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Press Release

Canada South


This piece originally appeared in The Wall Street Journal on
May 5, 2005.

CONCORD, Vt. -- The real political news in Vermont has been buried under recent headlines announcing the retirement of Sen. Jim Jeffords: The Vermont House has approved the most radical health care proposal ever to gain majority support in a state legislative chamber.

In its early days in the Union -- after 14 years as an independent republic -- Vermont was a bastion of 18th century radicalism dedicated to principles of "liberty and property." But shaped by the state's traditional town-meeting democracy, succeeding generations of Vermonters tempered this radical individualism. Until recently, however, Vermonters had steadfastly resisted big-government collectivism.

This great leap forward into socialized medicine can be traced to the governorship of Madeleine M. Kunin (1985-90). She was committed to a Canada-style single-payer system. But her plan faded as revenues declined and she ultimately settled for providing health services to needy children age six and under. But the single-payer concept would rise again.

In August 1991, when Gov. Kunin's Republican successor Richard Snelling died in office, part-time lieutenant governor and physician Howard Dean suddenly found himself Vermont's chief executive. Gov. Dean quickly distanced himself from the single-payer idea he had supported, favoring instead something called "regulated multipayer." Translation: Hillarycare.

Gov. Dean convinced the 1992 legislature to create a Health Care Authority to come up with two proposals: a single-payer plan and a regulated multipayer plan. But when it came time for a House vote in 1994, political support for a big-government solution had evaporated. Health care "reform" died ignominiously after a 7-0 vote in the Senate Finance Committee, and the Health Care Authority was abolished in 1996.

From 1995 until late 2004, health care "reform" in Vermont consisted of Gov. Dean's constant expansion of Medicaid to higher income workers, known as the Vermont Health Access Plan. Since the plan's costs rose much faster than the revenues assigned to pay for it, Gov. Dean financed the expansion by progressively underpaying doctors, dentists, hospitals and nursing homes. His successor, moderate Republican Jim Douglas, ruefully announced in his 2005 inaugural address that the state was headed for a $270 million Medicaid shortfall by 2007.

But the new, exceptionally left-wing legislature elected with him was eager to implement their platform pledge of a single-payer health system. House Democrats, with a working majority of 89-60, elected the very liberal Rep. Gaye Symington as speaker.

Rep. John Tracy, chairman of a new committee on health care reform, drove his committee hard to come up with a plan. The eventual bill declared that Vermont had no "clearly defined, integrated health care 'system,'" but instead, a patchwork of programs, inequitably financed, leaving some 60,000 Vermonters without access to care. The proposed solution was universal coverage for "essential" services as defined by legislative committee. The state's 12 hospitals would be subjected to a binding "global budget." Doctors and other providers would be compensated on a "reasonable" and "sufficient" basis, in light of bureaucratically established "cost containment targets." Private health insurance for essential services would be abolished. The new system would be paid for by $2 billion in new payroll and income taxes.

The plan overlooked a few sticky considerations. Many Vermonters go to hospitals in neighboring states: How could those hospitals be forced to accept Vermont's government payment rates? What about sick people migrating into Vermont to gain the benefit of the universal care? How could the state have "single- payer" efficiency when Medicare, Medicaid, and Veterans Administration care existed side by side with "Green Mountain Health"? The final version of the bill, which appeared on the House floor on April 20, didn't settle these questions.

Nonetheless, the House passed the single-payer plan on a vote of 86-58. Gov. Douglas attacked the measure as potentially "devastating to our economy." "They are asking Vermonters to pay more taxes, but get less health care," he said.

The business community largely ignored the problem for the last 10 years. Then, on the eve of House passage of "Green Mountain Health," business organizations finally united in opposition to the single-payer plan, but they still couldn't agree on a strong alternative proposal. The Retailers and Grocers associations came up with a plan whereby the group insurance market would remain the same, but the individual (non-group) market would be converted into a government-run Vermont Health Security Plan. Those not otherwise covered would be required to buy insurance from this plan.

Democratic Senate leader Peter Welch, though a longtime single-payer advocate, quickly sidetracked the radical House proposal. A proposal for more modest reform would avoid a certain veto battle, and the negative fallout for the liberal legislators who strayed beyond what even liberal Vermont voters want. The current Senate version features a new payroll tax to be paid by employers that do not offer health coverage and by their employees. Its price tag is only $40 million, a far cry from the House plan's $2 billion.

Sen. Welch is a likely candidate for governor when Gov. Douglas vacates that office. Many believe that he does not want to be viewed by the business community as the champion of socialized medicine in a future statewide campaign.

All of this would seem to be a tempest in a very small teapot, but for one thing: Over the past 30 years, Vermont , with a liberal majority, a hive of activist left- wing organizations, and a press corps largely hostile to anything smacking of conservatism, has become the nation's premier blue-state testing ground for virtually every imaginable liberal proposal. Putting single-payer health care in place in Vermont would be an enormous breakthrough for the left. This year its advocates are closer to victory than ever before. If they ultimately succeed, the reverberations will be felt from coast to coast.

Mr. McClaughry, a former state senator, is president of the Ethan Allen Institute.