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ColoradoCare by the Numbers

screen-shot-2016-10-04-at-10-16-06-amWhen Vermont Governor Peter Shumlin dropped his support for Green Mountain Care a year and a half ago, it looked like single-payer healthcare in the United States might have taken a fatal blow.

But no! A couple of thousand miles away, in Colorado, a new single-payer proposal is on the November ballot and might even pass. 

ColoradoCare would put in place a quasi-state-administered health plan covering almost every resident of the state. Paid for by a “premium tax” on businesses and individuals, it would provide a wide range of benefits for residents not covered by any federal government program (but including those now enrolled through ACA insurance exchanges). It also would pay for Medicaid services at the same rates as other residents and provide supplemental Medicare coverage.

ColoradoCare’s proposed coverage is remarkably generous, with no deductibles and with zero copays for most primary care, but—predictably—the ballot measure to create the program faces strong opposition from insurers and most business owners.

What’s likely to happen? A June poll showed strong support, but the insurance industry is now funding a barrage of negative publicity. Support for the ballot measure may also be eroded by the announced opposition of Colorado’s Democratic governor, and by a Colorado Health Institute analysis indicating that revenues would likely be insufficient to cover costs.

We’ll have to wait to see what happens in November (and as events in Vermont have shown, ballot success doesn’t mean implementation will follow). However, we can identify issues that all single-payer proposals face.

People don’t like government. – Realistically, single-payer universal coverage can only be achieved by government—state or federal. Funding must come directly from government, or as a result of a tax, or through a government mandate forcing citizens to pay premiums (as the ACA has attempted to do). ColoradoCare tries to deal with the issue by creating a new governmental jurisdiction controlled by an elected board independent of the state’s executive and legislature but, even so, is being painted by opponents as “socialized medicine.”

People really don’t like taxes. – Obamacare tried to duck this problem though a combination of mandates and subsidies. States, however, can’t impose effective tax penalties on those ignoring a mandate. (It turns out that the Obamacare penalties aren’t too effective, either.) The alternative of an income tax creates instant opposition, not only from tax opponents, but also from those who worry about the effective doubling of state budgets, even though the average citizen might see no increase in costs. ColoradoCare’s attempted solution is to call its levy a “premium tax,” rather than an income tax. However, this raises another issue: will the IRS allow a “premium tax” as a tax deduction for individual filers? No-one knows.

What will employers do? — A switch to a single-payer system like ColoradoCare (with costs split between employees and employers) will mean that some employers will pay less and some will pay more than at present. The same is true for employees. Two questions arise. Will employers paying less increase their employees’ wages (especially for employees paying more than currently)? Will employers paying more (including some paying for coverage for the first time) cut their staffs or impose wage reductions?

What will providers do? – Providers may welcome having to deal only with a single insurer, but may be less happy with the increased care load resulting from a single-payer’s fewer restrictions and more enrollees. Since one of the arguments for single-payer is the potential reduction in provider administrative effort, they can also expect to see lower fees which can only be made up for by reducing staff. Some providers will gain from a change to single-payer, others will see the potential loss of revenue and fight it vigorously.

Will the federal government give their approval, and when? – Implementation of single-payer will require waivers from both ACA and Medicaid regulations. Section 1332 waivers (which require approval by CMS and the Treasury Department) allow changes to ACA rules provided there is no reduction in benefits or numbers covered and the waiver does not increase the federal deficit. Section 1115 waivers allow changes to state Medicaid programs provided the changes are budget-neutral to the federal government. If waivers are granted, a single-payer state would pick up the tab for any increase in per capita Medicaid costs and for any reduction in ACA mandate penalties otherwise collected by the federal government.

Whether waivers would be granted may depend as much as anything on federal opinions of financial and operational viability. Washington bureaucrats will not want to be blamed for encouraging implementation of a program that collapses or becomes bankrupt. CMS and Treasury evaluators will want to see every detail of the proposed fee schedules, along with projections of utilization, with an actuarial analysis showing the program can operate within revenue constraints. In ColoradoCare’s case, the 1115 waiver may also depend on CMS’ willingness to approve an approach that imposes premium taxes on Medicaid recipients and their employers.

No 1332 waiver has so far been processed, but the generally less complex 1115 waivers take on average almost a year for approval in spite of the experience of both states and CMS evaluators. Although CMS and Treasury have committed to no more than 45 days for a preliminary review and no more than 180 days for a final determination after a state’s 1332 application is determined to be complete, this leaves an unlimited amount of time between the preliminary review and the start of the 180-day commitment. Given the enormous amount of detail required for a 1332 application, and CMS’ insistence on separate evaluations of “twin” waivers, it’s hard to imagine the process being completed in less than a year—and perhaps much longer—and that’s on top of the federally required public comment period and the months necessary to prepare the waiver applications.

How difficult and costly will implementation be? – The travails of the federal government and various states in developing ACA exchanges give some idea of the costs and time necessary to implement a major healthcare system innovation. Implementing single-payer may face even more problems, starting with the uncertainty of waiver approvals. How fast should the new single-payer entity move in refining policy and operational details before waiver approval? The information required by the waiver applications will force states to define their proposed policies and procedures in great detail before submitting their applications, but this will still leave the uncertainty of when to build membership and payment systems and operational staffing and develop provider agreements.

The bottom line? Single-payer offers many advantages: guaranteed coverage, lower administrative cost, no “employer lock,” better continuity of care, and fairer funding. On the other hand, the “re-contouring” of the playing field means there will be winners and losers—and the potential losers will vigorously oppose it. It’s a high-risk proposition for a state at every step: ballot approval, waiver application effort, implementation—and, eventually, ongoing operation.

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Jonathan Halvorson
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Roger, you might also be interested in what Vermont is going ahead with after their single payer approach failed: an all-payer ACO with a global budget. Payers don’t set their own rates and everyone, payer and provider, has to live within a global budget. This cuts across Medicare, Medicaid and commercial insurance (state-regulated, not ERISA-regulated).