in the first year, in addition to the annual cost of the program? The latter sounds absurd, so I will assume what they mean is that it is an annual cost of $2.5 billion to give everyone in Vermont coverage under the single-payer system.

According to Kaiser, 48% of Vermonters have ESI at an average cost of $5,580 per enrollee per year, 18% have medicaid at an average cost of $6,291 per enrollee per year, and 6% have private individual market insurance at an average cost of $4,812. There are other sources of insurance coverage as well, including 2% of Vermonters on some form of state-funded insurance other than medicaid, and of course 19% of Vermonters on federally-funded medicare but we'll ignore those. The population of Vermont is 626,630 so a quick calculation shows that the people of Vermont spend $2,568,869,685 per year on ESI, medicaid, and individual-market health insurance every year to cover 91% of the population (I'm counting medicare enrollees as covered but not part of the cost, since Medicare is not affected by the single-payer plan). That's about equal to the $2.5 billion estimate to cover 100% of Vermont's population.

So, it's not really true that Vermont can't make the numbers work. Actually, it appears that Vermont could extend healthcare to everyone without increasing anyone's costs--looking at taxes and insurance premiums combined--by replacing these three types of insurance with single payer. This is, if anything, a rather fortuitous finding since it means that insuring more people won't actually cost the state any more than they are already paying.

It's possible that I'm overlooking some details with medicaid. Medicaid is partially funded by the federal government, and I'm not fully read up on how medicaid costs were factored into the $2.5 billion estimate. But it certainly looks like the claim that Vermont can't afford the $2.5 billion reform is a case of narrowly viewing the cost in terms of past budgets, where the vast majority of health insurance costs were left off-budget. Whether we want insurance costs to appear on or off the state's official budget is a matter of political preference. But we shouldn't measure the cost of a program by the portion of that cost that happens to appear on-budget--we need to look at the whole cost to taxpayers, who pay both taxes for public insurance and premiums for private insurance.