Peter Shumlin, Vermont’s Governor, is expected to sign legislation tomorrow putting Vermont on the path to having the nation’s first single payer health insurance system (for a review of the Vermont legislation, see Kevin’s series of explainers). It’s hard to predict how single payer will work in Vermont. Some will be concerned that waiting times may increase and others will look forward to lower administrative costs. One thing is pretty certain though: there will be only one payer for health care services. So it seems like a good time to point out that some new research shows that less financial fragmentation can lead to improved outcomes.
The study, “Is Fragmented Financing Bad for Your Health?” was co-authored by myself and John Gardner and will be appearing in Inquiry this summer. We examined a population of veterans who had access to care from the VA and from Medicare, choosing between the two systems based on differences in cost and convenience. Because the VA has its own hospitals and clinics, patients using both systems may have difficulty coordinating care between the non-overlapping networks of providers. This is a variant of a common problem in our multi-payer health system: having to change doctors when we change jobs, get divorced, retire, or enroll in Medicaid or the Children’s Health Insurance Program. Our hypothesis was that coordination failures between networks might lead to reduced quality of outpatient care and increase the likelihood of hospitalization for certain conditions known to be sensitive to ambulatory care quality.
We found effects that were larger than we expected. A typical (one-standard deviation) decrease in financial fragmentation led to a 20% decline in the rate of preventable hospitalization. This alone would be enough to cut Medicare’s hospital spending by 3%. If Vermont’s new Green Mountain Care generates quality improvements like this, other states will take notice.
There were many technical challenges with this research, including the need to use instrumental variables to account for the simultaneous determination of financial fragmentation and health status. Fortunately for those interested in the truly wonky details, there is an ungated working paper version available.
 The confusion that often occurs when we switch from our primary care doctor to a specialist (repeated tests, lost records, etc.) might also be reduced in a single payer system, but that was not a focus of this study.