I just posted the article below in our MBA program's blog. I personally believe that implementing Hsiao's version of single-payer health care, closing Vermont Yankee, and phasing out oil for heating and most transportation are three absolutely necessary steps for Vermont in our quest to create long-term, sustainable prosperity, and preserve our dignity and independence. They all require tackling and overcoming dominant American economic interests. Vermont must do all three, fast. This article focuses on certain aspects of the first one.
Thoughts from Off Main Street
Ralph Meima, Marlboro MBA Program Director
Issue: Health Care Reform
Event: Dr. William Hsiao’s talk to the MBA program on Friday, September 16th (http://bit.ly/j9pzck; see video at http://bit.ly/pR0Dxg )
Idea: Implementing universal, single-payer health care in VT will benefit its economy greatly
Our task: Figure out the business impact and how to thrive with the new paradigm, when it arrives (as it surely will)
I just heard today that American families’ health insurance premiums rose about 9% this past year [VPR; http://www.vpr.net/npr/140846379/]. Whose salary is growing by that much these days? Are you getting 9% in your savings account? Is your home appreciating by 9% a year, compounded? No, of course not.
This is just another indication of how health care costs in America have entered an uncontrolled, asymptotic acceleration toward infinity – a vicious circle causing costs to rise until a profound change in regulation or another key factor (national default?) changes the system’s behavior.
Dr. Hsiao, of the Harvard School of Public Health, reported to us that health care now consumes about 20% of Vermont’s gross state product (GSP), or $5.2 billion, or about $8,400 per state resident. This is more than twice the percentage in the other modern, industrialized OECD countries with which the US competes, like Germany, France, the Netherlands, and Japan. If Vermont were spending at the same level as those countries, we’d have an extra $2.6 billion to spend every year, or $4,200 per person, or somewhere around $10,000 per household.
This alone does not explain to me why so many Americans are pretty poor and insecure in relation to our nation’s great wealth, but it must be part of the answer. Imagine if that money were distributed broadly among the whole population – i.e., unspent on health insurance premiums, co-pays, and uncovered costs - instead of concentrated by a small number of insurance companies, funneled to an equally small number of pharma and med tech companies, and ultimately deposited out-of-state in the investment accounts of their shareholders, their execs, and some medical professionals. Ceteris paribus, the American middle class might not be nearly as far down the decay curve as it is. That money would go to many good uses.
Dr. Hsiao told us that, in its first full year of operation, the single-payer system he proposed for Vermont would save more than $500 million. My heart fell. Now, I’m not going to walk away from my family’s share of those savings. They would have a palpable stimulative effect on Vermont. But I asked him why he did not foresee efficiencies on the level of the rest of the OECD.
Dr. Hsiao smiled politely. While the saved share of GSP might increase over time, as new savings were uncovered and the benefits of universal preventive care kicked in, he explained that America is wedded to an industrial policy that subsidizes the pharma and med tech industries, and also that he expected America’s social norm of paying doctors larger multiples of the average person’s salary* to persist for a long time.
At least Dr. Hsiao is willing to assist Vermont, which passed legislation this year (http://bit.ly/mPMJUO) that puts the state on a path toward universal heath care. He decided in the 1990s to stop such policy research for other US states. This admission elicited a groan of despair from the audience. But, said Hsiao, Vermont is different. “You have an honorable vision. This reflects your social ethics. You worry about equity. Most states don’t worry about equity.”
I believe in his plan. I lived for many years in several European countries, and know their health systems work better than ours. I think his economic estimates are accurate, although we cannot exactly foresee what will happen in Vermont’s economy and state budget when the system shifts. I believe it will shift, and must.
A few weeks ago, the new Green Mountain Care Board (http://bit.ly/pXE9z2) was appointed, and they will start work next week on the implementation of the Legislature’s act. Change is going to come. It will mean more cash around for ordinary people. It will mean the removal of a cumbersome burden for businesses. It may mean some immigration into Vermont, and some added impetus for business startups. It will mean a net jobs increase, says Hsiao, despite the loss of hundreds of health care administrative jobs.
It will be fascinating to see how the liberated money impacts the state’s economy and our many small businesses, and whether, over time, a gradually healthier and more secure population starts spending and investing differently. With the many challenges we face, both economic and natural, this change cannot come too soon.
* Hsiao said that US doctors earn on average 4.4 times the income of the average college graduate, whereas the multiple in the UK is 2.5.