Illustration by Bloomberg View
Illustration by Bloomberg View

Vermont has an idea for health care. It wants to adopt a single-payer plan. Florida has an idea for health care, too. It wants to privatize Medicaid. One approach puts its faith in government, the other in market forces. Although the plans couldn’t be more different, they have one thing in common: Both need waivers from the Obama administration to deviate from existing laws.

Given the urgency of U.S. health-care woes, the government would do well to allow these diametrically opposed experiments to go forward.

In Vermont, Democratic Governor Peter Shumlin signed into law a plan that would offer insurance to the state’s 620,000 residents, including those without coverage and those on Medicaid. A five-member board, appointed by the governor, would determine benefits and set doctor and hospital payment rates. The state is considering paying for the plan with a 12.5 percent payroll tax. Employers that offer health insurance would not be exempt from contributing.

Florida has a different approach. With the support of Republican Governor Rick Scott, the Legislature voted to seek a block grant from Washington that would let the state shift almost all its Medicaid population into private, managed-care plans. Starting in July 2012, the state would be divided into 11 regions, and insurers and other health plans, including doctor and hospital networks, could compete for business in any or all of them. Recipients would have to pay $10 a month, plus a $100 copayment for showing up at an emergency room for non-emergency care. The Florida law would limit malpractice awards by capping pain and suffering payouts at $300,000, well below the $500,000 allowed other state residents.

Pros and Cons

Not surprisingly, both plans have strong support -- and strong opposition. Vermont’s backers talk about volume discounts and big savings in time spent on paperwork and not having to keep shareholders happy; its detractors argue that the payroll tax will drive business from the state and raise unemployment. Backers of the Florida plan cite managed care’s power to drive down costs and track patients; opponents reply that health-care providers will scrimp on care.

The fact is, there are good arguments on all sides, and we have little idea whether either plan will work. We don’t know if a state can insure most of its residents without going broke. And studies are inconclusive on whether a state can both demand that health plans cut costs and protect the quality of care.

Grant Waivers

To that end, the Obama administration should, as a waiver condition, require both states to adhere to a so-called medical-loss ratio, meaning they must spend a percentage of revenue, to be set in consultation with Washington, on patient care. The administration should also require regular evaluations to know whether the experiments are working and to allow for corrections.

It could be, in fact, that neither the Florida nor the Vermont plan will pan out. Maybe the solution will lie in the experiment proposed by Christine Gregoire, Washington’s Democratic governor, who wants to convert her Medicaid program into a block grant, giving the state freedom to change eligibility rules that federal law now bars. All three state experiments deserve to be approved; chances are, they’ll tell us many things we don’t know.

To contact the Bloomberg View editorial board: view@bloomberg.net.