Monday, February 23, 2015

Legislative Update, February 22, 2015

Legislative Update

Feb. 22, 2015

Rep. Anne Donahue


In case anyone is counting, the official budget shortfall has reached $130 million, without counting anything towards Lake Champlain clean-up. We started the year at about $95 million in the red for the coming budget year, but shortly afterward, the new forecast was down by another $18 million.

It has now been officially recognized (as I suggested it needed to be, two weeks ago) that the $16 million in state dollars in new Medicaid caseload has to be counted as part of the deficit, because it is a cost that reflects continuation of a current program.

If we didn’t count it as deficit, we would be pretending we didn’t raise new taxes to fund it, which is the way the governor’s budget presented it.

Our economic engines just haven’t revved back up, so our spending is catching up with us. So how do we even begin to address these numbers?

Most committees have been told that they must find additional cuts beyond what the governor proposed. My committee – health care – has a whole list of increases proposed by the governor that would be paid for through his proposed payroll tax, and we have been told we need to begin to prioritize them in case we cannot do them all.

They are mostly very good initiatives, but I find it hard to imagine any of them as being more important than reducing the amount we will be cutting from essential human services. It is almost inevitable that there will be proposals for some tax increases as well as further cuts when the majority party presents the budget and tax bills several weeks from now.

Here’s what the proposed health care expansions include:

The Blueprint for Health. This is Vermont’s signature health care program to create community health teams to support primary care practices in integrating care for people. It was experimental at first (can we provide better care and save money?), but is beginning to prove its worth, particularly with high-cost chronic illnesses that really need good coordination of care.

If you compare Blueprint practices with others, the cost increases for care are on a slower slope. However, it requires an investment to create the health teams, and it requires a small per patient payment to the providers for the extra time they spend coordinating services.

Although it started as a Medicaid initiative, Vermont has succeeded in making it an “all payer” initiative. Private insurers and Medicare now contribute to the pool of money that makes it work.

Now it faces two problems. The percentage of Vermonters on Medicaid has increased, as part of the effort to get every Vermonter insured. That means the Medicaid share for the community health teams needs to be increased proportionately, since it has more patients in the pool. Otherwise we are adding to the cost shift onto private payers.

The amount of money that the primary care practices receive for providing the coordination of care ($2 per person per month) hasn’t gone up in years, and we all know that costs have gone up.

So those are two of the pieces in the health care budget: increase those two funds by $2 million.

Insurance subsidies. Uninsured Vermonters have dropped almost by a half, down to 3.7 percent, in the year since the insurance exchange (Vermont Health Connect) has been open. About two-third of those folks were eligible for Medicaid – which is what caused our caseload growth. However, many of the others were eligible for federal subsidies to help pay for health insurance.

Vermont chose to provide added support above the federal level, but it still leaves a pretty big affordability gap for low and middle income folks who do not get insurance from their jobs and are buying their own. So another budget item is an increase in those subsidies, at a proposed price tag of $2 million.

The Cost Shift. I’ve discussed this quite a bit. The governor’s budget proposes to not increase the cost shift (and to not leave a $16 million hole), through funding the Medicaid increases with the proposed payroll tax (that’s the new $16 million), but to also attack it more directly by increasing what the state pays providers for Medicaid patients.

That would be an increase of $14.5 million in payments. It actually isn’t a pure increase to providers to get closer to actual cost. A good part of it just keeps up with current cost increases and thus prevents an increase in the cost shift.

The chairman of the Green Mountain Care Board, Al Gobeille, addressed the cost shift with our committee last week, and used the term “price differential” instead of cost shift to describe the problem that we need to address. We shift the cost to private payers to make up for the fact within overall health care spending that we underpay what we are buying, but that does not change the fact that the prices being paid are radically different.

That does not make for a rational, or honest system, and it is something that Gobeille thinks is essential to fix.

In addition, the Health Care Advocate’s office has a shortfall of about $40,000 to stay even with the expansion of issues that it needs to be on top of to protect consumer rights.

The Green Mountain Care Board itself needs money in three buckets in order to do three new things the governor wants done, totaling about $1.5 million. First is to study whether the board should be regulating our health care system as though it were a public utility, which would make it more formal – almost like a court – in how it functions.

The second is to prepare the application for an “All Payer” waiver to the federal government.

The third is a directive to move forward with setting rates for professional services – something it was empowered to do under Act 48 (the universal health care bill), but hasn’t acted on yet, given how full its plate has been.

What is an “All Payer” waiver? Here are two things it is not (despite the rumors): it is not a mechanism to pull Medicare funds into a Vermont-controlled health fund and take over the administration of Medicare. It is also not a step that locks us in to moving to a single payer system, although it would, indeed, make it easier to do so in the future.

Medicare would continue to control Medicare payments, just as private insurers would continue to maintain their separate balance sheets, and the state would maintain the Medicaid budget.

However Medicare and private insurers work as completely independent systems right now. In our Blueprint for Health model for primary care, those three payer groups all come to the table to develop the plan to act in a unified way in how to support the community health teams and the Blueprint practices – creating a more uniform care delivery system.

The All Payer waiver would mean the federal government would sit down at the table and share in the same kind of planning for the whole system. It would include a guarantee that Medicare would not pay any less than is due and owing for what it pays now, and would not reduce any services that Medicare enrollees receive.

The private insurers would do the same thing; they’ve already agreed to the concept. Gobeille calls it a “coalition of the willing” to create better integration. The “waiver” basically is the federal government waiving its normal “we are our own system” approach in order to become part of a joint approach.

My bottom line question: if we never moved to a step where private insurance was shut down because Vermont took over all health care spending (the “single payer” plan), could this exist as a way of coordinating among various funding streams, without taking them over? In other words, it is a better system, all on its own?

Gobeille said, yes, and I think that in understanding it that way, it does make sense.

Act 48, the single payer plan, is still on the books. The governor said he didn’t believe it was possible to do right now. He did not say he was throwing out the long-term intent.

My own position has never been far from that. I have simply not believed it was ever feasible unless and until we were not trying to go it alone as a tiny state with tiny purchasing power. If not the whole country, at least a significant region would need to be participating.

Rate setting for doctors: So what about that second piece, having the state establish physician rates around the state?

Gobeille is the one in charge of doing it, but he doesn’t think that’s the right way to develop a more uniform system. He thinks there should be standards and values that are applied, but not individual professional rates. I think that’s a far better approach, and I will be suggesting language to my committee next week to revise the Act 48 language accordingly.

All of these new budget items, in the governor’s plan, come from a new payroll tax that could produce double the revenue by drawing down federal Medicaid matching money. The theory is that this would raise enough money to do the new stuff while also cycling the payroll tax money back to employers through the reduced private insurance premiums that should result.

Vermont would be the only state in the country imposing a state payroll tax. That’s not a very good way to be competitive in drawing in business and rebuilding our economy. The legislature as a whole has been making big noises about not being in support of that plan.

It was also developed before we discovered we were going to have an extra $18 million shortfall in the budget.

But then, where would the money come from to do any of this, given that we are already $130 million in the hole? And that’s without counting the absolutely essential work we need to do to restore the water quality of our lakes and rivers.

It’s no wonder we are hearing so many new revenue proposals floating around, such as the new sugary drinks tax.

We didn’t get into this situation in a year, and we probably can’t get out of it in a year. But major cuts will clearly have to be a part of the mix. So I’m hard-pressed to consider supporting any new health care spending, however much I think it is the right thing to do, knowing that – even if one assumes some new tax proposals -- it will result in even bigger cuts elsewhere.

Please keep sending me your thoughts and concerns – they are important to me. Contact me any time via messages at the state house (828-2228), home (485-6431) or by email: You can read my past updates on my blog site,

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