Vermont embarks on single-payer health care plan

The laboratory of democracy is about to run a test on single-payer health care, as the state of Vermont has passed a bill to implement a Canadian-like system on our side of the border. Megan McArdle reports for Bloomberg:

Of the plans that states have hatched for the Affordable Care Act, none has been bolder than that of Vermont, which wants to implement a single-payer health-care system, along the lines of what you might find in Britain or Canada. One government-operated system will cover all 620,000 of Vermont’s citizens. The hope is that such a system will allow Vermont to get costs down closer to Canada’s, as well as improve health by coordinating care and ensuring universal coverage.

Heady stuff for progressives. This has been their dream all along for American medicine. And now they get their chance. But as Ms. McArdle reports, there are a few problems:

Just two small issues need to be resolved before the state gets to all systems go: First, it needs the federal government to grant waivers allowing Vermont to divert Medicaid and other health-care funding into the single-payer system. And second, Vermont needs to find some way to pay for it.

Although Act 48 required Vermont to create a single-payer system by 2017, the state hasn’t drafted a bill spelling out how to raise the additional $1.6 billion a year (based on the state's estimate) the system needs. The state collected only $2.7 billion in tax revenue in fiscal year 2012, so that's a vexingly large sum to scrape together.

Wow, that’s a 59% increase in tax revenue. Too bad Vermont can't just print money, as the federal govenrment does. And, as McArdle points out, these sorts of cost estimates are always on the low side. Sometimes, by multiples. So Vermont’s taxes are going to have to go up a lot. In fact, by her calculations, Vermont’s taxes will go from the middle of the pack among states to the very highest, outpacing even California, New York, and Hawaii.

I actually applaud this experiment. Let’s see how it works out. Vermont, as it happens, shares a long border with New Hampshire, which prides itself on having no income tax or sales tax. Let’s watch how people vote with their feet.

Ms. McCardle thinks Vermont will pull the plug:

…this is going to be expensive. So expensive that I doubt Vermont is actually going to go forward with it.

This should be instructive for those who hope -- or fear -- that Obamacare has all been an elaborate preliminary to a nationwide single-payer system. It isn’t. The politics are impossible, and even if they weren’t, the financing would be unthinkable.

I hope she is wrong, and that Vermont demonstrates for the rest of us what happens when the government completely takes over medical care financing.