Eleven Years Under Howard Dean: Lessons from Vermont

Eleven Years Under Howard Dean: Lessons from Vermont
January 1, 2004

John McClaughry

John McClaughry is vice president of the Ethan Allen Institute. (read full bio)

Judging from his 11-year track record, Governor Howard Dean most wants Vermont voters to remember him for his efforts to drive down the fraction of Vermonters who lack health insurance coverage. Those efforts were persistent, but ultimately not successful.

The “young doctor-governor” began his effort by pushing Act 160 through to passage in his first legislative session (1992). The act created a Vermont Health Care Authority and charged it with bringing forth two sweeping health care plans. One was to be a single-payer plan Dean had championed as lieutenant governor in 1991. The other was something called “regulated multi-payer,” which Gov. Dean championed in 1992.

Act 160 also imposed community rating on all health insurance premiums. That practice divorces premium cost from health risk, so that young, healthy families with limited means are required to subsidize the premiums of older, more affluent families with more health problems. Community rating drove most of the private insurers out of the state.

Other provisions of Act 160 authorized a statewide insurance pool (abandoned in six months), binding state control over hospital budgets, and a “safety net” for customers abandoned by the fleeing insurers (which cost Vermont Blue Cross millions of dollars until effectively repealed by regulatory fiat).

In late 1993 the Authority presented the two required plans. They were immediately rejected by Dean and the single-payer forces in the legislature. In 1994, an effort to legislate a “universal access” plan collapsed so dramatically in the state House of Representatives that it became a national story in the New York Times. Shortly thereafter the legislature abolished the Authority.

In 1995 Dean decided to expand Medicaid instead of attempting a “universal” solution. Eligibility levels were increased until children in families with up to $51,000 in annual income could qualify for benefits. To finance the expansion, the legislature levied taxes on hospitals, nursing homes, and tobacco, and providers were underpaid even more dramatically than usual for the health care services demanded by program participants.

Higher Spending, Even More Uninsured

Eleven years have now passed under Dean’s leadership. Over that period, the state’s spending on Medicaid has risen from $86.7 million to $263.5 million. According to Census Bureau figures, the state’s uninsurance rate has gone from 9.5 percent (1992) to 9.7 percent (averaged over 1999-2001). In 1994--before Medicaid expansion--Vermont’s uninsurance rate was second lowest among the states. By 2001, Vermont had fallen to 10th place.

Dean’s defenders will be quick to point out that the Census Bureau data sample for Vermont is quite small, and thus the Vermont percentage jumps erratically between 8 and 14 percent. That is true. However, in 1997 Dean himself crowed about Vermont being second in the nation, based on the 1994 Census data. (At the time he crowed, the newer 1995 data showed Vermont had slipped back to 22nd.) If the governor can refer to Census data to tout his success, others are free to use the same data to reach a less-favorable conclusion.

So here’s the bottom line on the Dean era: Eleven years of dramatic expansion of government health care; the near-destruction of the individual and small group health insurance market; creation of a true Budget Monster, heading for a projected $95 million deficit by 2008; and a higher fraction of Vermonters without health insurance today than in 1992.

Wrong Strategy

A reasonable person would have to conclude that the state of Vermont has been doing something wrong here.

What’s wrong is the whole strategy of destroying the insurance market, relentlessly expanding government control, and above all shifting from personal responsibility for wellness to government delivery of services.

Vermonters need to recognize that a sound health care system ought to be based not on forced collectivization, underpaying hospitals and doctors, government mandates to take away consumer choice, and ever higher government spending.

The alternative--personal responsibility, well-informed consumers, a competitive insurance marketplace, tax-favored medical savings accounts, a high-risk pool for the uninsurable, and government assistance limited to those who are unable to pay for addressing their own health problems--ought to be looking a lot more attractive.


John McClaughry is president of the nonpartisan free-market Ethan Allen Institute in Concord, Vermont. He served in the Vermont Senate with Howard Dean from 1989 to 1992. McClaughry’s email address is eai@ethanallen.org.

John McClaughry

John McClaughry is vice president of the Ethan Allen Institute. (read full bio)