Limbo Time at the Statehouse

                                                        by Hamilton E. Davis

      Town meeting week is usually a brief respite in the headlong scramble by the Vermont legislature to get the peoples’ business completed by late April or early May. Legislators go home to attend their meetings and to assess where their constituents stand on pressing issues; advocates and the press get a short break. The kids are out of school for the week. The occasional footsteps echo in the marble hallways.
   This year, however, seems somehow different. State government appears to be stuck in a strange limbo, a lingering hangover from last November’s unusual election that recast the state’s policy and political landscape. Peter Shumlin, a third-term Democratic governor in a very blue state, seems to have no traction at all. The state budget is in deficit, and no one seems to have a very clear idea what to do about it. Single payer health care reform, the governor’s signature issue for the last four years, is dead in the water.
   Real leadership is in perilously short supply. The Governor says repeatedly that he is “open to new ideas”, which ends up sounding like, “Somebody please throw me a rope.” Shap Smith, the powerful Speaker of the House, has so far at apparently declined to issue his committees any clear directions on where to go. Smith, a Democrat, and the Republican Lt. Gov. Phil Scott, have begun to position themselves for the 2016 state election, but neither has said enough to provide a hint on where the state might go.
  Two of the most critical players at the committee level—Janet Ancel, chair of House Ways and Means, and Tim Ashe, chair of Senate Finance—are still holding their fire on both the budget and health reform dilemmas. The health care committees in both chambers are still in the very early stages of figuring out where to go on reform…
   In short, the whole 180-member body seems be drifting, with nearly half the session gone. The health care committees have just four working days left to “crossover”, the point at which a bill originating in one chamber needs to go the other. The money committees have just eight days left to cross over. These deadlines can be slipped, but it only makes sense to do that if there is real movement toward a consensus. No such consensus is visible yet.
   There are some glimmers of light. One of the most important is that Peter Shumlin seems to be running hard. He isn’t yet getting very far, but he is not mailing it in. There is no way to tell what or how long it will take him to regain the mojo that took him through his first three years, but he at least seems to be fully engaged.
   There are some indications that one of the most corrosive of the failures in managing health care reform—the failure of Shumlin’s office to adequately manage and coordinate the operations of their own office, the Obamacare Exchange, and the Green Mountain Care Board—may be easing.
   Moreover, there is some movement toward new thinking and initiatives on the financing side of the single payer program.
   It is also true, however, that these glimmers of light will remain just glimmers for the remainder of the current legislative session. The administration and the legislature will have to patch together some kind of fix for the budget deficit. But health care reform is probably far too complex for the legislature to master in the time left this year.
   All of which points to the 2016 session as the first real chance to determine where the state will go politically, financially and policy wise, especially on health care.
   Over the next week or so, I’ll revisit these issues in detail. First up, the politics, always the father of public policy; then health care. On the budget, I have no idea what will happen, but I am comforted by the belief that nobody else does either.

Al Takes Exchange Guys to the Woodshed

by Hamilton E. Davis

      The managers of Vermont Health Connect, the Obamacare insurance Exchange, have travelled a long and painful road getting their system running adequately. Last week, they ran into another huge pothole when they presented their plans for the next fiscal year to the Green Mountain Care Board.
   The presentation consisted of recommendations for changing some of the dozen or so insurance plans that qualified Vermonters can sign up for beginning on Oct. 1. The changes included sharp cost increases in some of the plans areas, along with other tweaks to the intricacies of their management.
   It seemed to the quietly-seething board that the Shumlin administration managers were unprepared to deal with obvious questions about how the plans would actually work and what the suggested changes would mean. The Exchange managers ran into particular difficulty with one of the low-cost plans that they want to modify by tinkering with the blend of copays, deductibles and coinsurance.
   The managers’ problem was that they couldn’t say whether the changes they wanted could actually be  implemented—“operationalize” was the buzzword—by Vermont Blue Cross and MVP—the two insurance carriers whose plans are offered on the Exchange. What made it worse was that the bureaucrats had never asked the carriers if the modifications were workable. The presentation pretty much went downhill from there.
   The players on the presenting side were Dana Houlihan, the Exchange plan management director; David Martini, operations director; and Adaline Strumolo, a policy analyst at the Exchange. Participating by telephone was Aree Blye of UMass-Wakely, a consultant to the state for health care reform. Blye did most of the talking in the back and forth with the board members.

   Al Gobeille, board chair:

   I in no way mean to be disrespectful, but I thought you were here to make your recommendations known to us…I think it’s homework that needs to be done prior to this meeting.

   Blye:

   The paper you have in front of you is our recommendation--

   Gobeille:

   But you don’t know if it will work, Ok?

   So, if we approved it, it might not work…

   Long discussion on drug costs in the plans.

   Gobeille concludes:

   I really don’t know what to do with the question you’ve laid before us—I mean, if you don’t know it will work how would we know if it would work when we vote on it…so do you want to come back to us in a week and tell us if it can be done?

Stay Tuned

   So, that’s what will happen. The Shumlin administration managers will return to the GMCB boardroom Thursday, Feb. 12, to take another run at the recommended changes for the coming fiscal year. Even if this session goes better, however, it seems clear that the chronic tensions between the Shumlin managers and the rest of the health policy world will continue.
   The reason is that the glitch over the low-cost plan was just the most obvious point of contention. An overarching concern is that the Exchange managers’ sluggish pace is jamming up the timetables for getting the 2016 process in place. By February 15, the board is scheduled to have voted on changes to the plans and gotten them to the carriers.
   By March 2, the carriers are scheduled to submit their plans to the GMC board for approval. This schedule cannot now be met. Gobeille made it clear that the board would let the schedule slide so as to ensure that the work was of high quality. The board’s unhappiness about that, however, was palpable. 
   There were other omens.
  Jessica Holmes, the newest member of the GMC board, wanted to know how Vermonters’ choices among the various plans cast light on the program designs. The Shumlin managers had no idea. Board member Con Hogan was concerned with how patients would handle the cost increases proposed by the Exchange managers.
  The driver of those changes in most cases will be rules promulgated by the federal managers of Obamacare, but the board seemed puzzled by the seeming lack of empathy for the Vermonters who have to live with those rules. And there were small things, like the tentative way the Vermont Exchange bureaucrats responded to questions about how federal poverty levels determine benefit levels.
   That level of detail is utterly foreign to the ordinary person, but health policy adepts normally navigate then effortlessly. Not last week.
   Maybe this week will be different. Stay tuned.

Shap Auditions for 2016

by Hamilton E. Davis

   When Shap Smith addressed his colleagues at the opening of the legislature a few weeks ago, he sounded to many in the chamber more like someone running for statewide office than a veteran speaker gearing up for a difficult session. There was a good reason for that: he is running for office. There is no way yet to tell which one—there are three possibilities—but it is clear the 2016 campaign is underway, and that Shap Smith is one of the most important players in the field.
   The fact that Smith is positioning himself for statewide politics is obvious from more than just his speech to his colleagues after being elected speaker for a third biennium. He might have just gotten carried away on that occasion, but his intentions were unmistakable in his two efforts to reach out to the public for suggestions to deal with issues coming before the legislature.
   Less than a week after Governor Shumlin shocked the policy world in mid-December by dumping the financing component of his single payer health care initiative, Smith issued a press release asking Vermonters to weigh in on the education financing issue. Education spending is driving property taxes to unacceptable levels, he said. “We need to work together to solve this problem,” he continued.  “That’s why I’m inviting taxpayers, stakeholders, and policy makers to add their voices to the conversation the House will undertake when we reconvene in January.”
   A month later, he expanded on that invitation by asking in another press release for public input on economic development and job creation. “Vermonters want a business environment that fosters sustainable, good paying jobs that reward employers and workers alike,” he said, adding that public input would “drive that agenda forward.”
   Efforts to connect with voters like this are perfectly normal for politicians and office seekers. They are not perfectly normal for House speakers, who usually function as managers, or expediters, or referees among contending forces within the chambers they lead. In Vermont, for example, past governors like Madeleine Kunin, the late Richard Snelling and Howard Dean began their careers in the House, but they exercised their leadership ambitions by running for statewide office, not for the speakership.
   These strikingly early efforts to build toward the next election arose from the almost bizarre circumstances of the last one. After blowing away a strong Republican opponent in 2012, Shumlin very nearly lost to a comically inept one in the next election. His party also lost several seats in the legislature. The governor followed that up with a decision to drop the financing side of his signature issue, single payer health care reform.    
   These shocks left Shumlin badly wounded and the Republicans reinvigorated. Phil Scott, the Republican lieutenant governor, began to raise his profile soon after the election results came in, and is now considered to be a candidate for governor in 2016. In sharp contrast to his laid-back political persona over the last decade, Scott sponsored a forum for returning legislators on the eve of the current session, reaching out to the public and advocacy groups for ideas about how to gin up the Vermont economy. In a sense, Smith, as the strongest, or at least one of the strongest members of the Democratic bench, had no choice but to begin positioning himself aas well.

The challenge for Smith  

  The speaker of a House of Representatives is one of the most important and rare political jobs in the United States. There are just 51 in the country, one in each state and one in the U.S. Congress. If you are male, you have a better chance of being a middle infielder on a major league baseball team (60—two middle infielders on 30 teams) than of serving as the boss of a house of representatives. Yet House speakers seldom run for higher office; their power is usually bounded by the walls of the capitol buildings they serve in.
   The reasons for this can be seen in the exquisitely complex political calculus that Shap Smith confronts as he guides the House into the next four months.  
   The first big hurdle is a simple political one—name recognition. House members are elected from the smallest political unit in their state or country. Smith can pretty much be considered unbeatable in Morristown, his Lamoille County district, where roughly 5,000 votes get cast to elect two representatives. If he runs for governor or lieutenant governor in 2016, the vote total will range upwards of 275,000. In other words, Smith has been exposed politically to fewer than two percent of Vermont voters. He gets his name in the news a lot, of course, but if he takes a name recognition poll early, he will be lucky to break out of single digits.
   Steve Terry, a retired journalist and utility executive who has watched Vermont politics closely for more than 50 years, says that it is striking how few Vermonters know anything about their speaker. “If you walked down Merchant’s Row in Rutland with the speaker of the House and observed how many people on the street recognized him, it would be — none.” he said.
   These political realities constitute the reason why so few speakers try to move to statewide office. Gaye Symington, the Democratic speaker in the Douglas years, tried it in 2008 and lost badly. She actually finished third, albeit by the tiniest of margins. She trailed the Progressive Anthony Pollina by a one tenth of a percentage point, 21.8 to 21.7 percent. Douglas crushed them both with 53.4 percent.
   Still, the roiled political environment following the 2014 election has presented Smith with a series of political options that he pretty much had to consider. The first would be to run for governor if Shumlin doesn’t run for re-election in 2016.  Shumlin has made a determined effort over the last month to reverse his political fortunes, but it remains true that many of the people who know him best are not sure that he will want to run again.
   If Shumlin does run again, then his opponent almost certainly would be Scott, the Republican lieutenant governor, so that Smith’s second option would be to run for that seat.
   The third option for Smith would be to run for attorney general if the incumbent Democrat Bill Sorrell retires. That is less likely, however. Most political mavens expect Chittenden County State’s Attorney T.J. Donovan, who ran a strong race in the 2012 Democratic primary against Sorrell, to try again for that seat. Still, the AG campaign remains a plausible alternative.
   In any event, Smith can’t do anything in the near term about what might open up. The challenge that is already upon him is how to manage the House and the issue agenda in such a way as to get the best result for the state—and for his future prospects.
    An important backdrop to this political calculus is that the Progressive Party is already restive in the face of the relative conservatism of governor’s office over the last 15 years, starting with the Howard Dean administration in the 1990s and continuing with the Republican Jim Douglas and then during Shumlin’s tenure since 2010. The Progressives supported Shumlin on the strength of his opposition to Vermont Yankee and his pledge to build a single payer health care plan, but those issues are gone now so the Progressives are likely to run their own candidate for either governor or lieutenant governor or both. A third-party Progressive candidate probably couldn’t win a a statewide race outright, but the challenge could kill the chances for either Shumlin or Smith.
   So, the performance of the legislature on the issue agenda is critical for Smith, and for Shumlin, if he runs.

The issue agenda

   There are two major issues that face the legislature in the current biennium—the education financing/property tax conundrum and health care. These twin towers are also likely to dominate the political environment going into the next election. At present, education financing and property taxes hold pride of place. These issues are very important and difficult: in an ordinary year it would absorb the major energies of the body. Which could turn out to be what happens, substantively and politically.
   Yet, health care reform is ultimately more important: if your kid is having trouble with math and reading, that is a serious problem; if your kid is seriously ill, that is a bigger problem. Health care is also far more technically complex as well as more expensive than education. Moreover, the Shumlin administration’s four-year effort to build a single payer system has left a lingering sense that we could have done better.
    Smith has seemed to be ambivalent on health care reform over the last couple of years. He was quietly unhappy with the governor’s management of the project, and he has seemed more interested in the education-property tax nexus. He has always said that he would give single payer a fair hearing, and he connects the two by noting that getting health care costs down would be a big factor in improving education financing. But he has his enthusiasm for health care reform firmly under control.
   The danger is that health care remains a huge issue for Progressives and the Democratic left, and if he is seen as an impediment to progress there, he’ll get a left opponent in a statewide race. A variation on the same theme lies in the fact that new initiatives for financing health care could arise out of the legislature itself, so Smith would have to decide whether to lead that process.
   What all this amounts to is that Smith has to deftly manage the House at the same time he is auditioning to be a leader on a far bigger stage. Slighting health care could hurt him in that effort.  

Style and political personality

   Smith isn’t your conventional politician, either as a speaker or potentially as a candidate for governor or lieutenant governor. For one thing, he is much more policy oriented than most speakers — he is far more sophisticated about health care delivery than Shumlin, for example, and vastly more informed about the ins and outs of complex issues than the last truly dominant speaker, the Democrat Ralph Wright, who served through much of the 1980s and 1990s.
   For another, he is remarkably ambivalent about his ambitions. For example, he waited literally to the last hour in June 2014 before he filed his reelection papers. He told friends that he wasn’t sure he wanted to run again, that he has an excellent job with a prestigious law firm and that he and his wife are raising two small children. He made it clear he doesn’t need politics to be happy.
   In other words, he is more Mario Cuomo than Pat Leahy or Bernie Sanders. Leahy and Sanders were clearly born to run for office. Shap Smith wasn’t. It isn’t that he tries to hide the fact that he is positioning himself to move up in 2016. That is obvious to everyone, and he doesn’t bother to deny it.
   But it does render believable his assurances that in managing issues in the legislature, he would never sacrifice effective policy choices for a course that would benefit him politically. Which might be good for Vermont, but not necessarily good for Smith’s political chances in 2016.

N.B. Nebraska has a unicameral legislation, which is called a Senate, but its leader is a speaker.

A Truly Bad Shumlin Idea

By Hamilton E. Davis

   Having sunk the financing side of single payer health care reform by ignoring political reality, the Shumlin administration planners are now making the same mistake in dealing with the Green Mountain Care Board, the only part of the reform apparatus that actually is working well.
   The mistake is the proposal to turn the board into a public utility regulator, like the Public Service Board. The PSB regulates rates for electric, gas, telephone and some water companies. By contrast with the hideously complex health care system, public utilities are as simple as dirt. Everybody’s toaster has to fire up on cue, which it does, notwithstanding the occasional blizzard.
   Anyone who believes you can deal with the health care system with the rigidly legal structure of a public service board is simply not thinking clearly. The central problem is called ex parte contact, which is a fancy term for talking to people. If Green Mountain Power wants a rate increase, they have to go through an elaborate minuet—filing big piles of documents, replete with lawyers, hearing rules, etc.
   What can’t happen is for the chairman of the PSB and the president of Green Mountain Power to sit down in a private conversation to see if they could work out a solution that works for both of them. With public utilities, those kind of conversations would be illegal, and even if not illegal, would be a bad idea from a policy perspective.
   There is not the slightest resemblance between the public utility model and what the Green Mountain Care Board is trying to do. The health care delivery system in Vermont is in fact no system at all. It is a random collection of providers that has grown up over the last 100 years in a way that is clearly irrational and unsustainable. There are all sorts of political and policy differences in this crucible, but the overarching fact is that no responsible person denies that it has to change.
   How to change, however, is as difficult as any domestic policy problem that has ever arisen, short of something like a civil war. Vermont is hugely overbedded, which means that it has too much capacity, so that its costs are too high. Health care providers spend one dollar of every five produced in the state. Recasting that system involves changing how it is paid for, and how it is operated.
   The Green Mountain Care Board has to walk a very fine line between getting the costs in the system under control, without damaging the ability of our doctors and hospitals to deliver care. Doing that will require that all the stakeholders talk to one another as much as humanly possible. Each player has to be able to walk in the other player’s moccasins. Trust is critical. 
   An example: in 2013, the Green Mountain Care Board, which was established in 2011 to control costs in the system, was getting ready to rule on the budgets for the fiscal year 2014. The Board had a serious problem. Fletcher Allen Health Care (now University of Vermont Health Systems) had submitted a budget that exceeded the board’s cap.
   Fletcher Allen delivers nearly half the care available in Vermont, and if it was allowed to blow through the cap the board’s credibility would be badly compromised. The board had let its first hospital system budget come in too high and it could not afford make that mistake a second time.
   When Fletcher Allen President John Brumsted submitted his budget in the summer of 2013 he said that he couldn’t get it any lower. But on the day he was to actually present his budget to the board, he pulled it off the table and said he would resubmit it. When he did, it came in under the cap.
   No one has ever said what happened between the submission of Fletcher Allen’s first budget and the submission of the revised one. But you will look long and hard to find anyone who doubts that Al Gobeille and Brumsted had a private conversation and they reasoned together about the absolute necessity that Fletcher Allen meet the board target. The outcome was exactly what was needed. In the utility model, no such luck.
   The Fletcher Allen budget was child’s play compared to the work that needs to be done in recasting the whole Vermont system. Doing that within a public-service type framework is just plain impossible.
   And it isn’t that the Green Mountain Care Board lacks power now. Act 48, the single payer law the legislature passed in 2011, confers great power on the board. It has the authority to set budgets for the state’s hospitals, which also employ roughly two-thirds of the state’s doctors. It has the authority to rule on the insurance rates requested by Vermont Blue Cross and MVP, the major carriers in the state. It has been charged under Act 48 with a rebuilding the system in the most basic way.
   Once the system has been rationalized, then a public utility structure might make sense. For one thing, changing payment mechanisms and altering the care infrastructure would already be accomplished. What would be left would be setting expenditures, and that might be doable with a purely judicial type system. At this point, however, no such a system is even on the horizon. It is out at best four to five years and building it could take twice that.
   For now, the Care Board doesn’t need any more power, and it has never asked for more. The administration proposal would give it subpoena power, for example, which it does not need. Anybody who doubts that should look at the faces of the representatives of the doctors and hospitals and insurance companies who sit in the room during the board’s meetings. They hang on every word. Al Gobeille can talk to anybody in the health care arena at any time or place of his convenience. He doesn’t need any “help” from the Shumlinites on the Fifth Floor.
   When Mike Donofrio, the lawyer for the board laid out of the issue for the panel yesterday, the most trenchant comment came from Con Hogan, the board member who has more management and government experience than anyone in the room.
   “If it ain’t broke,” he said, “don’t fix it.”

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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.”

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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.  

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Shumlin's Thursday Speech: The future is now

by Hamilton E. Davis

   One of the most vivid memories I have of serving in the Vermont House some 25 years ago was the afternoon that a man came into our committee to present his case for passage of some bill whose subject I cannot remember, but which in any event had little chance of passage.
   He sat in the witness chair without ceremony and began his testimony this way:
   I once actually saw, in a foreign country, a man beating a dead horse.
  I couldn’t help thinking of that as I sat through a three-hour hearing last week in which Governor Peter Shumlin’s three top single payer health care reform experts laid out, in excruciating detail, all the reasons why they couldn’t recommend any of the financing options they had developed over the previous three years.
   The governor had pulled the plug on the financing section of his single payer reform initiative on Dec. 17, and followed that by releasing just before New Year’s Day a vast heap--hundreds of pages--of reports and appendices concerning the financing of a shift from private insurance to state financing.
   The governor’s decision to kill off the signature measure of his four years in office left much of state flabbergasted. Supporters of single payer ranged from heartbroken to angry, while conservatives exulted, although wondering whether the governor who has dominated state politics for years was planning some slick maneuver that might resuscitate the dreaded single payer plan.
   In fact, the Shumlin administration will spend additional time this week explaining to legislators why they had no choice but to do what they did. These dispiriting recitals should end this week, however; and both the lawmakers and the Shumlin health planners will have to turn to the really important question: where do we go from here?

The future is now

   The key indicator to the future track of health care reform will be Governor Shumlin’s budget address Thursday afternoon. Shumlin mentioned health care only in passing in his inaugural speech last week, but his planners have put together a package of proposed legislation and other steps to affect the course of health care reform.
   What is a mystery at this point is whether Shumlin wants to, or can, say anything that will breathe life back into the financing side of health care reform. For serious health care reform is a war fought on two fronts.
   The first front is cost containment and the restructuring of the health care delivery system so as to make its quality much higher and its spending rational and sustainable. That task lies within the purview of the Green Mountain Care Board and the war on that front is already going very well. Indeed, the GMC board doesn’t really need any new legislation. Its legal framework is the single payer law passed in 2011, and that statute, arguably the best such legislation in the country, gives the board all the powers it needs. Shumlin could come up with legislative proposals in that theater of operations, but if they are more than housekeeping stuff, they could do more harm than good.
   At this point in Vermont’s reform effort, the key theater is the financing front. The question there is how to move from health care financing based on employment status to financing based on residence in the state. That is the front where, on Dec. 17, Shumlin broke and ran.
   It is important to note that even though the governor abandoned the field on financing, the cost containment effort will continue at the GMC board. The difficulty lies in the fact that the political momentum behind the cost containment front could be dangerously eroded by the failure on financing.
   The ultimate question, therefore, is whether Shumlin can recover enough substance and credibility on financing to provide at least some support to cost containment. What might that look like?
   One thing he could do would be to reverse his Dec. 17 declaration. He could present one of his 15 potential financing scenarios to the legislature and invite the members to join him in trying to find a road forward. That would require a dramatic shift in approach from plans developed basically in secret to plans developed in a real partnership with another branch of government.
    I can’t imagine such a thing happening. Shumlin personally does not have enough credibility with the legislators, the press or the public to get away with it, even if he would consider it, which he almost certainly wouldn’t. So then what?
   He could try one of the many step-by-step proposals on financing that have been floating around in the policy ether for the last four years.
   One of those would be to try to extend insurance coverage to the 23,000 or so Vermonters who remain uninsured. Senate Finance Chairman Tim Ashe has expressed interest in that area. There are problems with it…but there are problems with just about everything. If it could be done, Vermont would be the first state with universal coverage, and Shumlin could be known for that nationally, instead of his current role as the father of failure.
   Another would be to figure out whether a sector of the delivery system—hospitals say, or primary care—could be shifted to public financing. Problems there also, but moving a piece of the cost into the public arena would be cheaper than moving the whole system in at once.
   He could try to add something to Medicaid financing, a step that would draw down more federal dollars and achieve some incremental benefit.
   Another possibility would be to build a piece of infrastructure that could be used for public financing, without committing big money at this point. Shumlin’s report to the legislature has a sort of sleeper element that could serve as the framework for such a step. The language refers to a management “entity” that could operate as a public utility for health care. Although Vermont Blue Cross is not mentioned by name it would be the obvious “entity.”
   Just having such a hunk of machinery in place would ameliorate at least somewhat the political burden the Shumlin administration has had to carry owing to the failures of the federally financed insurance exchange. The mere association with Blue Cross could confer some political benefit on the administration.
   Whatever the individual merits of the list that Shumlin produces Thursday, the question will be whether, taken as a whole, the list can move single payer financing  from “dead”, which it is now, to at least “critical but likely to survive.” 

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A Reply to "Thumb on the Scale"

By: Lawrence Miller, Robin Lunge, Michael Costa

The decision to not move forward with a public financing system for health care in Vermont was an incredibly difficult one and it was not taken lightly.  The charge that we essentially cooked the books for political purposes, is both absurd and insulting. There are many difficult tradeoffs in designing a new health care system that affect the lives of almost all Vermonters.  It is neither fair nor borne out by serious scrutiny of our plan and the documents we released with it to say otherwise. 

Some say that we could keep costs down by offering a less generous plan. This ignores the fact that the majority of Vermonters have health insurance that is equivalent to or better than our recommended plan.  If you look at what most large, private employers offer today, 65% of Vermonters would have worse insurance if we had recommended a less generous plan. This percentage goes up if you include state employees and education employees and their families. To argue for a less generous plan would be to ask Vermonters to support taxes that would require some to pay more than they do now – while asking the majority of Vermonters to also swallow a benefit cut. Doing that would be unfair, impractical and divisive.      

More importantly, choosing a lower benefit level – as shown in the plan and the documents we released – would actually be worse for Vermonters, as shown in the economic modeling. What a lower AV level actually does is shift more costs to individual Vermonters in the form of out-of-pocket expenses, while still requiring a sizable individual and business tax contribution. The overall burden on individual Vermonters was shown to be worse, not better, than a higher AV plan.  Given the data, we can only imagine the opprobrium that would have been aimed at us had we chosen to recommend the lower AV plan.  In addition, a lower AV plan has some real-world consequences – such as individuals forgoing care – that undermine the very notion of universal health care.  Lastly, it asks Vermonters who are sickest or have chronic illnesses to bear the burden of more of the costs – shifting to a less fair and equitable financing plan.

Some also argue that we increased cost by deciding to cover commuters at the last second.  Commuters were in our thinking from the start.  Commuters pay Vermont income tax, and their employers would be asked to pay the payroll tax under Green Mountain Care so excluding them from the program would not be good policy.    The documents we released with the plan shows that staff recommended including commuters in June, many months prior to the modeling, though the cost was unknown until the economic modeling was settled in early December.  The implied question is why didn’t we drop commuters from the model after learning how expensive it was?  Removing commuters would have required employers to not only pay for Green Mountain Care but also to continue offering insurance to commuter employees, or drop them altogether.  Overall, excluding commuters would have undercut the basic message to businesses that GMC ought to be simple and allow businesses to focus less on health care and more on their work.    

One curious omission is any discussion of the challenge of transitioning thousands of small Vermont businesses into Green Mountain Care.  Small businesses fewer than 10 employees who do not offer health care today would pay hundreds million more in taxes.  If only such a problem could be ignored.  Sending these employers from scant contribution for health care to a large payroll tax with no transition would be reckless to our economy, yet would cost upward of $500 million to solve. 

Obviously, we expected criticism of the decision to delay implementation of Green Mountain Care.  That’s fair.  Yet claiming that we somehow purposefully made the numbers look bad is not.  The fact is that the math didn’t add up.  Sometimes facts are stubborn things.  The fact our current health care system is a mess that makes transitioning to a new system especially difficult seems to be the most stubborn fact of all.

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A Shumlin Thumb On The Scale

by Hamilton E. Davis

   In the dying hours of 2014, Governor Peter Shumlin issued an autopsy report for his single payer health care initiative. Shifting the financing of health care away from employment to simple residence in Vermont would be way too expensive and disruptive, especially to small business, the report said. The degree of difficulty was exacerbated by a $100 million hole in the state’s budget, along with doubts about how much federal support would be available.
   The cost of going forward now, the governor said, would be about $2.6 billion, which he described as an “eye-popping” number that was simply out of the question.
   On the day before the new year, the governor’s staff held a briefing for the press on the report, which consisted of many hundreds of pages of financial analysis, charts, tables, and models for how the cost of health care might be redistributed across the state.
There hasn’t been time for a line-by-line analysis of this huge pile of information, but a preliminary reading suggests that the governor larded what was already a pretty strong case with as much as $1 billion in additional costs. Here is what a first pass over the material looks like: 
   The first flag shows up in a simple inspection of the 15 ways to finance a single payer plan that Jonathan Gruber, the administration’s consultant, produced. From that group, the governor chose the most expensive one -- $2.6 billion. By itself, that might not prove something, but it will get your attention.
   The second obvious issue is the richness of the program to be put forward. In 2013, the University of Massachusetts-Wakely consulting group estimated the cost of implementing single payer in Vermont at about $1.6 billion. A key assumption inside of that estimate was a decision to confer benefits valued at 87 percent of the cost of care.
   That means that if a Vermonter used health services valued at $10,000 the state would pay $8,700 and the patient would pay $1,300. The 87 percent is called “actuarial value” in the health care world and is the basic measure of richness of benefits.
   Shumlin, however, opted to increase that percentage to 94, which took the costs up by something like $300 million. Was that necessary? The Shumlin staff argued in the briefing that it was; most people who have insurance in Vermont have benefits that exceed 90 percent, they said.
   That is only partly true, however. If you strip out schoolteachers and state employees, a majority of Vermonters have insurance that amounts to a value of 87 percent or less. You can certainly argue, and many have, that an actuarial value in the mid-nineties is better than 87, but the 87 percent was established by the legislature in the single payer law and has been the basis for the discussion over the last four years.
   Another anomaly concerns what the planners call commuters, people who live outside the state, but who work for Vermont employers. The original assumption was that Vermonters would not pay for insurance for non-Vermont residents. At the 11th hour, the Shumlin planners put them back in. The defense for that is to relieve employers of administrative inconvenience. The inconvenience, however, was certainly not a mystery: the issue has been on the front planning burner for four years.
   In his talks with the press over the last several weeks, the governor has lamented that he just didn’t have any choice but to pull the plug on his signature issue. No one could show him a program that could get the job done for markedly less than the $2.6 billion figure, he said.
   Actually, he could have found one in his own report, albeit buried about as deep as it is possible to get. That would be Alternative 12 of the 15 scenarios modeled by Gruber. The cost of that scenario: $1.6 billion, very close to smack-on the UMass-Wakely estimate.
   So, where does this kind of analysis leave us?
   Some press commentary has argued that the whole single payer project was a political scam by Shumlin to get elected and then stay ahead of any possible opposition. Another view is that Shumlin gave it his best shot, and that he deserved credit for owning up to its failure.
   My view is that Shumlin sincerely hoped to accomplish his vision for single payer, and he made a very good start, putting an excellent team to work on it and winning approval in 2011 of the single payer law. Act 48 is the best state-level piece of reform legislation. His management of the program, however, has been weak and shallow. And in any event, even the realistic price of $1.6 billion had no chance to pass the legislature.
   Once Shumlin realized he couldn’t get his program passed, at least in the near term, he just bailed. And having decided to bail, he reverted to his old political habits. Load up the bill with everything but the kitchen sink so as to avoid getting blamed for not pressing on.
   One of the defenses put forward by his staff in the press briefing is that they have only had real numbers from their consultant for a few weeks. That defense is sheer fertilizer. Shumlin has spent the last four years hiding from the cost of single payer, as well as how to pay it.
   He put off hiring UMass-Wakely for at least a year, so as to avoid having to defend any cost numbers before his reelection campaign in 2012; that was understandable in the light of his very narrow winning margin in his first run in 2010. He won big in 2012, but when the UMass group submitted their report in 2013 they were instructed to avoid any suggestions for how to raise the money. The obvious problem was that specific financing recommendations could have been used against him in the 2014 election.    
   Meanwhile, Shumlin spent nearly two years talking utter nonsense about the financing. His first idea was to get the speaker of the House, Shap Smith, and the president of the Senate to figure it out. That was obviously a non-starter, so the governor drafted a business group to figure it out. That was just slightly less obviously a non-starter.
   He finally happened upon Michael Costa, a young, skilled tax expert who was working in the Tax Department. Shumlin gave Costa the job of figuring out the payment structure but Costa knew he needed help from a modeler to understand how any payment scenario would play out in real life. He got the modeling help he needed, but so late that no numbers were available until after the 2014 election.
   No one can know what was in the governor’s mind through all of this, but if he did load up the estimate it would be pure political Shumlin, of a piece with the way he has handled a lot of the tough issues.
   When everything looked good in the early days, he assured Vermonters they would have a single payer system in operation by 2014, a notion so absurd that it left policy experts speechless. When he found out in the spring of 2013 that the Obamacare insurance exchange was headed for a ditch, he insisted it was a “nothing burger” and continued to be reassuring about progress on that issue. The press then unearthed the internal e-mails that showed the administration knew about the exchange mess months before admitting it.
   The problem in the current situation is that by insisting on an inflated cost for single payer now, he has not only drained all the political energy out of the reform effort, but he has poisoned the well for a longer time because so much of the public will write off the shift away from an employer base as a financial pipe dream.
   The sad thing is that he didn’t need to do it. The legislature was never going to pass a $1.6 billion tax bill anyway. Not in 2015 and probably not in 2016 either.
   Where does it leave us? Health care reform will continue, based mostly in the Green Mountain Care Board rather than the governor's office. There will be no great leap forward to full single payer. Beyond that lies uncertainty. We'll discuss many of the issues involved over the next several weeks.

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Vermont Health Architect Moves

by Hamilton E.Davis

   Anya Rader Wallack, the lead designer of Vermont’s single payer health care reform initiative, has been selected by Rhode Island governor-elect Gina Raimondo to run that state’s Obamacare insurance exchange, according to sources in Rhode Island.
   The move by Wallack would be the first loss for Gov. Peter Shumlin of the team that has run health care in Vermont since 2011. She was the first chairperson of the Green Mountain Care Board, and has served as a consultant to the Shumlin project since she stepped down as chair last year. She has also been in charge of administering the $45 million federal grant to support Vermont reform.
   She will have to sever all her formal ties with the Shumlin administration if she becomes employed by the incoming Rhode Island administration. An irony in the situation is that managing an Obamacare exchange is the lone element in the Vermont reform effort that Wallack had nothing to do with.
   Wallack’s move comes in the wake of Shumlin’s decision to drop his effort to finance his single payer project in the upcoming session of the legislature. Shumlin has said that health care reform will continue in the efforts of the Green Mountain Care Board to contain costs in the health care delivery system. 

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Ready or Not--Vermont 2016

by Hamilton E. Davis

    If you think it’s just terrible that political campaigns go on so long, don’t read this story. It will ruin your day. If you’re into political reality, however, then you need to know this: the 2016 election in Vermont is well underway.
   With the 2014 election just over a month behind us, Phil Scott, the Republican lieutenant governor who won re-election handily, is already under heavy pressure to run against Gov. Peter Shumlin two years from now. Elected in 2010, Scott has coasted along in the second spot in Vermont government without any sign of strong political ambition or deep interest in any particular policy area.
   Scott is the only proven Republican vote-getter at the state level, however, and given Shumlin’s extraordinarily poor performance in the November election, Scott’s allies are pushing him to make more political appearances and to begin laying the foundation for a run for the top spot.
   That means more than just pounding the political streets, which he is already doing. His supporters, and the press, will expect him to become the leader of his party. That in turn will require him to step to the forefront on such policy hairballs as single-payer health care reform and education finance. There isn’t much heavy lifting involved in the lieutenant governorship, but the agenda in the coming legislative session is heavy indeed, so if Scott is serious he needs to be doing lots of homework now.
   While center-right Republicans, and no small number of Democrats, love Phil Scott, far-right Republicans don’t. So the early steps by Scott are generating pressure on the Republican right to look for a candidate of their own much earlier than they would otherwise.
   The key player there is Darcie Johnston, a long-time GOP operative, who ran former state Sen. Randy Brock’s unsuccessful challenge to Shumlin in 2012, and who supported the Libertarian candidate, Dan Feliciano, in this year’s race. Johnston and her conservative cohorts will have to decide soon how to deal with a Scott candidacy.
   Johnston pleaded with Brock to run this year, but he refused. So she and other prominent conservatives shifted to Feliciano. He got only 4 percent or so of the vote, but he was far more coherent than Scott Milne. So what do leaders on the far right do? Do they try again with Brock, if he’ll go? Do they accept Scott, hoping to push him to the right? Do they try to build Feliciano’s credentials to the point that he could win a Republican primary? Or do they simply look for another horse to ride?
   One decision that doesn’t have to be made is what to do about Scott Milne, who came within a hair’s-breadth of defeating Shumlin last month. Milne’s performance had very little to do with him and pretty much everything to do with disappointment in Shumlin. Moreover, Milne has acted like a political dingbat both before and after the election. So he is likely to just disappear.
   Shumlin, meanwhile, is in a strange position for a sitting governor. After winning his third election, he should be free to focus on strengthening his management team and getting ready to drive ahead on his major policy objectives, particularly single-payer health care reform.
   Instead, he has to let his team and his supporters know that he’ll run again in 2016. He won’t announce that publically, of course; but there has been considerable speculation that he is too disheartened by the 2014 election to run, and he has to lay that speculation to rest.
   Moreover, Shumlin can’t afford to wait until 2016 to begin building his re-election effort. He has to begin now, because it wouldn’t be safe — not even close to safe — to assume that he couldn’t be beaten in 2016. We discussed this in Shumlin Redux.
    Rebuilding his standing with the state’s voters will be unusually tough, because the atmosphere around the single-payer issue is already pretty toxic. And given the signs that the introduction of single-payer legislation in January may not go smoothly, the political environment for Shumlin could get worse before it gets better.
   Political ripples from the 2014 election will reach beyond the governorship. One of the most important players in the political firmament is House Speaker Shap Smith. A Democrat, Smith will preside over one of the most complex and difficult policy agendas in Vermont history, while considering his own political future. If Shumlin doesn’t run, should he try to seize the top spot? If Shumlin does run and Scott runs against him, Smith would have to decide whether to run for lieutenant governor or perhaps attorney general.
   That calculus in turn rests on such questions as whether Bill Sorrell, the current attorney general and a Democrat, runs for re-election. Smith would not run against Sorrell; but if Sorrell steps down, then T.J. Donovan, the Democratic state’s attorney in Chittenden County who ran a strong if losing primary campaign against Sorrell in 2012, could try again for statewide office.
   Smith will have to parse these questions at the same time that he is grappling with Shumlin’s health reform monster, as well as with education financing and property tax reform. The speaker has already told some legislators that in the current session he will adopt the following priorities: education, education financing, jobs, and health care, in that order.
   He also is committed, however, to giving Shumlin’s single-payer project a fair hearing. Can he do all that at once? Possibly, if not easily. One route would be to conflate education finance with health care reform: health insurance is a huge burden for Vermont school districts and successful health care reform could ease those pressures markedly.
   A critical question for Smith is the way that he and the legislature assess the quality of the health care proposal that Shumlin drops on them at the end of this month. If the conceptual plan -- and the depth and solidity of the details — are compelling, then Smith has to be all in. If they are shaky, all bets are off.  
   Out on the left wing, the Progressives will have to decide whether to take advantage of a markedly roiled political environment to push one of their number forward.  Dean Corren, a former state representative from Burlington who ran as a Democrat against Scott this year, could claim precedence for something like the lieutenant governorship. While his poor performance this fall would be held against him, the Progressives have never lost their taste for third party candidacies. Just last week, for example, the Progressives decided to run Steve Goodkind, a former Burlington city engineer, against Mayor Miro Weinberger, a Democrat, who is seeking re-election in March. There is no Republican in the race, yet. Regardless of whether one appears, Goodkind will stay in the race.
   Even further out on the political margins, the uncertainty at the governorship level has to be stirring political calculations. The Republicans could seek out a potentially stronger candidate than Scott, Brock, or Feliciano.
   The business community is growing more critical of Shumlin. A business publication recently ran blistering critiques of single payer by a spokesman for National Life, and by Bruce Lisman, who has run a government advocacy website for the last couple of years.
   The state Republican Party has been searching desperately for a truly credible gubernatorial candidate since Jim Douglas retired in 2010. Brock was certainly credible, but 2012 was a terrible year for Republicans in Vermont, and Brock’s showing (38 percent of the vote) was poor. So they could keep looking. A possibility might be state Sen. Kevin Mullin of Rutland. Mullin is pretty conservative, but he is widely respected, and he has already played an important role in drafting the single-payer law.
   On the Democratic side, the Shumlin difficulties almost certainly are stirring ambitions on the party’s bench. As we have seen, Shap Smith could step up. But he is not the only one.
   State Sen. Tim Ashe of Chittenden County might think about it: he very nearly won the Democratic nomination for mayor of Burlington three years ago and as chair of Senate Finance he is well positioned to play a major role on single payer, and indeed, on any financial issue that galvanizes the legislature. Another possibility is Sue Minter, Shumlin’s secretary of transportation.
   You get the idea: At the roots of the political system lots of things are already in motion. The public won’t pay attention till 2016, but two years is none too long to build a campaign for a tough election. Which is what 2016 looks like it will turn out to be.

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Losing the Narrative

by Hamilton E. Davis

   With three weeks still to go to the official launch date, the Shumlin administration has begun to lose its already-tenuous grip on the narrative around its single payer health care initiative. One of the most sensitive issues involved—the payroll tax for Vermont businesses—leaked out to the press last week, with no comment or explanation from the administration.
    That led to an ad hoc exchange on Vermont Public Radio about what the tax would mean to big, self-insured companies that enjoy federal ERISA protections from state action. In the wake of that, National Life, a large central Vermont employer, expressed concern about the effect of the payroll tax.
   Both of these reports were necessarily incomplete and raised more questions than they answered. And both are certain to turn into major battles once the whole Shumlin plan goes to the legislature in January. Their importance lay in the fact that the Shumlin team really couldn’t defend or explain them because the financing plan isn’t yet complete.
   Moreover, the administration’s hunkered-down posture means that it has not been able to make the positive case for its plan as a whole. There definitely is a case for the plan, but the opponents have gotten another month to hammer away, with no response. They surely appreciate it.

The Leak

     The payroll tax issue was cracked open by Morgan True of VTDigger, who reported that a business group had been told by the administration that the tax would be set at eight percent, which could be a difficult burden, especially for small firms. There are thousands of small companies that do not provide health insurance now, so the payroll tax could pose a threat to their survival.
   The designer of Shumlin’s financing plan is Michael Costa, who has been working at it for two years. There are lots of ways that the eight percent could be applied: there could be protections for marginal small firms, for example, and there will be small firms that do provide health insurance that will save money at eight percent.
   But no one can get a full grip on the issue until the administration turns Costa loose to explain it. Neither Costa nor anyone else in on the Shumlin team has made the broader case in the last several weeks for rebuilding health insurance financing. Instead every business owner in the state is simply multiplying his payroll by .08 and some of them, perhaps many of them, are freaking out, before the Shumlin plan has been put on the table.
   As for the ERISA company question, Administration Secretary Jeb Spaulding left some misimpressions about how the payroll tax would affect big companies. Spaulding told VPR’s Bob Kinzel that he hoped the ERISA companies would sign up for Green Mountain Care.
   In fact, no ERISA company can “sign up” for Green Mountain Care, as the Shumlin project envisions it. The payroll tax is a tax, which means that big companies would have to pay it. What they did about their own insurance plans would be up to them. They could shut them down, at least for their Vermont-resident workers, or they might pay for better benefits than the state would provide. But nobody is going to ask them to sign up for anything.
   If the Shumlin payroll tax were to pass, the biggest question surrounding ERISA companies is whether they would attack the tax in court as an infringement on their rights under federal law to operate a health plan without state interference. No one can say what the outcome of that would be. But it would be a legal question, and then a political one—could they be talked out of a legal challenge.
   In any event, you almost certainly won’t be hearing about any of this in the next several weeks. Nor will you be hearing any substantive defense of the Shumlin plan in broader terms.  
In bits and pieces over the last few years some of those broader issues have emerged.
   Single payer proponents, in and out of government, have argued, for example, that going to public-based financing would give Vermonters more security, because their insurance coverage would not depend on their job.
   They have argued that we need a much fairer system, since people in pretty much identical circumstances now pay dramatically different amounts for coverage. A group of Harvard students recently put a video on YouTube, comparing two Vermont women with identical jobs in different companies, identical salaries and identical insurance coverage. One paid $1,200 a year; her employer offers health insurance. The other pays $6,000 a year; her employer doesn’t offer health insurance.
   Probably the strongest arguments in favor of the Shumlin plan is that it will rein in health care costs, after more than four decades of trying. The Green Mountain Care Board, a major component of the single payer project, has already cut the inflation rate in Vermont hospitals to a third of its historic trend.
      I mention all of this not because it means that the Shumlin plan should be adopted, but rather to point out that the partial information that leaked out will be used at maximum decibel level by single payer opponents leading up the launch. That may not be fatal, but it certainly isn’t helpful.

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Shumlin Redux

by Hamilton E. Davis

    It’s often said that politics is a contact sport. It is also often said that when athletes get knocked down, they get up. Pete Shumlin is trying to get up now. It isn’t easy.
    On election day last month, Governor Shumlin got absolutely flattened, by far the worst beating he has taken in his political life. Technically speaking, he won-but by a tiny margin. In a very real political sense he actually lost; the total vote for the Republican, Scott Milne, and the Libertarian Dan Feliciano, exceeded Shumlin’s total.
   Because Shumlin got less than 50 percent of the vote, it will be up to legislature to pick the winner. It will be Shumlin; but that should be scant comfort to him. He knows, better than anyone else, that the vote amounted to a rejection of him personally, not of his administration or his policies, but him personally.
    So, what does he do now?
     His first response was to embrace humility, saying that the voters have spoken and he will listen. He is holding more press conferences, which is a good thing. But humility doesn’t solve policy problems, and humility isn’t leadership, which is what Vermonters elected him for.
    And the policy landscape is an absolute minefield: the state budget is diving into deep deficit; there is a developing wrangle over education policy and property taxes; and, most difficult by far, Shumlin will bring his signature single payer health reform package to the legislature in January.
    Moreover, in a way that is rare in Vermont, partisan politics will be inextricably tied up with the policy arena. The first decision that Shumlin has to make-- and make really quickly--is that he will run again; he can’t wait for a year, or a year and a half to decide. If he leaves the slightest doubt that he might not run, then single payer will slide into political limbo. The major players in both major parties will begin to parse everything they do in terms of the succession questions. Indeed, the governor will lose political leverage on whatever issues come up. 
    In the first week or two after the election, some of the people who know Shumlin best were sure that he would not run in 2016. He doesn’t have the stomach for it, ran a common refrain. That may have had as much to do with the shock experienced by Shumlin supporters than it was the case for the governor himself, and in any event, the he-won’t-run sentiment appears to be fading.
    A more important question, however, is not fading: Can he win in 2016?
    Not everyone thinks it is an issue. This election was a complete fluke, the argument runs. The turnout was very low, there were no major Democratic races to generate involvement of the voters. That will change in 2016—it will be a presidential year, all those hold-out Democratic voters will come back and since Vermont is famously a blue state, more than enough of them will vote for Shumlin.
    That could turn out to be true, but in my view there really is no such thing as a meaningless election. Some can signify more than others, and they may be difficult to interpret, but none is irrelevant. In this case, it seems to me, an important outcome is that the Shumlin spell has been broken.
    Ever since he began his rise as a leader in the Vermont Senate he has been an unusual political player. He has never been loved and often has not been trusted. But he was always recognized as very politically astute and after his very decisive reelection in 2012, he seemed, well, inevitable. Too smart, too clever, too well financed to be dislodged in blue, blue Vermont. That magic is gone.
     It emphatically does not mean, however, that Shumlin can’t win in 2016. It is true that Shumlin has invited a serious Republican into the race. But it isn’t clear that the Republicans can find one. And even if they do, it isn’t clear that he or she would produce a serious policy agenda for Vermonters to consider. Virtually the entire Republican agenda consists in a plea to dump Shumlin—it’s very hard to win a purely negative campaign.
    Still, the fact remains that Shumlin is in a deep political hole and he needs to find a way to reestablish himself as the dominant political leader in the state. He did so in the past on the strength of two liberal planks—single payer health care and closing Vermont Yankee—reinforced by his bravura performance in the wake of Hurricane Irene.
    The only one of those elements still in place is single payer and it is hard to overstate how problematical that is right now. The Obamacare insurance exchange still doesn’t fully work, and Shumlin has to take the blame for that. His single-payer financing plan, which is scheduled for launch at the end of December, started leaking out last week and probably can’t be reeled back in, which means that Shumlin has lost control of the narrative around the single most troublesome element of his plan. (more about that soon)
   The underlying question for Shumlin going forward is whether he can shift his style from political maneuver, one deal at a time, to operational management. For example, Shumlin has been delaying and ducking and dodging on his financing plan for at least three years, all in the service of making sure that it couldn’t be used by his political opponents or that the public wouldn’t fault him for it.
    There isn’t any place left to hide now, and Shumlin is going to have to defend a massively complex plan in a bitterly contentious environment. He is almost certain to suffer very serious setbacks on the plan’s particulars. The more important question, however, is how he handles it.
    He has to open the whole issue up to the public as well as the legislature and then persuade Vermonters of the virtues of his vision. In other words, the best political strategy at this point is to demonstrate that he can manage a complex structure competently.
    Can he do that? He has done it in the past: the reform design team he put on the field in 2011 was a very good one, the plan embodied in the single payer legislation enacted in 2011 was superb. The management of the issue since then has ranged somewhere from good—the Green Mountain Care Board is first rate—to awful; the exchange, and the overall management of the financing issue have cost the single payer plan virtually all its political momentum.
    In 2010, Shumlin won his first election by just a few thousand votes, so it made sense to delay any talk about money until after the 2012 election. But Shumlin won that one big, against a strong opponent: Republican state senator Randy Brock got just 38 percent of the vote in 2012. The result left Shumlin with plenty of political capital.
    But he then completely wasted two years, 2013 and 2014, leaving his Republican opponents to keep chipping away at public confidence in the single payer idea. In the recent campaign, he scarcely mentioned health care reform from Labor Day on. There was no deal to be made, so Shumlin said nothing. It is that style that has to change.
    So, the next two months will be the biggest political test of Shumlin’s life. My own feeling is that he can pass it, that he is at bottom a good political athlete. But he has to change his approach. And he has to get up, really fast.

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A Missed Opportunity

by Hamilton E. Davis

   When the Shumlin administration presents its single payer health reform plan to the legislature in January, it will do so without a key feature that could have significantly increased the plan’s political credibility: an agreement with Vermont Blue Cross to manage the delivery of care to most state residents.
   Such an agreement has been talked about for more than two years, but as the end of the planning period nears, no such agreement is in sight. There have been some informal discussions between Shumlin planners and Blue Cross, but the state never developed a proposal that could have led to something specific.
   They could certainly do so in the future; indeed, that is likely, but the negotiations would be complex and would take at least six months, well past the end of the 2015 legislative session. The political benefit, therefore, will be lost during the critical early days of legislative consideration of the Shumlin initiative.
   The potential value of a Blue Cross agreement as a component of the overall plan grows out of the botched rollout of the federally-financed insurance exchange, a failure that drained much of the political momentum from Shumlin’s effort. Reform opponents have charged that since Shumlin’s bureaucrats couldn’t handle the basic operation of the exchange, they couldn’t be relied upon to handle the far more challenging job of directing coverage of the whole state.
   The most effective reply to that claim would have been the assignment of the paperwork dimension of single payer to a proven performer like Blue Cross. The loss stings even more, given the increased toxicity of the political environment for reform recently, the hairs-breadth margin of the governor’s reelection last month, as well as the flap over Jonathan Gruber, the nationally known consultant to the Shumlin planners, who has made a series of disparaging comments about the passage of Obamacare.

Blue Cross on a Longer Reach

  While the administration has forgone the political benefit of having Blue Cross standing shoulder to shoulder with Shumlin planners in January, the long-term prospects for solving the management problem with the company are intriguingly good. Blue Cross, which could have been a dangerous reform opponent, actually sounds like a supporter.
  When asked about the issue Blue Cross President Don George issued the following statement:
   “Since Act 48 was approved, Blue Cross and Blue Shield of Vermont’s overriding focus has been to support the principles of reform and establish our company as a contributor to the state’s policy initiative. We continue our commitment to work with the administration and legislators to assure that all Vermonters have access to timely, affordable health care.”
   That apparently isn’t just rhetoric. Last winter, when problems with the exchange left many Vermonters wondering whether they had health care coverage Blue Cross stepped up and crafted programs to bridge the gap.
   Lawrence Miller, the Shumlin administration’s single payer chief, referred to that fact when asked about the status of contacts with Blue Cross. “The company has helped out in the past, and could be a suitable partner in the future,” Miller said. Still, Miller added, it is critical to go slowly because of potential difficulties with the flow of federal money. It would also be a good idea, he said, to see what the legislature has to say about the proposed plan before trying to solve the management problem.
  Most significant of all is the unique role that Blue Cross plays in the Vermont health care world.  To the outsider, Blue Cross is simply a Vermont-based insurance company, not that different from other carriers. The outsider would be wrong. Blue Cross is unusually well positioned to play a central role; it is already something pretty close to a single payer itself. Here’s how it is unique:
   Unlike other carriers, and unlike any private company, Blue Cross is a creature of the Vermont Legislature; it was established under Title 8 of the Vermont Statutes Annotated, which says the company must be maintained and operated solely for the benefit of the subscribers, that is to say, the people of Vermont. It can have no shareholders, it cannot make a profit, and it is exempt from all taxes. One of the intriguing possibilities, therefore, is that the ultimate owner of the Blues reserves of some $150 million or so may be the people of Vermont.
   The legal situation notwithstanding, Blue Cross has operated like any other private carrier much of the time. In 1983 the company mounted a counterattack against state regulation when the then-insurance commissioner ordered the company to take a series of actions to justify its request for a 30 percent rate increase. The increase flowed from very rapidly expanding hospital budgets and the commissioner wanted the Blues to show what they were doing to keep costs down.
   In its appeal to the Vermont Supreme Court, Blue Cross argued that it ought to be able to make the same kind of management decisions any other company might make. The commissioner’s orders were “an unlawful intrusion” into its decision making.
   In 1984, the Court slapped - Blue Cross down hard on that issue. Under Vermont law, the Court said:
   …Blue Cross is not a private business operating freely within the competitive marketplace; it is a quasi-public business subject to the regulation of the commissioner…A contrary holding would, we think, place the commissioner in an untenable position.  He would, on the one hand, be required to ensure that subscriber rates were not excessive, inadequate or unfairly discriminatory, and that benefits and services were being provided at minimum cost, and yet, on the other, not have the means actively to bring this about.
   I bring up this ancient history simply to demonstrate how closely aligned the interests of the state and Blue Cross are in their commitment to advancing the good of the state, without the involvement of business success and profits.
   That does not mean, however, that reaching a management agreement would necessarily be easy. If Blue Cross decided it did not want to get involved in Green Mountain Care, it could make several arguments. It could assert, for example, that maintaining its insurance standing could benefit subscribers who liked having the Blue Cross access card, especially when operating out of state.
   There also could be a problem with a provision in the federal Affordable Care Act that prohibits a firm that is managing the flow of federal funds from also selling an insurance product in the market place.
   Finally, it could appeal to the legislature to protect it from getting entangled in the Shumlin plan simply on the grounds that the program as it has operated so far is a tar baby that would endanger Vermonters’ health benefits.
   Nevertheless, as noted above, there is no evidence that Blue Cross wants to avoid a major health care reform effort. What it will take to get an agreement is a serious effort on the part of the Shumlinites to engage on the issue. That can’t be accomplished in the near term, but it remains very much on the agenda for the future.

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Still a Bogus Claim

by Hamilton E. Davis

   For close watchers of health care reform in Vermont, there is a technical but important issue left over from the recent election. That is the late-campaign claim by Republicans that Gov. Peter Shumlin is trying to “take over” Medicare in order to fund his single payer initiative. If he succeeds, these critics say, it could cost Vermont seniors their health care benefits and their access to doctors.
   I have written about this issue previously, but it is worth labeling this claim again for what it is: a total fabrication. Federal law does not allow anyone to deny Medicare recipients their coverage and all that comes with it, including the right to choose their own physicians.
   It is true that Shumlin’s planners will seek to shift the way that health care providers are paid by federal Medicare officials. That effort involves standardizing the wildly variable payment  patterns now in effect, as well as encouraging cost containment and higher quality. None of that implies denying care to seniors. Improving the efficiency of care delivery is the central goal of all reform efforts, including Obamacare. In fact, federal officials have already approved such a shift in Maryland.
  When the legislature wrote Act 48, the health reform statute, drafters thought it might be desirable to ask that Vermont become its own Medicare claims administrator, using either the state’s Medicaid machinery or an administrator such as Vermont Blue Cross.
  Subsequently, however, research by Shumlin’s planners showed no such step was possible. Vermont is part of a larger Medicare administration district that includes New York state. If Vermont administered Medicare claims, it would have to do so for the whole region. Given this landscape, it became obvious that the language in Act 48 was moot, so it was removed from the law.
   What remains, however, is critical to health care reform -- shifting the way doctors and hospitals are paid for services to seniors. Acting on its mandate from Act 48, the Green Mountain Care Board has been working for the last three years to design such a new payment structure.
  That work is not yet complete, but when it is the Shumlin administration will apply for something called an “all-payer waiver” that would work as follows: If Vermont can show the feds that the state’s new payment mechanism will save the federal government money, as well as improve the quality of care, then they (the feds) can adopt it for Vermont doctors and hospitals.
   Such a new payment methodology would, in practical if not legal terms, have to be acceptable to both doctors and hospitals. If it wasn’t there is little chance that the feds would have anything to do with it.

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Shumlin Can Recover From His Train Wreck, But He Has To Change His Game - Soon

by Hamilton E. Davis

   Governor Peter Shumlin presided over a political train wreck last Tuesday, barely beating a political amateur who ran a comically bad campaign, and having to watch his party lose seats in both the Vermont House and Senate. His performance drained what little momentum was left behind his signature single payer health reform initiative; its most lasting consequence might be that he has revived a moribund Republican party in the state.
   At this writing, it is not even fully clear that Shumlin actually won. He leads Scott Milne by just a few thousand votes, roughly one percentage point, so the final tally won’t be available for a few more days. Shumlin is still virtually certain to win, but that fact can’t blunt the breadth and width of the political spanking that Shumlin has taken, one of the most striking in recent state political history.
   When the governor finally took stage at the Hilton in the dying hours of election night, his opening comment neatly captured the political style that has been weighing increasingly on his governorship. “We all knew this was going to be a close election,” he said. That statement was pure Vermont fertilizer. Nobody had the faintest idea the election would go the way it did, including Shumlin himself.
   By mid evening at the Hilton, as the results reached a third or so of the total, the ballroom was enveloped in a blanket of shock and depression. The crowd had its usual complement: a 150 or so politicians from the Congressional delegation, Leahy, Sanders and Welch to state representatives, the political press, lobbyists and political operatives—political junkies of all stripes. Most had been in many other ballrooms and they knew exactly what had happened, so they were stunned and depressed, the usual political gabble muted. Many drifted away early.
   And the shock was still palpable Wednesday. There was some spinning, but most of the political class was still just trying to figure it out. Some said it was the very low turnout; there would obviously far more Democratic voters in a presidential year. True, but how did you explain how Congressman Peter Welch got 30,000 or so more votes than Shumlin? Some thought it was that he had angered the teachers union by his comments on the South Burlington strike. Others looked to the Republican claim in the closing days that Shumlin was trying to “take over” Medicare spending so that seniors would lose their benefits and their doctors. And what about the way he bought that property from his neighbor…
   As to the effect of the vote going forward, much of the speculation was overwrought. Shumlin’s career is over, according to one of the wise men. He can’t win a fourth term in 2016. Maybe he won’t even want another term, said another. Health care reform is obviously dead; the central issues will be come property tax issues and education restructuring.
   By Thanksgiving, the outer reaches of the Shumlin political angst will have receded. Reality will begin to take precedence. For one thing, Shumlin is far from dead. He remains—by far—the most capable political leader in the state. It is true that if he ran next week against a serious Republican opponent he probably would lose. There won’t be another election for two years, however, and even in little Vermont two years is plenty of time to turn things around. Beyond that, the fact that Shumlin has revived the Republican party, doesn’t mean that he has  given the GOP any better candidates, and even more important, he hasn’t given the ones they have any good ideas.
   As for health care reform, the single most important issue ever to face the state and a long time principal concern to the author, not only is health care reform not dead—it is strikingly healthy and it is going to remain healthy for many years to come. That is true even if the legislature refuses to even consider enacting whatever bill the governor drops on them in January. It would be true even if Shumlin ends up losing to Milne. (One of the most encouraging auguries in the campaign was the refusal of serious Republicans like Lt. Gov. Phil Scott, and even Milne himself, to join in the Vermont’s yahoo, tea-party right wing campaign to junk health care reform.)
  The reason for this claim is the regulatory and other powers embedded in state law already, along with the presence of a thriving accountable care organization that includes the bulk of the state's medical care provider. Together, they can advance the essence of health care reform, no matter what happens politically. We will elaborate on this contention in the lead-up to the legislative session in January. But there is an important caveat to what some may see as an overly optimistic view. It is this:
  Peter Shumlin has to dramatically change his game by the first of the year. If he does not do so, then he is likely to succumb to an at least marginally competent opponent in 2016; and he will slip away into political history, a mere echo of unfulfilled promise. What does that mean?
  Major executive branch politicians have to have two types of skill. One is political, they need that to gain the office. But then they need bring to bear management skills. They need to get serious about how you get things done. As small as Vermont is, it is still a multi-billion dollar operation and it takes a competent CEO to run it.
   Signs of the deterioration in Shumlin’s performance in both realms have been growing for at least a year and a half. First, the political.
   A politician must communicate with the public, and a major, if not the major, channel for that is the press. Over time, Shumlin has become more and more remote. He is the most distant governor of the modern era. Howard Dean served six terms as governor—if a reporter called Dean at his house at 10 oclock at night,(his number was in the book) Howard would answer the call himself, he would cheerfully answer all the questions, and he would never lie. Reporters never had trouble reaching Madeleine Kunin, or Dick Snelling or Jim Douglas.
   The process of getting through to Pete Shumlin runs closer to gum surgery. He wants no part of talking to the press, even though he can be very good at it. And his press apparatus reflects that bias. Shumlin’s press operation has treated the press as the enemy, and when a politician treats the press as an enemy, the press becomes an enemy. Right now, the Vermont press, to a very considerable extent, has a very sour view of Pete Shumlin. That has to change. Right now, by, say, tomorrow at the latest. In the matter of health care reform, neither the public nor the legislature has the faintest idea what Shumlin’s initiative portends, and he has done virtually nothing to bring them along. He pretty much ignored the issue in the fall campaign. Coupled with the mess surrounding the Exchange that omission can only amplify the difficulty of selling his plan in January.
   As for managing, Shumlin’s performance has also been deeply flawed. He has to a far too great a degree, treated statesmanship as a political game. Solve problems by slick political maneuver. It worked for him when he ran the Senate., It won’t work anymore. The damage flowing from that posture is unmistakable. When he took office in 2011, he named his opponents in the Democratic primary to major jobs in his administration, an obvious play on the same policy carried out by President Abraham Lincoln, as described in the book by Doris Kearns Goodwin (Team of Rivals) Not necessarily a bad idea, but it was all about political resonance.
   The problem came when he turned over his most important bureaucracy, the Agency of Human Services, over to Doug Racine, and installed as his most important deputy Mark Larson. Racine and Larson were good guys, and were good at policy. Both had excellent records, Larson in the House and Racine in the Senate. But the jobs they got required strong skills in the management of complex operations; and neither Racine nor Larson had the operational experience to run a Jiffy Lube.
   So when Shumlin turned over the establishment of the Obamacare Exchange to AHS, the result was chaos, and then failure. Shumlin eventually turned the problem over Lawrence Miller, his Secretary of Commerce and Development, and Miller began to impose order on it. But that move came more than a year later than it should have and the whole, unnecessary blunder has left health care reform in a mess.
  Back to the political dimension for a moment: There is no reliable way to tease out the roots of the vote on Tuesday, and it may be my particular bias toward health care reform, but I continue to believe the kerfuffle over the “take over” of Medicare had a measureable impact on the vote. At a minimum, it demonstrated the deleterious effect of Shumlin’s penchant for secrecy and his failure to be candid with the public on a critical element of health care reform.
  The details of that issue are too complex to go into here (I will assess that issue in the next few days) but what was clear is that Shumlin never made any effort to explain to the public what was going on with Medicare as an element in his single payer planning; so that when the Republicans began making the entirely dishonest claim that he wanted to steal seniors’ Medicare money to fund his nefarious single payer scam the administration had no quick answer.
  Any delay on an issue like that is fatal. In fact, reporters who cover state government should have blown the Medicare canard out of the water. But how were they to understand it? There are dozens of hideously complex issues tied up in health care reform. And Shumlin has never said as much as a syllable about most of them. So—the press flounders, the public and the legislators are at sea, and Shumlin is just letting the whole mess drift.
  The conclusion: Shumlin can right his own ship. He can win future elections, if he wants to. And by navigating the state toward successful health care reform he can eclipse the performance of any governor in the state’s history, including giants like Phil Hoff and Deane Davis.
   But he has to bring up his game, and bring it up fast. We won’t have to wait long to see whether he does.
   January at the latest.

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A Bogus Claim and Vermont Politics

by Hamilton E. Davis

    The 2014 Vermont election now drawing to a close is one of the strangest in memory. There is virtually no competition for the U.S. House or Senate, or for governor. There is one huge issue on the state’s agenda in the form of Governor Peter Shumlin’s single payer initiative, and some lesser but still important questions like property tax levels and education financing. However, none appear to be affecting either the gubernatorial election or any significant number of legislative races.
   Yet, there are important forces at work underneath the surface which can be seen, if indistinctly, in the one competitive statewide race, the contest for lieutenant governor. Phil Scott, the Republican incumbent, is being challenged by Dean Corren, a former Progressive legislator who has been endorsed by the Democratic Party. Scott is an easy going, very popular Republican who has won his recent elections handily. The smart money calculates that Corren’s vote is likely top out at just a little over 40 percent.
   That reading could be correct, although the smart money often turns out to be wrong. Even if it is correct, however, the importance of the Corren candidacy extends well beyond the current campaign. The reason is that Corren himself and his campaign encapsulate the deep contradictions presented by the progressive movement. In the first decade of the millennium the Progressive Party very nearly turned the management of the state over to the Republicans, notwithstanding the huge margin enjoyed by the Democratic Party.
   In the 2002 campaign, Anthony Pollina, a Progressive, ran for Lieutenant Governor against Peter Shumlin, the Democrat, and Brian Dubie, the Republican. Dubie received just 41 percent of the vote; Shumlin got 32 percent, and Pollina drew 25 percent. The center-left, in other words had the support of 57 percent of Vermonters, a huge margin over Dubie.
   Yet Dubie got to spend eight years in an office that is tailor-made to get its occupant ready for a run for Governor. And when Dubie and Shumlin ran against one another for the governorship in four years ago, Shumlin prevailed only by a hair’s breadth. I have written about this issue and its recent history previously; that article is available on my web site, A Vermont Journal.
   Is that ancient history, or relevant contemporary history?
   I believe it is relevant for two reasons. The first is that the lieutenant governor could play an outsized role in the coming debate over single payer. He will have the deciding vote in the Senate in the case of a tie. Corren professes to be a strong supporter of single payer, and in the abstract he certainly is. But the single payer is much more complex than is generally supposed, and it is possible that Shumlin’s plan could be opposed by the left, in particular if the left decides that the level of benefits at the end of the legislative debate is too low, in their view.
   On a longer reach, Corren or another Progressive could run as a third party candidate in the future, just as Pollina did in 2002. I have heard no public discussion about that issue at all, despite its potential to have enormous effects on state politics. Over the past decade, the Progressives have alternated between a focus on issues and party building. And there is no evidence yet that the commitment to party building has receded.

    When Corren announced in June that he would run for lieutenant governor, he did so as a Progressive. His major issue, he said, would be his support for single payer. Up to that point, the narrative that Progressives have labored for more than a decade to establish is that the Democratic Party is worn out and reactionary and that any progressive legislation that advances does so because of the support from Progressives.

   And the commitment to party building was evident in the announcement. Morgan Daybell, the executive director of the Progressive Party, told Vermont Public Radio that Corren's candidacy would advance that cause. The Republican Party is weak, he said, and that leaves an opening for Progressives to step up to a statewide stage. He concluded:

   And I think what Progressives are able to do is to start to make the case that we can be the opposition party to the Democrats, and really pull the debate in our direction.

   In the same interview, also pressed the claim that Progressives rather than Democrats are the leaders on forward looking legislation. The roots of the health care reform movement lay in the bill that he, Corren, introduced into the 1993 session of the legislature, he told VPR.  That would be interesting, if it were true.
   It isn’t. The actual roots lay in the previous session of the legislature, when then-Senator Cheryl Rivers, a Democrat, introduced a single payer bill, S127, when the session opened in the winter of 1991. During the entire biennium, the Senate Health and Welfare Committee under the chairmanship of the Chittenden County Democrat Sally Conrad worked on the Rivers single payer bill, at the expense of almost all other issues.
   They not only held hearing after hearing in their own committee, they spent the entire summer of 1991 holding hearings all over the state and worked hard to garner public support. In 1993, Howard M. Leichter, a political science professor from Oregon, published a long article in the journal Health Affairs detailing the Rivers effort and he came to this conclusion:

   Two things were clear on the eve of the 1992 Vermont legislative session: There was broad and deep support for health care reform, and the option with the most visibility, although not necessarily political support, was S127 (the Rivers single payer bill).

   The House, meanwhile was working on a multi-payer reform bill, and Conrad and Rivers failed to get their single payer bill out of their own committee. But in a striking bit of legerdemain Conrad and Rivers struck a deal with Ralph Wright, the House speaker, to modify the House reform bill to include the design of a single payer system as well as a multi-payer system, both to be available to the 1994 legislature.
   The legislature subsequently decided to pursue the multi-payer option, which then failed.
   I bring up this history because it so clearly impeaches the Corren claim that he was the leader of the single payer reform movement. Corren did submit a single payer bill in 1993 session of the legislature, but it was purely grandstanding, given that the development of a plan based on the Rivers bill was already in process.
   While this history is in my view important, it is nowhere near as critical as where the Progressive movment goes from here. For Corren’s part, he sought and obtained the Democratic endorsement in his current campaign. He has professed to be enthusiastic about working with Democrats in the future, and he has been endorsed by major Democrats like Shumlin and Senator Pat Leahy.
   But there has been no discussion about whether the Progressives will run third party efforts in the future. In fact, it is quite clear that they have in no way renounced doing so. That is true despite the mountain of evidence that third party candidacies almost always function as spoilers…
  If you’re looking for evidence of the baleful influence of these spoiler candidacies, you might look to Maine, which has a governor named Paul LePage, who was elected with just 38 percent of the vote in last election and is running now for reelection. LePage, an almost comically right wing character, won despite the fact that Maine voters by a two to one margin favored a center-left candidate. LePage prevailed because there were two such candidates and they split the center-left vote. The same thing is going on in the current election.
    The New York Times has written about similar spoiler potential in statewide elections this year in North Carolina, Iowa, Hawaii, and Alaska, as well as Maine.
   It is the spoiler issue that sits beneath the surface of the election this year in Vermont. 

N.B. I am familiar with these events because I was a member of the Legislature in the 1991-92 session and I worked on the House bill; I also served on the conference committee that resolved the differences between the two chambers. The reader should also be aware that Corren and I ran against each other for a House seat in the 1990 election. In the two-seat district, I finished first, the late Rep. Alice Cook Bassett finished second, and Corren finished third. I did not seek reelection.  

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Giving credit where it's due

by Hamilton E. Davis

   Vermonters will elect a governor next week and it is virtually certain to be the incumbent Peter Shumlin. It is an unhealthy irony, however, that he will be elected more in spite of his successes than because of them.
   This judgment is based solely on the issue of health care reform. The governor has dealt with a range of other issues in his nearly four-year tenure of course, from school financing to genetic labeling to energy matters. But his single-payer initiative is the central issue of his governorship so far; health care reform dwarfs everything else. 
    Yet the whole issue of single payer has become a strange political enigma. The shrewdest political operatives thought the reform initiative would be the central concern in the current election campaign.
   It wasn’t. Health care reform will have virtually no impact on the outcome of the voting, although Shumlin’s margin will clearly suffer because of his handling of the insurance Exchange established under Obamacare.
   A major problem is that real health care reform is so complex that it has, so far at least, eluded the public, the legislature, the press---just about everybody, including, in the greatest irony of all, the governor himself.
  As a result, all of the attention over the last several weeks has centered on the Exchange, which isn’t really health care reform at all, just more money to get some more care for some more people, and isn’t really Shumlin’s at all, but rather Obama’s.
   Still, getting the Exchange up and running is Shumlin’s responsibility so it is fair to say it seems clear that all of the criticism of Shumlin’s performance in that regard is justified. Lost in the process, however, is any sense of the positive elements of Shumlin’s single payer plan. Which is a loss not only for Shumlin, but for all Vermonters.
   For the Shumlin initiative is truly stunning in its scope and ambition. It far exceeds anything even contemplated by recent governors, like Jim Douglas, Howard Dean, Madeleine Kunin, and Dick Snelling. You have to go back to Philip Hoff’s effort in the 1960s to build union schools and wrench an isolated, rural Vermont into the 20th century or Dean Davis, who saved the Vermont environment with Act 250, to find anything comparable.
   Moreover, in some important ways, Shumlin’s performance has been superb. Here’s how:
   Health care is by a wide margin the most important and difficult domestic issue that Americans have dealt with ever, with the possible exception of social security. Beginning in the mid-1960s, health care has exploded, both in its reach and complexity and its cost.
   Even before the turn of the millennium, it had become clear to everyone whose head was not under water that the current health care delivery system was not sustainable at its historic inflation rate. The costs simply were not bearable. So reform was essential.
   But who would do it? How would it work? How would doctors and hospitals, insurance companies, employers, policy makers, and the public at large summon up the political will to rework a social institution that deals with life and death and in the process eats up one dollar out of every five of our national output?
   Vermont and a half dozen other states tried hard in the middle 1990s, and failed utterly. Hilary and Bill Clinton tried for a national system in that decade also, and delivered one of the biggest policy train wrecks in our history. The whole history of the HMO movement was a litany of failure.
   As a candidate for governor in 2010, Shumlin plowed headfirst into this stony ground without a backward glance. He would go all the way toward full reform—single payer. He needed two things to get going—a plan that that had the potential to fully rework the system, and he needed a core team with the skill and drive to make it happen.
   He got both of them. He talked the two major players---Anya Rader Wallack, a national class policy analyst, and Steve Kimbell, a veteran lobbyist—into committing to the project. They in turn brought in other major players, like Robin Lunge in the governor’s office; and in a matter of weeks the team wrote and convinced the legislature to pass Act 48, which established the framework for the single payer plan.
   It is impossible to overstate the importance of Act 48. The early efforts to pass single payer in the U.S. focused on replicating the single payer system that Canada adopted in the mid 1980s. The left is still entranced by Canada, but the consensus in the American health policy community is that it wouldn’t work here.
   The Canadians built their plan so as to cover everyone and pay for it with taxes at both the federal and provincial levels. They left the delivery system, the doctors and hospitals, alone; there was no clear cost containment system to cope with the inflation that ensued with a huge increase in demand. Within months, the Canadian system began to crack under demand and they had no way to deal with it except by making people wait for care.
   The Shumlin team turned the Canadian system on its head. They started with cost containment and built the system based on their ability to control inflation. It is important to understand that policy makers of every stripe in the United States had been trying since the early 1970s to get American costs under control. All failed.
   To cut that knot, Act 48 established the Green Mountain Care Board, with the power both to regulate hospital budgets and to restructure the delivery system itself as well as the mechanism to pay the doctors and hospitals. That was critical because regulation alone had proved inadequate to corral costs.
   Moreover, the Green Mountain Care Board itself was designed to be light years more effective than its inadequate ancestors, the Vermont Hospital Data Council  and the Public Oversight Commission.
  Act 48 in short was simply brilliant—there is nothing to compare with it in the United States today, including Obamacare.
   At the same time, the Shumlin designers utilized a provision of Obamacare that envisioned the establishment of accountable care organizations (ACOs), coalitions of doctors and hospitals that would cooperate in delivering care. The purpose of these structures would be to replace the kind of competition between providers that had driven up costs for so long…
   Once in place, the Green Mountain Care Board began to fulfill its mission to bend the cost curve. After 40 years in which costs in the Vermont hospital system routinely rose by from eight to 11 percent, the trend is now running at just about three percent. That could still be a little high, but the board has delivered a solid cost performance for the first time in the modern era.
   For this performance—assembling a really good team and designing a brilliant reform plan, as well as getting an excellent start toward cost containment and restructuring—Shumlin has gotten no credit at all. As of this writing in Oct. 28, the Shumlin performance on the essence of health care reform has been, as far as I know, completely absent from the political environment.
  Why should that be?
   Part of the problem, although far from all of it, is the fault of Shumlin himself. The government machinery he built is excellent; his management of it, particularly the way he has dealt with the legislature and the public, not so much. Terrible, in fact.
   He talked about health care reform with an airy insouciance. It would all be perfectly straightforward, he was prone to say. We can get a single payer up and running by 2014, he said, “because we’re smarter than the feds.” The problems with the Exchange were a “nothing burger.” The feds will give us whatever waivers we need. It will be simple, you just swipe a card…
   So far from being routine, getting from a really good start in the first three years to an actual operating system that will fulfill the promise of Act 48 will be brutally hard, a fact that has been clear to the real health care players in the state but one that Shumlin hasn’t begun to share with the public.
   It hasn’t all been Shumlin’s fault, however. Part of it lies with much of the Republican Party in the state, whose candidates have had nothing substantive to say about health care reform. No Republican that I know of has said what she or he would do about health care reform in Vermont.
   But Shumlin remains the leader. I suspect that the reform environment will change drastically after the election. The plan for single payer has been developed pretty much in secret, but the veil is going to be pulled away once the legislature is back in session.
   At that point, the concept will still be brilliant. Act 48 will stand and it is finely wrought. And the team Shumlin has on the field is very good. But there has never been this big a challenge for the state ever, so success will be elusive.

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More Bunk on Single Payer

 Bob Frenier, the Republican candidate for the Vermont Senate from Orange County, has caused a stir in the Northeast Kingdom with his Burma Shave-type signs suggesting that Gov. Peter Shumlin's single payer initiative would degrade the benefits now available to seniors under Medicare.
  In fact, that would be impossible: the federal government will not grant a waiver to a state or region  to manage Medicare if there is any reduction in true federal level of benefits. Which makes total sense. Any move to reduce Medicare benefits would be political suicide for anyone contemplating it. 
   The only way that Shumlin could affect the current level of benefits would be to improve it. That could be done by reducing or eliminating the amount that Vermont seniors pay to get supplemental insurance coverage for their share of an episode of medical treatment. The buzzword for that is "Medicare wraparound", which is under discussion by the Shumlin design team. According to Robin Lunge, a top Shumlin aide, the wraparound would be complex, but a decision on the issue will be contained in the plan that Shumlin brings into the legislature in early 2015.
   The idea that Shumlin could or would want to degrade Medicare benefits is simply ridiculous. There are too many real, very difficult issues to wrestle with when contemplating health care reform to waste time dealing with phony issues like Frenier's, whatever you think about Burma Shave.

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Time To Get Serious

by Hamilton E. Davis

  State Senator Anthony Pollina got some media attention recently with his recommendation Governor Shumlin base his single payer health care reform initiative on the insurance system now in place for state employees.
  Pollina, a Progressive, told VPR’s Bob Kinzel that using the VSEA platform would be much simpler than setting up a whole new management operation for the envisioned Green Mountain Care; it might also avoid the kind of problems that have hamstrung the federal financed Exchange.
  What Pollina didn’t tell VPR is that just extending the VSEA plan would add a cool $288 million to the already very high estimate of more than $2 billion to get to single payer. According to Michael Costa, Shumlin’s finance designer, that would be the cost of shifting from the tentative Shumlin plan to have the state pay 87 percent of a patient’s costs to the VSEA level that pays 94 percent of those costs.
  A comment: with less than three months to go until the legislature begins to grapple with the Shumlin plan, it’s important that players such as Pollina stay somewhere in the vicinity of reality land. Ignoring a 14 percent bump in an already high number doesn’t meet the standard.

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Transparency Studies are Opaque

by Hamilton E. Davis

   For more than a year, the Green Mountain Care Board has been struggling to understand how the money spent on Vermont doctors and hospitals flows through the system. How much does a hip replacement actually cost at one hospital compared to another? Does that depend on who the insurance company is? Do different insurance companies pay one hospital differently from another? If so, why?
   The board has commissioned two studies to tease out these kinds of details about the payment system in the state. Yet the analyses are so convoluted that they have served more to demonstrate how opaque health care financing is than to render it transparent.
   The need to cut this knot is critical to the cause of getting costs in the system under control. And cost control is the single most important structural piece of Governor Peter Shumlin’s single payer reform initiative. Act 48, the statute governing health care management in the state, says plainly that the board’s responsibility is to get costs on a sustainable track, and that no single payer system can be put in place until it is clear that they are.
   Can it be done? And what will it take?
   Everyone involved in the health care arena knows that the way providers are paid makes no sense and badly needs to be rebuilt. But it has been very hard to see the finance problem clearly because for decades insurance carriers and hospitals have kept prices in the system hidden. They do this with non-disclosure agreements that make it impossible for the ordinary consumer, and for regulators like the Green Mountain Care Board, to figure out how the system actually works.
   The studies of the transparency issue have shown that there is incoherent variation in who gets paid how much for what. But the non-disclosure agreements have prevented anyone outside the system from seeing what the variations mean in dollars and cents.     It works this way: if you call a hospital and ask what it will cost to have your hip replaced, they will ask you what your insurance policy says. Based on that, the hospital will tell you what your out-of-pocket costs will be; if you ask, they will also tell you what they will charge the insurance company for the work. However, no one pays charges, there is always a discount.  If you ask what the hospital actually gets paid, they won't tell you because of the non-disclosure agreement. So, you never know the real price.   
   Buried in these studies, however, is enough information to get a glimpse of what’s going on. Here is an example:
   The first transparency study commissioned by the GMC board was carried out by Mike Del Trecco, Gary Zigmann, and Ted Gates of the Vermont Association of Hospitals and Health Systems and published in June of 2013. The second, by a group including Steve Kappel for a group at UVM and the UMass Wakely consortium, was presented to the board a couple of weeks ago. The data in the first study was from 2011.
   Both documents are pretty much torture to read, not because of any deficiency on the part of the consultants, but because the whole system has been built to be impenetrable. Still, the Del Trecco study contains a fascinating visual pricing diagram that inadvertently throws the current system into high relief.
   The diagram shows the variation in prices for DRG 470, a block of medical care that includes joint replacement of the lower body—mainly hips and knees. Here it is:

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   The diagram provides a look at how payments to the hospitals by various insurance carriers deviate from a mean value, represented by the heavy grey vertical line down the middle. Paler lines left and right of the central line are shown for amounts that are either plus or minus 25, 50, 75 or 100 percent of the mean.
   A quick glance will show you that payments to Rutland, Copley, Porter, and North Country hospitals tend to be higher than the mean, while Fletcher Allen and Central Vermont are below it. There are no dollars shown, of course. For a real shopper it would be like knowing how five television stores differ from one another, but without having any idea what it would cost to buy an actual t.v. set.
   The crack in this presentation is the straight line of eight red bullets left of the center line. These are Medicaid payments to the eight hospitals, and Medicaid payments are made by the state and are a matter of public record.
   So, voila, once you know from the state that the Medicaid rate for joint replacement is $16,000 per case, and the rest of the diagram is drawn to scale, you can convert the whole thing to dollars. The mean value scales up to $22,000 (hint: one millimeter equals $400).
   And the dollars are indeed fascinating. Take a look at Rutland. Vermont Blue Cross paid Rutland $31,200, far more than the mean. The diagram also shows that TVHP paid the hospital $34,000 for the same service. But Vermont Blue Cross and TVHP are the same company…why so high and why the difference within one carrier?
   And why are the payments to Fletcher Allen so much lower, ranging from $15,600 to $24,000. As at Rutland, the Blue Cross-TVHP passes understanding. Blue Cross pays FAHC $18,800 per case, while TVHP, the same carrier, pays them just $15,600.
   You can see these price differentials in the following table and bar graph:

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    Getting at what ought to be perfectly transparent payment flows this way is obviously a kind of guerrilla operation, and some caveats are in order. The amounts won’t be exact; scaling deviation from the mean with a ruler graduated in millimeters is less than precise, although the differences are clear enough. Payments from Medicare are not shown, although they would be the same for each hospital.
   A more important factor could be that some hospitals may be getting higher than average rates for a joint replacement in order to make up for short falls in revenue for an important community resource, such as delivering babies or running an emergency room, which might not pay for themselves.
   But the extra money could also be used for providing staff pay raises, or something else: the point is that nobody knows.
   A striking example of payments that don’t seem to make sense can be seen at Copley, a small rural hospital in Morrisville. Copley draws orthopedic patients from a much bigger area than just its community hospital service area. So there would not appear to be any reason why Vermont’s insurance carriers should be paying them such high rates.
   MVP pays them $30,000 per case, and Blue Cross pays them even more, $31,600. TVHP on the other hand pays Copley a relatively parsimonious $26,800. You will never find out the reason for these price discrepancies, but they make a mockery of the often-voiced sentiment that patients ought to be price conscious in selecting providers.
   One might argue that the patient really needs to know only his out-of-pocket costs. Still, the patient also pays the premiums and if a carrier is paying excessive prices for a service, that fact will drive up the premiums. 
   The whole system is, in fact, ripe for change and the resistance to such change may be crumbling. Asked about the disparities in the DRG 470 case, Don George, the president of both Vermont Blue Cross and TVHA,  said that Blue Cross has shifted its strategy over the last couple of years.
   “The payment rates in the reports and the variations they created between payers and providers reflected discounts off fee for service charges and product and network partnerships that made sense in the past, but are not consistent with how we approach things now,” he said.
   “Our entire focus is in reforming the payment system, not only to address these variations and provide greater transparency but more importantly to provide incentives to improve outcomes and control costs.”
   Responding in the same vein, MVP noted that the contracts reflected the circumstances "unique to each negotiation," but concluded, "We welcome the Green Mountain Care Board's ongoing analysis of payment variations among commercial payers and we fully support transparency moving forward."
   The decades-old system is already showing serious cracks in some other states. As of Oct.1 of this year providers in Massachusetts will have to publicly list their actual charges (albeit not the actual prices).  And for some time now Maryland law has required that insurance carriers pay providers the same amount for the same service.
   Given the fact that the current system can’t be seriously defended, the impetus appears to lie with the Green Mountain Care Board, which has enormous powers in this arena. Act 48, the main health reform statute, empowers the board to set hospital budgets, to set payment rates to providers if it so chooses, and it controls the rates that insurance carriers can charge its customers.
   Moreover, the board is the custodian of VCures, a statewide health finance data base that will become the foundation on which the entire system is operated. 
   If the board tells hospitals and insurance carriers that it won’t accept non-disclosure agreements that curtain the public and the board off from a clear view of the financing in the system then the secrecy will vanish from the scene.
   Such a  development would be an important step forward for health care reform in Vermont.  Neither the Green Mountain Care Board nor anybody else is going to achieve sustainable costs without it.