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Gov. Peter Shumlin: The man who'd bring single-payer health care to Vermont

Peter Shumlin, the newly elected governor of Vermont, has a plan for health-care reform: Rather than repeal it, he wants to supercharge it. His state will set up an exchange, and then, as soon as possible, apply for a waiver that allows it to turn the program into a single-payer system. You can read a summary of the plan here (Word file). I spoke with Shumlin this morning, and a lightly edited transcript of our conversation follows.

Ezra Klein: The report (PDF) prepared by Dr. William Hsiao offered three options for Vermont: single payer, a strong public option and a form of private-public single payer. My understanding is that you're backing the third option. What separates it from a traditional single-payer system?

Peter Shumlin: Single payer means something different to everyone. The way I define it is that health care is a right and not a privilege. It follows the individual and not the employer. And it's publicly financed. The only difference between single-payer one and single-payer three in Hsiao's report is that in single-payer three, the actual adjudication of payment is contracted to an existing insurance entity. So the state doesn't have to set up a new bureaucracy to run it. His modeling suggests that'd be more economical. It's a minute difference.

EK: And why go to a single-payer system at all?

PS: In Vermont, this is all about cost containment. There are 625,000 people in Vermont. We were spending $2.5 billion on health care a decade ago. Now we're above $5 billion. And we project we'll be spending a billion dollars more in 2014. This is where everyone has failed in health-care reform. And this will go after three of our main drivers of costs.

First, Vermont spends 8 cents on every dollar on administrative costs, just chasing the money around. That's a huge waste of money. Second, we'll use technology to conquer waste. You'll get a Vermont medical card, and everyone's medical records will be on that card, so you'll go into a doctor's office and they'll know what the last doctor did to you. That helps avoid duplication of services. And the last piece, the most challenging, is remaking the payment system so providers are paid for making you healthy, not for doing the most procedures.

EK: Single-payer systems often lose on the ballot and in the legislature. No state has successfully managed to pass one into law, much less implement it. And the objection that usually stands in the way of these projects is that I'm happy with my health-care insurance, and I don't trust the government to create something new and put me into it. How do you answer that?

PS: I suspect I'm the only politician in America who won an election in this last cycle with TV ads saying I was going to try to pass the first single-payer system in America. This election was a confirmation of my judgment that Vermonters are tired of enriching pharmaceutical companies and insurers and medical equipment makers at the expense of their family members. The reality in Vermont is that there are not very many Vermonters who are happy with the current system. We're losing our rural providers. Our small hospitals are struggling. And Vermonters are lowering their coverage and paying more and more for it.

EK: How will the funding work? Right now, a lot of money comes from employers. What happens to their share?

PS: Where health care has failed is in designing a cost containment mechanism that works. That's the really hard part of our job. So I'm asking us to spend the next 12 months designing the tools for cost containment. Once we do, we'll figure out how to structure the way we pay for it.

EK: One of the things you asked of Dr. Hsiao was to preserve provider incomes. How can you do that while cutting costs? At some point, doesn't lower spending also mean fewer doctors or hospitals or lower incomes?

PS: The reason Vermont has the opportunity to be the lab for a different kind of change is that we don't have a lot of high-paid physicians in Vermont. We have a lot of low-paid physicians. We have rural providers who're making less than they did when they graduated from medical school. Our cost driver is not that we have a lot of physicians running around in Mercedes-Benzes. It's waste in the system.

EK: How will this interact with other systems? Let's say I have Kaiser Permanente. I come to Vermont and break my leg. What happens?

PS: Nothing different than what happens right now. You'd go to one of our providers' offices, and they'd bill Kaiser for that one. No different than if you break a leg in France or Switzerland. Radical as this seems to Americans, the rest of the world has figured this out and gotten it right. We keep getting it wrong, and we're paying for it.

Let's talk about us

The name "Mitch Daniels" does not appear in Kathleen Sebelius's op-ed this morning. But the whole piece is a response to Daniels's op-ed in the Wall Street Journal demanding that states get more flexibility to set the standards governing the insurance products that'll be offered in their exchanges. Here's the key bit from Sebelius's rejoinder:

What these critics miss is that the law already gives states most of the resources and flexibility they're asking for.

States have discretion, for example, to offer a wide variety of plans through their exchanges, including those that feature health savings accounts. Utah and Massachusetts already operate exchanges but take very different approaches: Utah allows all insurers to participate; Massachusetts has stricter standards. Under the law, both approaches could work.

States also have the flexibility to decide what benefits plans must offer. They can choose to require basic protections, based on the typical benefits people get through their jobs, or set higher standards.

I hope and assume that someone in the Department of Health and Human Services has placed a call to someone in Indiana's Family and Social Services Administration. Two op-eds containing a variety of unsubstantiated assertions -- why does no one link to bill text? -- about what the law does and doesn't allow aren't worth much here. But if Sebelius's point is that the administration believes in giving states lots of flexibility and Daniels's point is that the states should have lots of flexibility and he's got some concerns, it seems like something could be worked out, at least if everyone involved is actually interested in working something out.

What Karl Rove gets right

I don't agree with Karl Rove on much, but he's right that if the GOP takes control of the White House, the House of Representatives and the Senate in 2012, they can kill the Affordable Care Act even if they don't have 60 votes in the Senate. More than that, if the GOP takes control of the whole government in 2012, they should be able to kill the Affordable Care Act.

The point of a representative democracy where various political actors have staggered terms is that it gives them breathing room to make difficult decisions and time to explain those decisions to the public. But if that time elapses and the public isn't convinced, and in fact is so unconvinced that they deliver the opposition two huge victories in a row, then that's it. Game's up.

The Affordable Care Act is a good bill, in my opinion. But a bearded prophet didn't walk it down from the Temple Mount. Either the legislators who support the law need to win some elections or the people who the public keeps rewarding for opposing the law should get their chance to repeal or rework it.

No apology -- unless you'd like me to apologize for something, of course

The paperback edition of "No Apology," Mitt Romney's second book, is being released, and Romney -- or his team -- has made a few changes. I'm sorry, did I say changes? I meant a few panders:

The first rewrite excises a relatively even-handed assessment of the 2009 economic-stimulus package. In the original, Romney wrote that it "will accelerate the timing of the start of the recovery, but not as much as it could have." The paperback pronounces the stimulus "a failure," and blasts Obama's "economic missteps" with conservative red-meat language -- for example: "This is the first time government has declared war on free enterprise."

The other major change comes in a chapter on health care. In the original hardcover, Romney tried to carefully distinguish between the Massachusetts law and the national version that was nearing passage as he wrote.

But the Massachusetts model has become Romney's bête noire among conservatives, who loathe the national reform they call "Obamacare." The rewritten paperback swings much harder, proclaiming that "Obamacare will not work and should be repealed," and "Obamacare is an unconstitutional federal incursion into the rights of states."

Other additions in that section blame the Massachusetts legislature for altering his plan, and the current Democratic administration of Governor Deval Patrick for botching the implementation.

Asked about the changes, Eric Fehrnstrom, spokesperson for Romney's Free and Strong America PAC, responded by e-mail: "The book was originally written in the months immediately following President Obama's inauguration. A lot has occurred over the last two years, and these updates reflect those happenings."

They also reflect the mood of the national GOP. The original edition of Romney's book suggested the former governor of Massachusetts thought the Republican Party might be looking for an even-tempered moderate to challenge Barack Obama in 2012. This edition assumes they're looking for a hard-charging partisan. It's probably the safer bet. But it's a bit of an odd strategy to take inside the two covers of a book titled "No Apology." I guess we should've paid more attention to the subtitle: "Unless You'd Like Me to Make One."

Wonkbook: So many budget proposals

There are two budget debates going on in Washington right now. One is about the budget for next year, fiscal year 2012. That's the debate that the Obama administration will kick off when they release their budget on Monday. The other is what happens for the rest of this year, fiscal year 2011. That's the debate Republicans are going to kick off when they release their budget proposal next week. Confused yet?

Recall that for all the lame duck session's productivity, Senate Democrats didn't manage to overcome Republican opposition to a package funding the government for fiscal year 2011. Instead, they passed a resolution keeping the funding going for a few more months. That bill is coming up for renewal soon, and Republicans are hoping to use it as leverage for some big cuts. At the same time, this is the season when the government traditionally begins debating its proposal for the next fiscal year, too. Which means we're going to have a bit of a budget-proposal pile-up next week: We're going to get two proposals next week -- and perhaps three, if the Republican Study Committee decides to go its own way -- but they'll be covering different time periods. Republicans in Congress are looking at the rest of this year (and at some point, Democrats in Congress are going to have to weigh in on that, too), while the administration is looking to next year.

Top Stories

The House GOP previewed its budget cuts proposal, report Lori Montgomery and Shailagh Murray: "House Republicans sketched their vision for a smaller federal government Wednesday, proposing sharp spending cuts that would wipe out family planning programs, take 4,500 cops off the street and slice 10 percent from a food program that aids pregnant women and their babies. Top White House priorities also would come under the knife: Key Republicans are proposing to defund President Obama's high-speed rail initiative, slash clean energy programs and gut the Office of Science by 20 percent - cuts that would deal a direct blow to Obama's innovation agenda. They would also cut the Environmental Protection Agency by 17 percent."

"All told, House leaders are aiming to cut programs unrelated to national security by more than $40 billion over the next several months, an unprecedented reduction...The full impact of the Republican plan was not immediately clear. Rogers released only a partial list of spending decreases measured against Obama's 2011 budget request, which was never enacted, rather than actual spending levels. He is expected to announce the complete spending plan later this week and present it for debate in the House starting Tuesday."

Conservatives are opposing GOP spending proposals from the right, reports Janet Hook: "Ultimately, the plan calls for a 9% reduction in nondefense, discretionary spending from 2010. It would eliminate some programs entirely, among them family planning for low-income Americans and the AmeriCorps national service program. But so many conservatives complained about the bill, aides to the GOP leadership said, that it might be revised with further cuts before it is introduced. Congress must approve a new spending measure for the current fiscal year by March 4, when short-term legislation that has kept money flowing for government operations expires. The bill must also pass the Senate, where Democrats hold a majority and are certain to push back."

Obama and the House look ready to cooperate on free trade and education, reports Perry Bacon: "President Obama and a trio of top House Republicans largely played down looming clashes at an hour-long lunch Wednesday at the White House, instead discussing issues of potential compromise, such as an education overhaul and free-trade agreements...Republicans have said they will support a free-trade agreement with South Korea that the Obama administration negotiated at the end of last year. And the president and congressional Republicans have in the past backed education proposals that emphasize increased accountability for schools whose students persistently get low scores on standardized tests. Next week, Obama plans to begin his push to get Congress to adopt his education proposals."

Fed chair Ben Bernanke urged Congress to pass an increase in the debt limit, report Neil Irwin and Peter Wallsten: "Federal Reserve Chairman Ben S. Bernanke offered dire warnings Wednesday about the damage Congress could wreak if it refrains from raising the government's debt limit this spring and forces the country to default on its debts.

Testifying before the House Budget Committee, Bernanke added his voice to a debate that could soon become a high-stakes contest of brinksmanship between Republicans and Democrats. With the national debt hitting record levels, President Obama needs to reach agreement with Congress on increasing the legal cap on how much money the government can borrow, or the federal government will be unable to pay some of its debts."

Folk interlude: Alexa Woodward plays "Darkest Days".

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Still to come: Interest groups oppose killing off Fannie and Freddie; states forge ahead with health care cuts; a group of Republicans want to require bills address a "single issue"; the Obama administration is cutting heating aid to low-income people; and two red pandas try to open a door.

Economy

Interest groups are mobilizing against a Fannie/Freddie overhaul, reports Zachary Goldfarb: "To many Republicans and the Obama administration, Fannie Mae and Freddie Mac, the government's mortgage giants, are ill. But rather than healing them, both sides agree that the companies should be left to die and that their support for the housing market should wither away. Some influential interest groups are taking issue with that surprising bipartisan consensus. They include small banks, real estate agents and consumer groups, who all say that Fannie and Freddie, or something similar, are crucial for sustaining the struggling housing market...Although Republicans and the administration agree that Fannie and Freddie have got to go, that's where the agreement ends."

The GOP wants to try aid to workers displaced by trade to approving new trade deals: http://wapo.st/fBVpx7

Annie Lowrey profiles Ron Paul -- and his plans to end, or at least bother, the Fed: "Last year Paul had what may be his greatest triumph as a legislator. He and other members of Congress successfully placed a provision to perform an audit of the Federal Reserve into the Dodd-Frank law, against the strong opposition of both the Fed and the Obama administration. The bill also forced the bank to release the details of 21,000 loans granted to financial firms during the credit crunch. Now Paul is in charge of the House subcommittee that actually oversees the Fed. That might cause some awkward moments, to say the least. The title of his book is not misleading. The central bank 'is immoral, unconstitutional, impractical, promotes bad economics, and undermines liberty,' he writes."

It's dangerous to treat the budget as a bargaining chip, writes David Wessel: "The White House argues there's no point in the president proposing anything serious on big health- and retirement-benefit programs until Republicans are ready to deal...By casting the budget as a bargaining chip in a two-year poker game with Republicans rather than showing gutsy leadership and offering ways to slow benefit spending, the president runs the risk that no one will take his rhetoric about taming the deficit seriously. Here's the tough reality: Even if defense spending goes from 4.7% of GDP to 2.8% by fiscal 2021, if stimulus spending ends, if domestic spending is cut and then frozen and if taxes are raised on upper-income Americans, the debt-GDP ratio still keeps climbing, Goldman Sachs projects."

Adorable animals failing at human activities interlude: Two red pandas try to open a door.

Health Care

State health spending is facing deep cuts, reports Julie Appleby: "Washington's quandary is shared by many states: Demand for health-related services is growing, voters don't want to raise taxes, payments to doctors, hospitals and clinics have already been reduced and states risk losing federal funds if they cut eligibility for the joint federal-state Medicaid health program for the poor and disabled...Health and Human Services Secretary Kathleen Sebelius told them they can trim some optional services, such as dental care, and those with budget deficits can cut eligibility for non-disabled, non-pregnant adults above 133 percent of the poverty line, which is $14,500 for an individual. Twenty-one states and the District of Columbia currently cover adults above that level."

The House GOP's malpractice reform efforts have hit a snag due to concern from Texas' reps: http://politi.co/hKpT68

Health care reform gives states more power than the federal government, writes Kathleen Sebelius: "The Affordable Care Act puts states in the driver's seat because they often understand their health needs better than anyone else - and that is why it is so frustrating to hear opponents of reform falsely attack the law as'"nationalized health care.' The truth is that states aren't just participating in implementation of the law; they're leading it. Consider the state-based health insurance marketplaces that will be created under the law in 2014. These marketplaces, called exchanges, will allow individuals and small-business owners to pool their purchasing power to negotiate lower rates. They'll also serve as a one-stop shop where insurers must compete to deliver the best deal."

Drug companies should be able to market drugs for the same condition together, writes Ian Spatz: http://nyti.ms/gwU9Cs

Domestic Policy

A group of Republicans wants to limit bills to one topic, reports Shira Toeplitz: "Republican Sens. Mike Enzi and John Barrasso of Wyoming want to end the practice of weighing down bills with irrelevant add-ons by confining every bill to a single issue, a companion proposal to one already proposed in the House. Lawmakers often combine issues into a single bill in an effort to drum up a coalition of support and move it quickly through Congress. But Enzi, Barasso and their co-sponsor in the House, freshman Rep. David Schweikert (R-Ariz.), introduced a bill this week to change that because they believe the current system does not give members enough time to review the legislation. 'Every bill voted on in the U.S. Congress should be considered on its own merit in an open and transparent way before the American people,' said Schweikert."

Democratic House members are pushing for Supreme Court Justice Clarence Thomas to recuse himself from campaign finance cases: http://politi.co/e8mV4S

Businesses are worried the House GOP will expand an immigration enforcement program, reports Shankar Vedantam: "In an early indicator of how congressional Republicans will legislate on immigration, House GOP leaders are expanding an inquiry into an enforcement program that allows employers to check the immigration status of employees. The E-Verify program has long been championed by Rep. Elton Gallegly (R-Calif.), chairman of the House Judiciary Committee's immigration panel, which will hold a hearing on it Thursday. Many business owners believe that Gallegly and other House Republicans want to make E-Verify, currently a voluntary program for companies, mandatory. Critics of such a move, many of them farmers, warn that it could destabilize the agricultural economy."

Teacher's colleges are fighting attempts to grade them: http://nyti.ms/fLYDx7

Progressives should be open to Social Security cuts, writes Matt Miller: "Advocates for these built-in increases (which didn't exist before the late 1970s) say Social Security should always replace the same portion of wages as it does today; since real wages will grow as the economy grows, the logic runs, so should benefits...But in an era when health care and pensions for seniors are poised to crowd out cash for every other public priority, or else require tax increases beyond what even liberals think would be good for the economy, this shouldn't be the left's only objective...Should Democrats really say trillions in automatic pension increases over today's levels are 'untouchable,' when there's no similar 'trust fund' guaranteeing great teachers for poor children, universal preschool, repairs for America's crumbling roads and sewers or help for [insert your favorite non-elderly priority here]?"

When ads aren't short enough interlude: This year's Super Bowl ads in two minutes.

Energy

Obama will cut energy assistance for the poor, reports Marc Ambinder: "President Obama's proposed 2012 budget will cut several billion dollars from the government's energy assistance fund for poor people, officials briefed on the subject told National Journal. It's the biggest domestic spending cut disclosed so far, and one that will likely generate the most heat from the president's traditional political allies. Such complaints might satisfy the White House, which has a vested interest in convincing Americans that it is serious about budget discipline. One White House friend, Sen. Chuck Schumer, D-N.Y., said earlier today that a Republican proposal to cut home heating oil counted as an 'extreme idea' that would 'set the country backwards.'"

EPA administrator Lisa Jackson got a frosty reception in the House, reports Darryl Fears: "EPA Administrator Lisa P. Jackson got a cool reception Wednesday in her first appearance before a House energy subcommittee under Republican rule. Conservatives grilled Jackson on her agency's ability to regulate greenhouse gases that contribute to climate change, saying it would burden manufacturers with expensive costs. EPA regulations would 'reduce manufacturing output in Michigan by $3 billion,' Rep. Fred Upton (R-Mich.) said. Last week, Upton and Sen. James Inhofe (R-Okla.) unveiled legislation that would strip the EPA of its ability to force industries to lower substantial greenhouse gas emissions linked to global warming under the Clean Air Act."

Republicans vow to block Obama's high speed rail proposals: http://on.wsj.com/gxEIXZ

Climate denialism has become Republican orthodoxy, writes Brad Plumer: "Take Fred Upton, the new chair of the House energy and commerce committee, who is working with Inhofe on the stop-the-EPA bill. Upton once thought climate change was 'a serious problem.' But, just this week, he said at a National Journal event, 'I do not say that it is man-made.' Surprisingly, he didn't feel the need to explain his shift--he recently told Politico that he probably wouldn't bother to hold climate-science hearings...At the hearing on Wednesday, Texas Republican Joe Barton was simply content to quote former EPA economist Alan Carlin saying that the theory that humans were warming the planet failed to 'conform with real world data.' (He didn't trouble himself explaining what real-world data he was referring to. Record temperatures? Dwindling ice caps? Who can say?)"

Closing credits: Wonkbook is compiled and produced with help from Dylan Matthews and Michelle Williams. Photo credit: Pablo Martinez Monsivais Photo.

Reconciliation

Recap: The states have cut spending pretty deeply, the White House has made some serious mistakes in Senate recruitment, and people in government like to gossip.

Elsewhere:

1) Former Democratic Leadership Council Policy Director Ed Kilgore on the DLC.

2) A few brave members of the House GOP decided to forgo the government's health-care insurance. This is their story.

3) "You want an acronym? Let's try ERF: Eat Real Food."

4) Real talk.

5) How to live with a chef.

Recipe: Sous vide tongue tacos. I've got these going at home right now.

Heads taxpayers win, tails they don't lose

There are basically two models for encouraging the private sector to do things the public sector wants done. You can pay them to try, or you can pay them to succeed. It's subsidies vs. prizes. According to David Leonhardt, the Obama administration is going to announce more than $100 million in prize programs next week -- but these come with a twist:

The idea goes by one of two names: pay for success bonds or social impact bonds. Either way, nonprofit groups like foundations pay the initial money for a new program and also oversee it, with government approval. The government will reimburse them several years later, possibly with a bonus — but only if agreed-upon benchmarks show that the program is working.

If it falls short, taxpayers owe nothing.

The first British test is happening at Her Majesty's Prison Peterborough, where 60 percent of the prisoners are convicted of another crime within one year of release. Depressingly enough, that recidivism rate is typical for a British prison.

To reduce the rate, a nonprofit group named Social Finance is playing a role akin to venture capitalist. It has raised about $8 million from investors, including the Rockefeller Foundation. Social Finance also oversees three social service groups helping former prisoners find work, stay healthy and the like. If any of those groups starts to miss its performance goals, it can be replaced.

For the investors to get their money back starting in 2014 — with interest — the recidivism rate must fall at least 7.5 percent, relative to a control group. If the rate falls 10 percent, the investors will receive the sort of return that the stock market historically delivers. "It's been only a few months," says Tracy Palandjian, who recently opened a new Social Finance office in Boston, "but the numbers are coming in O.K."

This isn't quite a prize program. In a prize program, you're competing with an unknown number of other groups to hit a goal first. If there's a big prize awaiting on the other end, you're likely to be up against a lot of folks. That means your likelihood of success is low. Investing a lot of money and manpower into the project is thus a bad bet.

In a pay-for-success program along the lines of what Leonhardt is describing, you get paid as long as your program fulfills it goals. Indeed, you not only get paid, but you get paid back for everything you invested into the project. Thus, if you believe that success is likely, you have an incentive to invest a lot more money and manpower into the project than you would under any of the other scenarios. So if this program works, it could unlock a lot more private money, at a lot lower taxpayer risk, than either a traditional prize program, where the incentive is to underinvest, or a traditional subsidy, where taxpayers lose their investment if the program fails.

The danger with a pay-for-success program is that it pushes against more experimental efforts. The incentives are set up to reward projects that are likely to work, not projects that have a high risk of failure. But sometimes, projects with a high risk of failure also have the potential for more breakthrough success. So discouraging their pursuit can cut both ways. All that said, it's not as if these bonds are the only way we'll be attempting to solve social problems, so this isn't a huge issue.

What happens to the unemployed, in one graph

If you ask people how an unemployed person stops being unemployed, they'll probably say that the person gets a job. But that's not the only answer: A person can stop being counted as unemployed if she gives up looking for a job. That's the worst of all worlds, of course. Giving up on working when you want a job is bad for income, for skills, and even for health and happiness. But as this graph from Mike Konczal shows, it's become increasingly common: