The Magazine

Vermont's Badly Managed Care

From the January 12, 2004 issue: Dean's health care record as governor is nothing to brag about.

Jan 12, 2004, Vol. 9, No. 17 • By DAVID GRATZER
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HOWARD DEAN'S campaign wants you to know that he used to be a practicing physician. Campaign literature refers to him as "Gov. Howard Dean, M.D." At public events, his supporters wave signs proclaiming "The Doctor Is In." Dean often addresses issues--mainly non-health care issues--by referring to his former occupation. "As a doctor, I know that failure to act on the environment has devastating consequences," he recently told a crowd. During one rally, he even brandished a stethoscope.

Stories about Dean's commitment to medicine reach mythical proportions. In Vermont, people talk about the afternoon Dean's predecessor died. Dean, then serving in the part-time job of lieutenant governor, was seeing patients in his medical office. He received the call, but finished examining his patient before driving off to be sworn in as governor. The message is unmistakable: Even from day one as governor, he put patients first.

"As a physician, I've seen the suffering caused by this nation's health care crisis," his website explains. "As Governor, I know it can be solved." It's a bold claim. Too bad it doesn't hold up on examination. As a look at his 11-year gubernatorial record shows, the doctor administered some pretty bad medicine to the people of Vermont.

Children's health is supposed to be Dean's signature issue. His campaign cites statistics on children's health coverage in Vermont: Ninety-six percent have insurance. If that sounds good, there are other seemingly impressive accomplishments: Nearly 90 percent of Vermonters have health coverage; in Vermont, Medicaid assists the poor and the working poor. And Dean managed to create this health nirvana while balancing the state budget.

Put in perspective, though, the picture seems less awesome. According to the Census Bureau, 9.5 percent of Vermont's population lacked insurance when Dean assumed office in 1991. About 9.7 percent lacked coverage at the end of his term (average of 1999-2001). Over the Dean years, Vermont fell from second to tenth in share of population with total health coverage. Such minute differences could easily be statistical noise, but if Dean claims to be the man who did something about the uninsured in Vermont, it seems there wasn't much of a problem to begin with.

From a distance, then, Dean's health care record seems marked by inactivity--after all, the percentage of people covered hardly changed. But this obscures dramatic changes under Governor Dean in who provides coverage to Vermonters. "Every governor has his obsession," notes John McClaughry, a former state senator who runs the free-market Ethan Allen Institute. "Health care was his. He worked on it until he lost sight of the big picture." The Dean years saw a sustained effort to increase public insurance coverage while hampering the spread of private insurance.

First, Dean meddled in the private insurance market. Before his swearing in, Vermont's legislature passed a bill mandating "community rating" and "guaranteed issue" for health insurance. Community rating means that premiums are based on age, rather than health status. It aims to reduce premiums for the chronically ill. Guaranteed issue requires insurance companies to sell policies to all applicants. Again, the aim is to improve access for those who aren't healthy.

While these mandates may appear innocuous in and of themselves, when combined, they create perverse incentives for people to game the system. People can buy insurance after they get sick--and yet they still pay the rates of other people their age. A downward spiral for private insurers follows. Faced with massive rate hikes, small employers drop coverage for younger workers. With an insurance pool of older and sicker workers, those left face high premiums.

Vermont isn't the only state to achieve such results with guaranteed issue and community rating. In New Jersey, according to the Coalition Against Guaranteed Issue, it now costs more to buy a family health insurance than it does to lease a Ferrari.