For the next several weeks before the new legislative session begins, we are likely to see a great deal of media attention and public reaction to developments in Vermont’s efforts at universal health care planning.
Two major announcements are due out: what the administration will propose as a benefit package (what gets covered and what percentage of costs are covered), and then, how it will propose to shift financing from privately paid premiums to a tax-based system.
Neither of those will be the last word, since they must receive the sign-off of the Green Mountain Care Board and/or the legislature before moving forward to next steps, but they will certainly set the tone for the discussion.
What is notable is how many critical issues are not even in the public eye at all. I would like touch on a few of those lesser-highlighted subjects.
On a recent Mark Johnson radio program, a caller asked about how long term care would be integrated into the universal access plan, including the option of home health supports in lieu of nursing home care. The guest on the show did not know.
The answer: it won’t be, apart from our existing Medicaid program. Although our need for long term care will be increasing significantly as our population ages, this is not considered as part of current “health care” coverage. It isn’t covered by private health plans or Medicare.
Unless you are one of the few who has purchased a separate long term care insurance policy, you will learn the hard way, as many families do, that you must spend down most of your life savings before becoming eligible for coverage under Medicaid. Act 48 told the Green Mountain Care Board to look at including long term care, but this would be a cost massively beyond all current conversation and not eligible for any federal support.
There are current advertisements promoting a universal plan on the basis that it will eliminate insurance companies from meddling with what doctors think is best for patients, and that it will mean “everybody is in,” in a fully equitable system.
Actually, the current insurance company role of managing care will simply be assumed by a different body, just as it is now for the state-run managed care entity that manages Medicaid (the Department of Vermont Health Access.) Although in theory any benefit revisions will be determined by the GMC board, those decisions will be controlled by the money available, which will be determined by the legislature in setting the annual budget.
The degree to which “everybody is in” will impact whether the plan will be legally, politically and fiscally viable, because some groups can’t be forced in, and others won’t want to be. Large companies that self-insure (about 20% of the Vermont market) can’t be, under federal law (ERISA); Medicare beneficiaries who buy their own secondary coverage (“Medigap”) may not want to have that coverage taken over by GMC; unions won’t want to lose the current level of benefits; and the list goes on.
Obviously those who do not want Green Mountain Care coverage will not want to pay a tax to finance it.
The most recent data (2012) provides this breakdown of insurance categories among Vermonters: Medicare, 16%; Medicaid, 18%; public employee plans, 13%; private insurance, 44%; military coverage, 2% and uninsured, 7%. Public employees are made up primarily by teachers (8%) and state employees (5%); private insurance purchasers are divided among large employers (29%), small employers (11%) and individuals (4%).
Everyone has acknowledged that “there will be winners and there will be losers” under any major change. Most agree that there is a need for greater equity, but that does not necessarily mean a willingness to sacrifice to achieve it. Thus once the dust settles, a key question will be whether there are more winners or more losers, and what their respective political strength is.
A recent comment to a VT Digger article suggested considering coverage based on how “the VSEA and the state of Vermont worked together to design the current state employees’ health plan. It’s a very high actuarial value plan and…it’s been the best plan out there.”
What is its relative cost? The administration has presented a profile that shows three scenarios for the current cost of coverage for a single parent with two kids. If one includes the average out-of-pocket costs for each in order to compare the theoretical full cost of the actuarially-equivalent product, then that coverage is about $13,000 if purchased on the exchange; $19,000 for a company with just a few more than 50 employees (small pool); and $27,000 for state employees.
That would not be remotely sustainable as the Green Mountain Care product. Will the VSEA surrender its plan in order that all residents in a Vermont-universal plan will be receiving the same coverage, based upon ability to pay? If not, how is that a universal program in which “everyone is in” and treated equitably? No group will be required to be limited to Green Mountain Care; anyone will be able to buy supplemental coverage as long as they are willing to pay extra.
Note that plans with a high actuarial value drive costs because they fail to promote responsible use – one of the reasons the administration gave me for why the VSEA plan costs the state so much.
Medicaid has an actuarial value of 99%. The VSEA plan is at 94%. A “platinum plan” on the health exchange is about 87%, and a “gold plan” is 80%. Slightly more than half of Vermonters currently have a 90% or better plan, while slightly under a third have a less than 80% value plan.
So how many win, and how many lose, if Green Mountain Care is at 80%, as Act 48 requires as a minimum? Or at 87%, which Act 48 describes as its intent?
Another critical aspect receiving little attention is the federal tax for such high-value health plans, a cost which must be considered in developing the Green Mountain Care package and financing. It is part of the federal Affordable Care Act’s mechanism to help pay for its costs.
Here are excerpts from the December Joint Fiscal report (available on line on the Joint Fiscal site) on this subject:
“The ‘Cadillac tax’ is a federal excise tax on high-value health insurance plans beginning in 2018. The 40-percent excise tax applies to the value of health benefits over a certain threshold... JFO estimates that many Vermonters, and most State employees, have insurance plans that will be subject to the tax in 2018. Some employers will likely modify their plans or shift the tax to their employees in order to prevent their costs from increasing substantially…
“JFO estimates that the aggregate excise tax bill in Vermont could be about $9 million in 2018 and about $40 million in 2023. All individual and family plans offered to State employees in 2015 are projected to be subject to the tax in 2018, imposing a new tax of about $6.8 million on the State government or its employees in the absence of changes in plan choice and design.”
Another missing part of the discussion is that there are other aspects of any potential proposal that are completely controlled by the Affordable Care Act itself. In order to get a waiver from the law (which must happen, otherwise we would lose all of the federal money that our entire health system depends upon), a number of conditions must be met.
These include the fact that there can be no reductions from the scope of the benefits required on the health care exchange, and that there can be no negative impact on the federal budget… in other words, it can’t draw any more federal money than what we get under the ACA.
It is the influence and constraints of federal law and money that has convinced me from the start that no state can succeed with a “go-it-alone” plan for completely reshaping health care delivery and creating government financing mechanisms. Even if Vermonters developed a common vision of what comprehensive reform might look like, we can’t fly it ourselves.
That’s regrettable, because waiting for national consensus on any significant change will be a very long wait. But it means we should be focusing our energy on those things we can change, such as payment reform, and accepting those we cannot change.
As that old ditty says, what we need most is the wisdom to know the difference.
I will be resuming my regular bi-weekly updates in January. It will be a legislative session with many pressures and controversies, and it isn’t possible to report on all of them, so please feel free to contact me and ask questions about issues of concern to you. You can leave a message any time at 485-6431 or email@example.com and I will get back to you as soon as I am able.