Fourth in a series of occasional articles


Early in his tenure as governor of Vermont, Howard Dean decided he was the man to fix the state's health care system. Having already diagnosed the problem -- too many Vermonters lacking care -- he settled on a remedy.

Dean, a doctor by training, would be the nation's first governor to guarantee health coverage to every state resident. And he would do it in a single legislative session, with one enormous bill.

It was ambitious, bold -- and an utter failure. In May 1994, five months after he began, Dean pulled the bill and declared the effort dead.

But it wasn't the end. Like a pragmatic physician who tries a new therapy when the first fails, Dean devoted much of the next decade to smaller, incremental changes aimed at filling the state's health care gaps.

It was a slower strategy, but by the close of his tenure, Dean came very close to achieving universal health coverage.

Vermont now has one of the nation's highest rates of health insurance coverage, providing care to virtually every child and more than 90 percent of adults. The national average is 83.7 percent.

Born in humiliating defeat, the seven-year odyssey established health care as Dean's signature issue and created a banner he has carried proudly as a Democratic candidate in the 2004 presidential contest. His handling of the issue also provides a glimpse into his executive style -- at times obstinate and combative; at others pragmatic.

His backers -- and some independent analysts -- said his Vermont record suggests Dean has the political savvy and persistence to drive a broad health care agenda for the nation and tackle other tough problems as well. Others in the health care industry said Dean simply took advantage of new federal dollars while shifting the burden of medical costs to doctors and private hospitals.

During Dean's 11 years as chief executive, Vermont was frequently among the first states to enact innovative health legislation. It passed bills boosting child immunization rates, reducing prescription prices for senior citizens, cracking down on discriminatory insurance practices, requiring pharmaceutical companies to disclose gifts to physicians and putting mental health benefits on par with other coverage. Meantime, the state's rates of smoking, child abuse and teen pregnancy fell sharply.

"It is a very strong record with regard to health insurance coverage, particularly the focus on children," said Karen Davis, president of the Commonwealth Fund, a private foundation that promotes health and social projects. Pointing to census data listing Vermont as the nation's best state for insuring children, she said: "Those things don't just happen by accident."

Dean was hardly the only governor devising innovative health strategies in the 1990s, and some of his actions came at a high price. He sharply increased tobacco taxes, and private insurance premiums have risen steadily -- as they have in many other states. As some Democratic presidential rivals are quick to note, Dean's embrace of balanced budgets led him to flirt with the Medicare-reduction plans of then-U.S. House Speaker Newt Gingrich (R-Ga.), and Dean sometimes trimmed his own state health programs.

These opponents also said that his policies have exacerbated the financial problems for Vermont hospitals, and despite Dean's efforts to expand health care coverage, there remains a yawning insurance gap for residents ages 18 to 29. Most important, Dean's heavy emphasis on government-run programs, with their low reimbursement rates, has saddled the business community with higher costs, according to some health care officials.

"I don't think we're any better off; perhaps we're not worse off," said Chuck Nichols, senior vice president of the Vermont Chamber of Commerce. "Governor Dean didn't take us anywhere, but he didn't put us in a horrible position."

However one views Dean's record on health care, much of it emerged from the ashes of a humiliating defeat.

'My Health Care Plan'

In hindsight, it is easy to see why Dean's universal health proposal failed in 1994. Like President Bill Clinton's national initiative, Vermont's was too complex, too costly and ultimately too disruptive for the many people generally satisfied with their coverage. For a while, however, momentum was building for a change.

In 1989, then-Gov. Madeleine Kunin (D) created "Dr. Dynasaur," a comprehensive state health program for young children and pregnant women whose income was too high to qualify for Medicaid (about $13,400 for an individual) but could not afford private insurance. The benefits came to include prenatal care, routine checkups, immunizations, medications, dental care, hospital services and lab tests. Dean then was lieutenant governor, and he played little role in the effort.

Similarly, when then-Gov. Richard Snelling (R) formed a health care commission in 1990, Dean -- still lieutenant governor -- was not involved, said Paul Harrington, a Republican who later worked in the Dean administration. But when he became governor the following year, "Dean took the commission's detailed report on ways to improve Vermont's health care system and said, 'This is going to be my health care plan,' " said Harrington, now executive vice president of the Vermont Medical Society.

The bill he sent to the legislature in early 1992 was less a detailed proposal, more a lofty goal with a deadline to reach it. Dean called for the creation of a Vermont Health Care Authority, with directions to devise a plan for providing a "common set of comprehensive health care benefits" to every Vermont resident.

Lawmakers agreed that the new authority's work should include cost controls, health insurance purchasing pools, standardized medical forms and limits on malpractice lawsuits. But they disagreed on a funding mechanism, so the final bill called on the agency to develop two versions: one modeled after the Canadian government-run program, and the second centered on a market-oriented approach. With that decision, and strong support from the business and medical communities, the blueprint became law in May 1992.

The ambitious goal made national headlines, but two lesser-known provisions would have a far greater impact on Vermonters. The first one revised insurance laws to prohibit companies from rejecting clients or charging excessive fees because of health status or age.

Most significantly, the 1992 law expanded the Dr. Dynasaur program. Under Kunin, low-income children under 7 had been eligible for the free or discounted health insurance. With a combination of federal and state dollars, Dean raised the age to 18. It remains the single largest expansion of health care in Vermont.

The next year, Dean was shuttling to Washington to provide health care advice to the new Democratic president and to fellow governors. He often warned against creating a national health system modeled after Medicare, which Dean called a "bureaucratic disaster." Like many governors at the time, he lobbied for greater state flexibility to design and administer health programs.

Although his call for flexibility appealed to the many physicians and state lawmakers who complained about the federal bureaucracy, Dean's comments would provide fodder for his opponents in the 2004 campaign. His Democratic opponents have seized upon Dean's early state budgets, in which he alternately proposed trimming a drug assistance program for the elderly and Medicaid benefits for Vermonters ages 18 to 21. In both instances, the legislature restored the funding.

To his opponents, the budget proposals suggest callousness and hypocrisy from a man who now brags about his health care record. Dean and his supporters said fiscal responsibility took precedence, even if that meant trimming benefits.

In the wake of passage of his 1992 bill, Dean was supremely confident. "Health care reform in Vermont is a done deal," he told one outside expert, Howard Leichter, a professor at Oregon's Linfield College.

Dean, in fact, did not wait for the health care authority to complete its proposal, pushing ahead with his own plan for universal coverage in early 1994. He sent a bill to the legislature to require every Vermont business to cover half its workers' health insurance costs. Employees would pay the rest. For the unemployed, Dean proposed raising nearly $38 million in tobacco, alcohol and gasoline taxes to broaden Medicaid coverage.

It was a dramatic reversal from his days as a practicing physician and legislator when he advocated a single-payer system modeled after Canada's government-run program.

Opposition and competing plans came from the left and the right. At one point, Vermont House Speaker Ralph Wright threw his support behind a $750 million universal plan that involved large increases in payroll and income taxes.

Throughout the spring, as legislators squabbled, Dean refused to get involved or to entertain changes to his plan. He also sent mixed signals, denouncing Wright's plan but then urging Democrats in the Vermont House to support it -- to move the bill along, he said.

Aides said Dean was reluctant to make things easy for lawmakers. "I don't think Howard wanted to put forth a more modest proposal," former Dean assistant Rachel Block said. "He wanted to hold the legislature accountable."

But Dean's strategy did not work. Wright's bill passed the House, but efforts to find a compromise in the state Senate failed. Public support for health reform collapsed, according to many, when Vermont newspapers described how much more money workers would pay in taxes to support the Wright legislation.

"That changed the dynamics in the statehouse remarkably," said Jeanne Keller, who was president of the now-defunct Vermont Employers Health Alliance. Soon thereafter, Dean pulled the plug.

Dean never sold his plan to centrist, middle-class Vermonters who saw no reason to ditch the existing system, said Leichter, who wrote about the Vermont debate. Dean does not dispute that.

"I think there's some truth to that," he said in a recent interview. "It was the same problem Clinton had."

Wright subsequently expressed frustration with the way Dean gave up. "We had the doctor/governor who had gotten this whole thing started," Wright wrote in his memoir, "All Politics Is Personal." "I guess this was the one thing I never could understand about Howard Dean. He always seemed so ready to abandon his cause at the first sign of defeat."

Chipping Away

Like the Clintons, Dean was damaged politically by the 1994 failure. But unlike the president, he did not wait four years before returning to the issue. In a matter of months, Dean began the piecemeal approach that has characterized health policy changes at the state and federal level since 1994.

"We never quit," he said in the interview. "And we never settled for less than we absolutely had to."

Over the next seven years, Dean chipped away at the issue, relying heavily on federal dollars through Medicaid and the Children's Health Insurance Program to expand coverage for children, pregnant women and the elderly. In 1995, with a federal waiver, his administration created the Vermont Health Access Plan. It provided health insurance for low-income, uninsured adults and prescription drug coverage for the elderly and disabled.

By the time Dean left office, adults making up to $13,400 could buy a one-year health insurance plan for $20 to $100, with co-payments. Participants paid 60 percent of drug costs.

Dean again expanded Dr. Dynasaur in 1998, raising the income eligibility levels for families by tapping new federal money. Today, nearly 56,000 Vermont children participate.

As for prescription drug costs, Dean advocated -- as he still does -- legalizing imports of medicine from Canada, where they retail for less.

In 2000, Dean expanded Kunin's "VScript" program, a prescription drug service for the state's poorest seniors. Currently, elderly Vermonters with annual incomes up to $18,800 pay 60 percent of medication costs, after meeting a $275 annual deductible.

Finally, in June 2002, as he prepared to leave the governor's office and run for president, Dean implemented the Healthy Vermonters Program, a prescription drug discount plan. Elderly and disabled residents with incomes up to $36,000, and younger adults making up to $27,000, can receive the government's steeply reduced Medicaid price on all medications.

Along the way, Dean complained that federal leaders needed to show "backbone" in controlling spending on Medicare and Medicaid. His argument at the time, and on the campaign trail today, was that slowing the rate of growth in huge entitlement programs is fairer than slashing education and other social programs to balance the budget.

Dean also enacted a series of tobacco tax increases to help pay for the program expansions. From 1995 to 2002, Vermont's tax rose from 20 cents per pack of cigarettes to $1.19, making it the nation's 10th highest.

"I always support higher cigarette taxes as a physician," Dean said. "The higher the cigarette tax, the less children smoke. But it should be up to the states."

No 'Massive Overhaul'

On the campaign trail, Dean promises to apply the lessons of Vermont to the nation. That suggests smaller, incremental changes such as tax credits to buy insurance and money for states to expand programs such as Medicaid. He said he has no intention of tackling a single initiative as he did in 1994.

"I don't think we're going to get a massive overhaul through Congress," he said. Dean said he remains committed to every American receiving health insurance, but he would pursue that goal incrementally, building upon the current system.

His Democratic opponents, some business leaders and even a few supporters point to weaknesses in the Vermont system and what they describe as risky tactics on Dean's part.

"Gov. Howard Dean has presided over a constant expansion in government health programs, without a commensurate increase in funding," the Burlington Free Press editorialized in December 2000. "Dean repeatedly blames rising health costs on hospitals, instead of taking responsibility for his part of the problem."

Aides to several of Dean's rivals said he hardly deserves credit for leveraging federal dollars to solve state problems. Throughout the 1990s, it was a popular and cost-effective strategy used by many governors, including Tommy G. Thompson (R) of Wisconsin, now U.S. secretary of health and human services.

Another criticism of Dean's health care record is that his heavy reliance on government programs hurt the private sector. Because government reimbursement rates are so low, doctors and hospitals in Vermont have been forced to charge more to private clients -- individuals and businesses -- to make up the difference. As Dean encouraged families to enroll their children in Dr. Dynasaur, corporate insurance pools were left with a larger proportion of high-risk, more expensive adults.

"To have Medicaid be the largest insurer is an unhealthy thing," said Harrington, of the medical society. A report by the Vermont Joint Fiscal Committee in 2001 estimated that insured workers, employers and insurance companies paid an additional $30 million in health costs to make up the gap between the true cost of services and government reimbursements.

Dean's tactics and style could inflame tensions, lawmakers said. On several occasions, he proposed trimming the very health benefits he instituted, including dental, foot and eye care for Vermont's low- and moderate-income adults. He fiercely defends this approach.

"I promised the people of Vermont I would not take one person off the program," he said. "So we did eliminate certain benefits. But that's better than cutting people."

The state budget plan that Dean submitted in 2002 contained $27 million in Medicaid cuts and charged seniors higher co-payments and deductibles for medicine. Initially, Dean said the legislature forced his hand by refusing to support his proposed cigarette tax increase in 2001.

Others said he cavalierly used services for the poor as a bargaining chip. "It's a who-is-going-to-blink-first strategy," Peter Youngbear, a lobbyist for the disabled, said at the time.

Dean said he proposed the cuts "to force the Republicans to adopt the cigarette tax. I got the damn program funded."

Howard Dean said he promised "I would not take one person off the program. So we did eliminate certain benefits. But that's better than cutting people."