The tab for health care grows

Healthcare costs in Vermont are growing and history suggests it could be difficult to slow them

Vermonters spend about $5 billion a year on health care, nearly 20 percent of the state's gross domestic product. Both of those numbers are large, and hard to wrap your hands around.

On a per capita basis, the federal government estimates Vermonters spend about $6,800 per person on health care, or $27,200 for a family of four. That's also a very large number, but one I can actually conceptualize. Yet I know few people who spend that much on health care in any given year, much less every year. That's because most people don't.

Only a very small number of families experience very large health care expenditures in any one year, and even fewer experience them on an ongoing basis. We buy (or should be buying) health insurance to protect us from catastrophic medical expenses, just as we buy homeowner's insurance to protect us from the catastrophic expense of losing our house.

In both cases it stands to reason that the average insurance policy has to cover the cost of what is being insured against. If, on average, per capita health care spending is $6,800, the average person is going to have to pay, one way or another, $6,800 for health insurance. By its very nature, that's how insurance works. Vermont's health insurance reform law, Act 48, is all about dealing with this cost.

I think most Vermonters see three big problems with health insurance: First, there are a number of Vermonters-about 6 or 7 percent of us-who do not have either private or publicly-funded insurance. Second, insurance is expensive, especially if everyone is paying roughly the same dollar amount whether they are sick or healthy, young or old. Third, and what I think is most important to the vast majority of Vermonters, is the fear that if they lose their job, they will lose their health insurance. If they or someone in their family has a serious medical condition, it's an even more important concern.

(Photo: DT)

Over the past 20 years, governors Howard Dean, James Douglas, and Peter Shumlin have all implemented programs to reduce the number of uninsured in Vermont and to reduce health care costs. More realistically, they have tried to reduce the growth rate of health care costs, or as they put it in terms that only a politician could invent, to 'bend the health care cost curve.'

Governors in almost every other state have also tried to 'bend the curve,' and many have also tried to reduce the number of uninsured, so Vermont is not alone in this quest.

Have these Vermont programs succeeded in bending the curve? In 1991, Vermont's per capita health care spending was twelve percent below the national average. After twenty years of trying to reduce spending growth, Vermont now spends twelve percent more than the national average.

What about the number of Vermonters without health insurance? That has declined over the past decade, but only by about one percentage point.

That's not how I would define success.

Will Vermont's current plan to implement a single payer health care system reduce the growth in health care spending? If history is any guide, I'm not very confident in the state's ability to accomplish that goal.

Art Woolf is associate professor of economics at UVM and editor of The Vermont Economy Newsletter.

Read or Share this story: http://ift.tt/1rkJlaw