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 counterp@tds.net and I will get back to you as soon as I am
able.
