Back From The Brink

by Hamilton E. Davis

  When Peter Shumlin announced on Dec. 17 that he would not recommend a financing plan for his single payer health care initiative, his four-year-old governorship hit its nadir. Combined with his terrible reelection campaign, he seemed to have nothing left: no big issue to drive to completion and cement an outstanding legacy; his political standing with the legislature, the press and the public in tatters. Even before he was inaugurated, key players in both parties were maneuvering to replace him in 2016.
   In his budget address last Thursday, Shumlin yanked his administration back from the brink of irrelevance. He breathed at least some life back into health care reform and he spoke out strongly on such issues as education, property taxes, and the Vermont economy. Whether he can rebuild his political standing by 2016 is more problematical, but if he wants to do that also it wouldn’t be wise to rule him out.
   Shumlin’s was a bravura performance that day. It was not that it was stunning rhetorically or that any of his proposals were likely to remake Vermont’s political world. It was long—more than an hour--gritty and full of realistic steps to cope with the array of problems facing state government. All the Lah-Lah land, happy talk that has characterized Shumlin’s posture in the last few years was gone.
   And the speech came against an unprecedented backdrop: No governor in the modern era has gone from a winner in a November election to a political dead man by New Year’s Day, which is what happened to Shumlin. In the aftermath, everyone concerned—Democrats who have been more than cranky about the governor for a good while, Republicans who have been feasting on his ineptitude over the last few years, and the public at large, which walked away from him in droves while giving him the narrowest of margins in the November election—are clearly now on notice that Peter Shumlin is back.

The Health Care Proposals

   By a large margin, the most important of the issues he confronted in his budget address last Thursday was health care reform. Property taxes and education are obviously important. But health care reform is more complex by orders of magnitude; if you strip that out of his speech, it would have amounted just to more Shumlin rhetoric.
   And turning health care reform around in a matter of a couple of weeks required a neck-snapping U-turn by Shumlin himself as well as a heroic effort by his staff.
    As the Shumlin program designers closed in during the fall on final plans to present to the legislature, they became convinced that the only efficient way to operate a new system was at a very rich level, with the state assuming most of the cost.  Moreover, they were constrained by Shumlin’s insistence that they had to get all the way to the Promised Land in one huge leap.
   What neither Shumlin nor his staff understood was that, irrespective of what any numbers said, doing nothing was a political catastrophe that would destroy Shumlin’s governorship. You simply cannot promise something for four years, and spend millions of dollars working on it, and then, at the 11th hour—do nothing.
   Even after Dec. 17, it took time for that sink in. The Fifth floor designers--Lawrence Miller, the chief; Robin Lunge, the legislative manager; and Michael Costa, the tax expert--spent hours, way too many hours, defending the decision to focus decision making on the most expensive financing alternative. One of the damaging problems that ensued was that much of the press couldn’t believe that there wasn’t some dark conspiracy afoot. So they wandered off into the “What did he know and when did he know it?” weeds. (In government and politics, for every real conspiracy there are at least 10 screw-ups: epic miscalculations, egregious dumbness, errors of commission and omission, the gamut. The metaphor of the sausage machine as government production is apposite here).
   Anyway, Shumlin and his staff got health care turned around at least somewhat. The major steps on the financing side were the proposal for a 0.7 percent payroll tax, aimed at health care, and the proposal to spend some money to try and get coverage for the last 23,000 or so Vermonters who do not yet have it.
   The significance of the payroll tax cannot be overstated. No facet of Governor Shumlin’s tenure has been more central than his opposition to any new tax. No one can predict what the legislature will do with that proposal, but it commits Shumlin to one of the gnarliest aspects of health care reform—how to pay for it.
   The biggest actual expenditure element in the Shumlin budget is a significant increase in Medicaid spending. Just increasing Medicaid funding isn’t really health care reform, but it is nonetheless very important to the Green Mountain Care Board, which manages the cost containment and system restructuring elements of single payer reform.
   The board has the responsibility for regulating hospital budgets and the insurance rates necessary to pay for them, and the Medicaid enhancements will be a big help there. Moreover, the board needs to get Medicaid spending up in order to qualify for a federal all-payer waiver, which is a key element of the board’s cost containment strategy. In the broader sense, the payroll tax proposal was the first specific step toward moving health care financing away from an employment-based financing system in favor of a tax-based one.
   Legislation embodying these proposals is now moving forward and I will look at each one more closely as the session proceeds.  
   Even more important than these specific proposals was the implicit acknowledgment by the governor of two very important truths going forward.
   The first is that health care reform will be a long, hard grind. Shumlin has occasionally paid lip service to that, but in fact he made it seem way too easy. A not very lyric metaphor is that if single payer is like getting to San Diego from Montpelier, Shumlin has told us over the last few years that we’ll just get on a private jet and, after four or five hours with bonbons and champagne, we’ll be there.
   A more realistic Vermont metaphor is that we’ll be heading to San Diego in a caravan of rusted-out Subarus, and if we perform really well, we might make it--on the first leg--as far as Albany.
   The second reality is that irrespective of how well Shumlin manages health care in the future, he is going to have to share that management with the Vermont legislature. And possibly with other stakeholders. The days of a design team working privately on the Fifth floor of the Pavilion and occasionally letting outsiders have a peek are over. Gone forever.
   In his speech the governor said expressly that he is ready for such collaboration. If the legislature had its own budget address, it might say: “Ready or not.”


NB:  In the aftermath of the Dec. 17 decision to walk away from the financing side of single payer, I wrote in this space that Shumlin had put his thumb on the scale by “selecting” the most expensive of 15 financing proposals, and then bringing forward a long analysis of why that financing plan couldn’t possibly work. A scale is a balance, and the Shumlin “thumb” came down on the political side, not the financial side.
   The Shumlin designers—Miller, Lunge and Costa—wrote a reply that described my article as an accusation that they had “cooked the books”, a proposition they emphatically rejected. I published the full reply with no comment, which I believe is fair.
   I wanted to make it clear, however, that I never used the term “cooking the books,” which I take to mean lying about numbers. If you own a company and you tell the IRS that you made $7 million in a given year and you really made $8 million, you have “cooked the books.” I never said, nor did I ever believe, that the Shumlin designers did that; to the best of my knowledge, the numbers brought forward by the administration are valid.
   My notion of Shumlin’s thumb on the scale was aimed at the political decision and handling of the issue, rather than lying about numbers. I take his subsequent reversal of his Dec. 17 decision to confirm my description.