April 2, 2016 Legislative Update

Legislative Update

Representative Anne Donahue

April 2, 2016

 

What counts as a tax increase? In fact, what counts as a tax?

We grappled at least indirectly with those questions in the past two weeks.

Fees are defined as not being taxes, because they come only from those who use a particular service, and pay only for the cost of that service.

For example: You want to be licensed in a certain profession. That profession is regulated in order to ensure your qualifications. Since you are the one benefiting by becoming licensed, your fee pays for the state’s cost in oversight of the licensing process.

It could be argued in the opposite direction. The reason for professional oversight is for public protection, so why isn’t the public at large paying for it, through taxes?

That is the policy decision that is made each time we, as a state, decides to pay for services through either a tax or a fee.

Every year, a third of all of the fees charged by the state are reviewed to ensure they are keeping up with inflation and still covering the costs of the service. This year, it was the Department of Motor Vehicles’ turn for increases.

Motor vehicle fees have a broader reach than just paying for the services of the DMV itself. We pay for our entire state portion of the transportation budget through contributions (mandatory ones) from those who use the roads, rather than from taxpayers as a whole.

There are three sources: the gas tax, the motor vehicle purchase and use tax, and motor vehicle fees.

These fee increases are nickel and diming us to death: a lot of items only going up a dollar a two, but all adding up to real money. It totaled about $10 million in fee increases, many of them in the range of a 20 percent increase.

That would be a whopping amount for a one year increase but in fact, most of these fees were last raised in either 2002 or 2012. Spread over the amount of time, they were in the range of two to three percent increases, very much in line with inflation.

For that reason, I voted for the transportation funding bill this past week. The increases made sense, and the DMV money raised goes directly into maintaining the roads we drive on.

***

I did not look kindly, on the other hand, on this year’s general fee bill. It included one whopping fee increase (by 233 percent) that was not remotely related to the actual cost of regulating the business at issue: mutual funds.

We raised it for one reason only: there was a deficit in the state budget, and someone noticed that our fee was much lower than other states around us.

So how did we get away with calling this tax a “fee”?  We simply changed the law, and passed language that exempted that specific fee from the statutory definition of a fee.

It always sounds easy to raise a tax (or supposedly, a “fee”) on a faceless big business. The fact is, businesses don’t pay taxes. Only individual people pay taxes… because one way or another, the money being raised is going to be passed on down through to the consumer.

***

Speaking of taxes, after getting through with this year’s big tax bill the week before (including an increase in the tax on your heating fuel), last week we also addressed education and the property tax.

The rate increase will be small this year, but regrettably and unnecessarily, it will still be an increase. Last year, we promised relief by requiring towns to come up with their own local money if they went above a pre-set growth percentage. Earlier this year, the legislature wimped out and mostly repealed it. That drove everyone else’s share of the property tax back up again.

So we will be finishing up yet another legislative session without reforming the education taxation system that has vexed us all for so many years.

***

There are times when the competing values in a piece of legislation leave one in a no-win situation, and those are the votes that can leave you second-guessing yourself long after the roll call is over and done.

So it was for me on a small amendment to the annual state budget.

Ambulance services around our state are mostly run by local communities, and they don’t break even on the reimbursement from health insurance. Towns often pick up the deficit (meaning, of course, your local property tax.)

The recent increase in the number of Vermonters on Medicaid has had a really negative impact on these services, because Medicaid (that is, the state) reimburses at about 40 percent of the cost of services. In effect, this is a cost shift from a state obligation (general fund taxes) to local property taxes.

Our general fund budget, however, is already outpacing our economic growth rate, and we can’t sustain further increases. While we ought to have stepped back and re-prioritized the state’s overall spending, that wouldn’t solve the immediate problem that was before us as we voted on the budget.

Some creative financing had been done to propose a fix. It’s something that actually is well known by its nickname, Medi-scam, as a way to artificially get federal money to pump up our budget.

It works by increasing the Medicaid rates paid by a medical service, a cost that is shared by the state and the feds. We pull in the federal money, but we don’t actually pay the state share. We create the state share by raising the money through a tax on that medical service provider (called a “provider tax.”)

For example: Say an ambulance ride is currently reimbursed by Medicaid at $100. The state increases the rate to $150. Of the extra $50, $25 comes from the feds and $25 has to come from the state. So we set a service tax of $25 for the ambulance, and use the tax to pay our $25 share.

End result: the ambulance “nets” an increase of $25 thanks to the federal share (minus some administrative overhead, of course.)

We do it for hospitals and nursing homes… why not ambulances?

From a policy perspective, it’s a really bad way to raise money. Sooner or later, the feds are going to cut off this spigot. And even if it is revenue neutral, it does increase the size of the state’s budget as a whole.

Finally, we have to remember that “federal” money is just another source of funds that ultimately comes from our pockets.

On the other hand, as a member of the Health Care Committee, I’ve been getting pleas from ambulance services around the state about the desperate state of their budgets, and the pressure being put on towns.

So I voted in support of the ambulance amendment (despite not supporting the budget as a whole.) But I’m still not sure it was the right decision.

***

I was pleased and grateful to see the Transportation Committee include a bill I introduced, within its larger annual transportation budget policy bill. It requires the Department of Transportation to develop short and long term measures to address safety at the Quechee Gorge bridge.

The bridge has become a suicide “hot spot.” Contrary to common assumptions, if a suicide is prevented, 90 percent of the time the individual does not simply turn to another means of death. Creating obstacles to suicide literally does mean saving lives.

If we had a particular traffic intersection or stretch of road where 10 deaths had occurred over the past ten years, we wouldn’t question the need to evaluate safety protections. We have lost 10 Vermonters since 2006, mostly young people, to the easy access and “no turning back” risks presented at the Quequee Gorge bridge. There are easy and low cost ways to intervene, and we need to take those steps.

***

Thanks for the honor of representing you! You can contact me or Rep. Patti Lewis by email (counterp@tds.net for me; pattijlewis@myfairpoint.net for Patti) or by leaving a message at the statehouse at 828-2228. We welcome your feedback and input.

March 19, 2016 Legislative Update

Legislative Update

Rep. Anne Donahue

March 19, 2016

 

The House passed some 29 bills last week to get them over to the Senate in time for action this session, but they ranged widely in importance. Some were clarification of existing law and some set out study committees to research more tangled questions of law.

This coming week will be the heavy lifting: the state budget (with increases), the tax bill (with increases), and the fee bill (with increases.)  Amongst House committees, many eyes will be on Judiciary, which is beginning to take testimony on marijuana legalization.

I sympathize when people say we pass too many laws, so I’ll offer one example of a minor bill that nonetheless made sense to act on. Sports teams on the college level or above often travel with their own team doctor. When our teams go out of state, their doctors are usually permitted to practice in that state, as long as they only treat their own team players or staff.

We don’t offer the same courtesy to those coming here, simply because we never passed a law authorizing that exception from medical practice laws. That was one of last week’s 29 bills.

A sampling of others:

Health Care Reform

My bill establishing limitations on the governor’s proposal for a federal waiver for health care payment reform passed on a 124-2 vote of the House. For the first time, we have laid out in law that reform agreements must bar the state from touching any Medicare money.

The bill – described in detail in my previous update – also would establish state regulation of the federally-created “accountable care organizations” that are gaining an increasing role in coordinating, and paying for, health care in the state.

Suspended Licenses

Many Vermont drivers are so overwhelmed by accumulated motor vehicle fines that, unable to pay them, they drive with a suspended license, and then get sucked further down by new fines. This bill proposes an amnesty period with reduced fines, and a new system that will allow for payment plans and fewer suspensions.

There is a fundamental inequity about offering amnesty when thousands of other Vermonters have faithfully paid their fines in the past, even if it was a huge financial struggle for them.

Unfortunately, two counties in Vermont already ran amnesty programs for their own unpaid tickets. That meant relief from old tickets was based purely on what part of Vermont you live in. To me, that is an even greater injustice, and it led me to support the bill.

By rebuilding the system to help people to avoid losing their licenses for failure to pay fines, we will raise less money in the future for the transportation fund in “driving while suspended” fines. That lost revenue will cost each of us a dollar a year in increased vehicle registration fees.

E-Cigarettes

Electronic cigarettes are getting more and more kids hooked on nicotine, and many of them move on to smoke tobacco. Although sale is already banned to those under 18, they are being widely marketed as though they were not dangerous to health.

This bill had two parts: extending the requirement that e-cigarettes be sold out-of-reach of customers along with tobacco products, and extending “no smoking area” bans to e-cigarettes.

I asked that the bill be divided in order to vote in favor of the store restrictions but against the public smoking bans. Such bans are based on protecting persons from the actions of others, and there is not clear evidence that the vapor that e-cigarettes produce have the “second hand smoke” risks of tobacco. Both sections passed, so I did vote for the final bill.

A surprise developed in the form of a proposed amendment to raise the smoking age to 21, on the grounds that it would protect thousands of younger teens from ever starting to smoke.

It is a rare moment on the House floor to see a roll call where there is no predictable outcome, and no party-line voting.  The amendment failed to get a majority, stalling at a 71-71 vote.

I did not support it. I think rights and responsibilities go hand in hand, and our rights as adults include the right to make bad decisions. We have chosen as a society to deem 18-year-olds able to make decisions to shoot others and be shot at war, and to be accountable for criminal actions even to the point of the death penalty. It is hypocrisy to deem them too immature to make decisions about unhealthy activities.

Ban the Box

The goal of this bill is to help persons with a past criminal record to “get through the front door” for job interviews. It doesn’t stop employers from asking about criminal involvement, or doing background checks, but it bans asking the question on a first-round written application.

Timber Trespass

This bill would create civil penalties for cutting timber on another’s property, and was one of several that promoted the importance of our forests as a resource, and as worthy of similar designations as our farm lands.

Corrections

Another bill addressed our aging prisoner population, focusing on system costs, public safety, and compassionate release. It would make persons eligible to be considered for parole at age 65 after serving at least five years, or at age 55 after serving at least 10 years, even if the minimum jail term had not been served, as long there are no public safety issues.

Impaired Driving

This bill would extend the length of license suspensions for impaired driving, and expand the use of ignition lock systems that require breath testing before and while a car is being driven.

Potable Water

We have drinking water standards for well systems, but not for surface water. As a result, water systems were not receiving permits if they used surface water as a source. This bill sets up standards to allow the use of surface water for drinking water systems for private homes.

***

Thanks for the honor of representing you! You can contact me or Rep. Patti Lewis by email (counterp@tds.net for me; pattijlewis@myfairpoint.net for Patti) or by leaving a message at the statehouse at 828-2228. We welcome your feedback and input.

 

March 6, 2016 Legislative Update

Legislative Update

Rep. Anne Donahue

March 6, 2016

 

The pace will begin to speed up as we near the end of the first half of the second year of this legislative session. This Friday is “crossover” – the deadline for bills to be voted out of a policy committee if a House bill is even to be considered by the Senate, and vice-versa.

So, what to expect from the House Health Care Committee, where I sit?

I have drafted a bill that we are taking up this week to set parameters for any agreement with the federal government about an alignment between Medicare, Medicaid and private insurers.

Most important of all is this language:

“The Green Mountain Care Board and the Agency of Administration shall only enter into an agreement with the Centers for Medicare and Medicaid Services if the agreement… continues to provide payments from Medicare directly to health care providers without conversion, appropriation, aggregation, or any other involvement by the State of Vermont.”

The talk about Vermont entering into an “all payer” model has worrisome overtones.  I have heard unequivocally from Vermonters: “hands off our Medicare.”

The administration has said that no such agreement would involve the state controlling Medicare money.

There is no state law, however, preventing Vermont from doing that, and I think we should put it into law: no agreement permitted unless the agreement itself guarantees that the state doesn’t touch Medicare money.

It isn’t just about the money, either. So the bill includes other requirements. The agreement would be allowed only if it:

-- preserves all existing the consumer protections (including not reducing Medicare covered services, not increasing Medicare patient cost sharing, and not altering Medicare appeals processes), and

--  allows Medicare patients to choose their providers.

The federal government is already deeply involved in pushing for health care reform through new ways of paying for Medicare. One route is through contracting with organizations made up of health care providers that agree to be accountable for all services for its patients for a single lump sum.

These groups of providers are called Accountable Care Organizations, and there are three that already operate in Vermont. A Medicare patient who sees a primary care doctor who is a part of an ACO is “attributed” to that ACO. The ACO coordinates all of the patient’s care.

If you are on Medicare, you may already be attributed to an ACO. Apart from having received a letter about it two or three years ago, you wouldn’t notice anything different, and your doctors have not been paid any differently.

The coming change from Medicare is through paying via that agreed-upon lump sum, instead of paying through the traditional fees for each service you receive.

The biggest difference in the arrangement that Vermont is proposing to the federal government is that we make it possible for our Medicaid program and private insurance plans in the state to align into the same model.

All the major payers in Vermont (thus, the “all payer model”) could establish contracts with an ACO, creating a unified method of payment. Having more payers involved creates economies of scale, both in administrative costs and in managing good coordination of care.

A participating doctor wouldn’t need to worry about which insurance you had or how much each particular procedure costs, and could concentrate on best care.

But if the ACO does not meet its target for costs, it is the ACO that loses money. Perhaps the biggest fear for many is, how can we be assured that the ACO won’t scrimp on care in order to meet its budget targets?

In addition, for an ACO to function successfully and survive financially under the new lump-sum model, it must be made up of a very large network of providers, including hospital and physician services. As a result, the three Vermont ACOs are planning to fold into one.

That brings other worrisome features. If there is only one ACO, will it create too much of a monopoly? How do we ensure that the big hospital partners don’t control the decisions, and keep most of the money?

That brings us to other parts of the oversight bill my committee is working on.

Although Medicare allows ACOs to operate fairly independently as long as they meet budget and quality of care targets, we want stronger oversight of what will be Vermont’s single ACO.

The bill would require that the all-payer model allow providers to choose whether to participate in an ACO or remain independent. The ACO would be required to contract with non-ACO members to ensure their patients can access the providers they need and choose.

The ACO would be required to invest in primary care and other parts of the health care system that help prevent expensive hospital use. It would also require shared decision-making between doctors and their patients.

Under the bill, the Green Mountain Care Board would monitor quality of care and patient protections, including the right to appeal denials of care. It would require that the ACO governing body represents its participants equitably.

The ACO would not be permitted to “diminish access to any health care service for the population and area it serves.”

The Board would also review and approve the ACO’s annual budget, in the same way it currently reviews hospital budgets.

I think this oversight is crucial if this new model of payment is to be successful in helping to make the most efficient use of health care resources while also protecting the highest quality of care.

The “all payer model” is intended to help make the system pay greater attention to the full spectrum of patient health care needs instead of separate pieces, through changing the way providers are paid.

That alone is not going to radically alter the trajectory of increases in health care costs. But it may “bend the curve” of increases, and that bending is a necessity if we are to keep health care even remotely accessible.

What must come next? Greater equity in access.

Right now, if you are very low income, your access to health care is well protected. If you have a good health care plan through your job, your access to health care is also well protected; it is affordable mostly because the costs are hidden through the employer contribution.

Neither of those routes is sustainable. We are seeing that now in a state budget that is being crushed by the expansion of Medicaid access, and employers are seeing it in the impact on the costs of doing business. It only takes looking at the effect on school budgets this year to know that we can’t keep on this course.

But those in the worst situation are those who are not covered by their jobs, yet are over the limit for state-sponsored Medicaid coverage. Insurance on the health care exchange still leaves health care inaccessible for many: the cost-sharing on top of high premiums is too expensive.

We have to do better.

The all-payer model, if done right, is likely a good step, but it is only a baby step in the big picture of achieving access to quality health care.

***

Thanks for the honor of representing you! You can contact me or Rep. Patti Lewis by email (counterp@tds.net for me; pattijlewis@myfairpoint.net for Patti) or by leaving a message at the statehouse at 828-2228. We welcome your feedback and input.

 

February 20, 2016 Legislative Update

My health care committee continues to plow through challenging issues as we head into the last week before the town meeting week break. I joined in a press conference last week after we heard testimony from a consulting group that has worked for the administration for the past three years. The issue: Vermont Health Connect, the state’s stubbornly rebellious system for people signing up for health care through the health care exchange.

The CEO of Gartner Consulting testified that his firm told the Shumlin administration back in 2013 that it was trying to do far too much at once by creating an exchange that would handle private insurance and Medicaid from day one. Boy, were they ever right – but the administration didn’t listen. This is yet another piece of “new news” coming to us years after the fact.

As a legislature, we hold responsibility for oversight. But we are a citizen legislator, and have to rely heavily on expertise from others. I’m no computer expert, but just in looking at the world around us, whether banking or shopping or business, it seems inconceivable that it could be as complex as everyone is claiming to get a working system for signing up and paying for health insurance.

Yet I have been reluctant to support the call to ditch the entire Vermont system and take on the new costs connected to joining the federal system instead.

We’ve invested more than $200 million in it. Do we throw all that out, if we are truly in the home stretch of getting it to work correctly? Or do we stop digging ourselves even deeper into a hole that is a money pit, throwing good money after bad?

The Gartner consultant said we need to stop pouring money into trying to fix our current system, but that we should not jump to something new without having an independent analysis of the best long-term, sustainable system. We should continue to “limp along” with the existing system for several more months, without making large new investments trying to fix it, while doing an analysis of the “investment value” of what we already have and the costs of turning to other options. Some choices might allow us to use some of what we have already invested in, while also aligning with another system.

This makes sense. It is the same recommendation made earlier this year by Blue Cross Blue Shield of Vermont, which has had to pick up the pieces of many of the major failures of the current system.

What does not make sense is to have the Shumlin administration do that analysis, as his staff suggested!

At our press conference, both Senate and House members joined Lt. Gov. Phil Scott in proposing that we move ahead as quickly as possible with this analysis, but to place it under the authority of the Green Mountain Care Board instead of the administration.

I will be pushing for language in the current budget to make this happen.

***

We sent a bill to the House floor this week to have the Green Mountain Care Board identify all of the quality measures that require reporting from primary care doctors, and to develop a plan to reduce the burden while still monitoring quality.

We have both state and federal programs that demand data to assess whether they are effective or not, and obviously, it is vital that we not putting money into programs without assessing whether they work. On the other hand, we should be able to align some of these different measures so that we get the information we need with our doctors having to spend more time on filling out different reports than time with patients.

***

We are working on a bill to set state standards to protect consumers under the new “Accountable Care Organizations” that are now part of our health care system under federal Medicare. They will become an even bigger part if we develop a model where all the major payers (Medicare, Medicaid, and private insurers) agree to pay ACOs the same way, per patient instead of per individual service.

An ACO is a group of doctors and providers that contract for joint responsibility for patient care. We will likely end up with a single ACO in Vermont, given our size. Because they are expected to work to save on costs, there is good reason to worry about whether quality and access to care will be reduced.

We need stringent standards to require ACOs to deliver appropriate care and to have independent appeal mechanisms for anyone who feels necessary care is being denied.

***

A vexing problem we are confronting is ambulance service payments under Medicaid. The state sets these rates, and we current pay far below the costs of the service. The increase in the number of persons on Medicaid under Obamacare has meant that local ambulance services are losing even more money.

Who makes up the difference? You, in your property taxes. Ambulance services are generally town-run (in contrast to other health care), so the cost shift for underpayment goes straight to town budgets.

This is a problem across health care, where the costs are covered by private insurance reimbursements (and higher rates for private payers), but it is worse for our local rescue crews because it has been much longer since they saw any rate increases.

They only solution is to increase Medicaid payments, and there’s the rub. We already have a gap of tens of millions of dollars in the state budget, mostly caused by increases in the Medicaid budget. We are continuing to look into this, but haven’t found a way out yet.

***

In the House last week we passed the mandatory paid sick leave bill that will require all employers to eventually provide at least five days of sick leave per year. On its face, this seems appropriate, but the devil is always in the details.

The bill includes even tiny businesses trying to get off the ground with only a few employees; it covers employees who work even less than half-time (18 hours per week). “Sick leave” includes taking an extended family member for a doctor’s appointment, staying home with a child on a snow day, or going to court for a family abuse hearing.

These are all good things, but are a lot to place as a burden on the cost of doing business in Vermont, especially at a time when our economy is so fragile. We need to do everything to protect small businesses if we want to protect the jobs they supply.

Some have pointed out that some employers will simply be forced to reduce salaries to cover the overall cost of hiring added staff to cover those out on a sick day. That won’t really help anyone.

As a result of these issues, I did not support this bill.

***

Importing ivory has been illegal in the United States for decades, but an illegal market thrives on poaching of elephants. One way to help fight this is for states to make the sale of ivory illegal within their boundaries, and the House passed a bill this week to have Vermont join a number of other states in this ban. The bill now goes to the Senate.

Discussion on the House floor included one light-hearted comment, when a Republican got up to speak in support of the bill by reminding others that the elephant is the symbol of the Republican party.

“We need to protect the elephant population,” he said as he looked across the chambers at other members of the minority party. “We clearly need more here.”

***

Thanks for the honor of representing you! You can contact me or Rep. Patti Lewis by email (counterp@tds.net for me; pattijlewis@myfairpoint.net for Patti) or by leaving a message at the statehouse at 828-2228. We welcome your feedback and input.

Legislative Update, Feb. 6 2016

Legislative Update

Rep. Anne Donahue

Feb. 6, 2016

 

Pity that we can’t maintain focus on the critical issues before us – the economy and budget, education and health care – instead of being distracted by whether Vermont should make marijuana legal.

This bill is not in the House yet; in fact, it hasn’t reached the Senate floor. But that’s where I’m getting questions from constituents, so:

A few years ago, I was prepared to support decriminalization (changing possession of small amounts from a crime to a small civil penalty) on three conditions: continue to consider it criminal if possession was in a school zone, enhanced penalties for possession in a motor vehicle, and a higher fine for use in public places. The bill passed with none of those, so I voted ‘no’ and was left with little confidence that there was a commitment to protecting against use by young people or against drugged driving.

I see little urgency in shifting from our current decriminalization law to endorsing it as “acceptable” (the effect of legalization.) So I currently lean against this change.  

I look forward to hearing more input from constituents.

***

The House bowed to pressure from school boards and the Senate to nearly completely repeal a bill passed less than a year ago to help slow the growth in school spending. The effect will be that towns that avoid large budget increases will take on some of the cost of those that do not. So anticipate another property tax increase that ignores local restraint.

If you heard about our midnight session to vote on this repeal, you know that even Vermont engages in political games.

Some eight years ago, I began to object to the end-of-session process of rushing final bills through without the time to even read them by suspending the usual rules and turning a three-day process into a half hour process. One of the few actual powers a minority party has is to refuse to suspend rules, because that requires a three quarter vote. So under my leadership, Republicans set out a ground rule that we would not agree to suspend rules without at least 24 hours to review it, unless there was consensus that it was a minor and non-controversial bill.

After weeks of legislative angst, last Thursday evening the Senate voted out its final bill and sent it to the House. The House Speaker scheduled it for a vote at 9:30 Friday morning. This required a rule suspension and would have left legislators with no time to even consult with their constituent towns or to assess the full fiscal implications of the Senate changes.

Democrats argued that there was great urgency because school boards had to finalize budgets by that Sunday, ignoring the reality that the window of opportunity had already passed, since budgets had already been adopted by then. There was no need to take the bill up before the next scheduled session on Tuesday.

Republicans voted against expediting the process. The Speaker kept the House in session for a revote at 3 p.m., threatening to convene the House again on Saturday. Republicans refused to bow to this bully tactic to suspend the normal process. Having been called on what may have been intended as a bluff, the Speaker had to save face and continue to maintain that it was an emergency. He reconvened the House for Saturday, which meant the Senate bill could be considered without needing to suspend rules.

Since it officially became Saturday at midnight, he set the session for 12:01 a.m. – ergo a first-ever January middle-of-the-night session. It cost tens of thousands of dollars for taxpayers, since legislators receive expenses for meals, and rooms or travel costs for the extra day.

(No, I did not put in a claim.)

Ironically, some news media reported that Republicans had tried to “delay” the bill. Last time I looked in the dictionary, refusal to suspend rules to expedite does not meet the definition of delay!

***

How can a tax that raises money from doctors save on health care costs?  It doesn’t – but it does make it possible to grab more federal tax money to pay our state spending bills, so that is the rationale of this budget proposal by the governor.

Here’s how it works:

We place a tax on providers (in this case, adding independent doctors and dentists to our existing taxes on hospitals, nursing homes and home health agencies), and take the money to spend on our Medicaid costs. Since money spent on Medicaid is matched by the federal government, we double the value of the taxes taken in.

Some of that money goes back to providers in the form of Medicaid rate increases. (Medicaid rates pay doctors at well below what it costs to deliver the care.) But they don’t necessarily get back as much as they pay in, and it could end up hurting our access to health care as doctor’s practices become unsustainable – something that has already happened in several instances in parts of northern Vermont.

As my committee delves deeper into this year’s Medicaid budget, we’re also learning more about why the budget is shooting upward.

The federal Affordable Care Act didn’t increase income levels for eligibility in terms of Vermont, because Vermont already had programs (VHAP – the Vermont Health Access Plan, and Catamount Health, a subsidy program) for lower income individuals. But it changes how income is defined, with the effect of making more people eligible. Under federal law a person’s assets (money in the bank, or the value of a home) don’t count in calculating eligibility.

It also bans access to federal subsidies for those with low income if they are now eligible for Medicaid.

So don’t frown on a neighbor who is “taking advantage” of Medicaid despite being above poverty level in income and owning a nice home and car. They have no choice but to either accept Medicaid or pay full price (tens of thousands of dollars a year) for health insurance. And we are all required to have insurance or pay a federal fine.

Through no fault of their own, these folks can end up with a real windfall, because the free benefits under Medicaid are much broader than any regular health insurance. Some of those benefits, such as dental, are optional for states to provide. Others, such as transportation to get to the doctor, are mandated by federal law.

I am pushing to explore whether we can take a middle road and cut back on some of the optional added benefits for the newly eligible, instead of making other cuts to balance the Medicaid (and overall state) budget.

Medicaid is a big deal when we look at the budget. It is 30 percent of our state spending, only a bit under education (33 percent); all other human services supports are 16 percent. Because we pull in so much federal money (coming, of course, from our federal taxes) Medicaid is only about 20 percent of all spending from money raised directly by the state. Education is 50 percent.

***

We’re also digging much deeper into the “all payer model” for health care reform. I’ll go into more detail another time, but it is not nearly as huge a deal as either feared or hoped.

Assuaging Fears: it does not change Medicare benefits. It does not turn Medicare funds over to state control. Medicare continues to be directly paid by the federal government to providers. Doctors who don’t want to be a part of new payment structures can still be paid the old way. Patients can still choose their own doctors, regardless of whether paid the new way (one payment for total care) or the old way (separate payments for each service provided.)

Lowering Hopes: it will create less cost savings than some may think. Better coordination of care and savings on doctor paperwork is likely, but other major drivers of costs will remain. Payers (the big three: Medicare, Medicaid and private insurance) will still pay their own separate rates to providers, so the cost shift – private insurance paying for what the state underpays – will not be solved. It will also add a new bureaucratic layer, because the new payment system requires that providers join an organization of multiple providers to contract for the rate and quality commitments.

***

Thanks for the honor of representing you! You can contact me or Rep. Patti Lewis by email (counterp@tds.net for me; pattijlewis@myfairpoint.net for Patti) or by leaving a message at the statehouse at 828-2228. We welcome your feedback and input.

 

January 23, 2016 Update

The effort to curb education spending increases (and thus tax increases) last year appears to be in serious jeopardy already this winter as school boards react to the “allowable growth rates” that affect the budgets now being completed.

There is a lot of misunderstanding about what the “cap” actually does, and a lot of politics surrounding the reaction.

There is a major disagreement between the House and Senate on what to do (something I think is really healthy, especially given the single-party super-majority), and very little time to act before school budgets are locked in for March town meeting voting.

I voted against Act 46 last year, not because I thought we should not push for greater consolidation of districts, but because I thought the predicted budget savings were overstated, and this alleged reform bill did little to address underlying cost and financing issues.

I believe that the “caps” were a poor, stop-gap measure to avoid any more serious efforts at reforming the financing infrastructure, but in the absence of other measures, they need to be maintained in the short term.

Why? What they do is protect districts against bearing the costs of those who are spending much more. Going above the growth rate is not banned. The limit on the growth rate varies for each school district based on prior spending. The penalty is simply that the local district must pay for its own increases in costs, instead of forcing others to pay.

The governor produced his annual budget proposal this past week, and he began by saying, “This will be my sixth budget that does not increase income, sales, or rooms and meals tax rates that are already too high.”

As pointed out in the weekly newsletter of the Vermont League of Cities and Towns, however, the governor has never included property taxes in his list of broad-based taxes that he has been unwilling to raise and therefore (appropriately) did not mention property taxes in that statement.

The state’s budget has many direct impacts on the property tax, and they cannot be left as though unrelated.

A New Distraction

As if existing controversy was not enough, a crisis erupted last week with the discovery that the Agency of Education had made an error in how it calculated the “allowable growth rate” provided to school districts. Budgets were, in some cases, based on wrong information.

The Senate had already indicated it would repeal the spending limits in Act 46, but this error became an added rationale. The Senate had opposed any spending restrictions last year, and only agreed to a compromise provision in the bill that finally passed.

The confusion resulted in the House Education Committee reconsidering its own actions, and a bill we were supposed to take up on the House floor last Tuesday was delayed. That bill proposed allowing an increase in the growth rates that would apply to all district budgets.

This means that in the coming week, the House will take up a bill with multiple components (and likely proposed amendments with lots of floor debate.) It will include the increase in growth rate, a “hold harmless” provision for the error by the Agency of Education, and potentially, a change in the limit on property tax rebates to make up for the Education Fund shortfall that will result from the allowed increase in the growth rate.

Party line politics emerged on Friday, when Republicans proposed that the House act immediately on the piece that everyone agrees on: protecting districts from negative consequences from the Agency error (the “hold harmless” provision.) That would have ensured that section passed, even if the other pieces are not addressed or the bill is voted down.

That proposal was voted down on a split between Republicans and Independents versus Democrats and Progressives.

What Is the ‘Cap’ Under Debate?

A Republican member of the House Education Committee, Scott Beck, did a superb job of explaining to his constituents the crux of this issue. Rather than duplicating his effort, I will share it directly:

“Facts can be stubborn. On average, for every additional dollar spent by a Vermont school district, their homestead taxpayers only fund half; the other half comes from homestead taxpayers in the other 276 districts through higher homestead education property tax rates. In St. Johnsbury (per pupil spending of $12,106 in FY16), $.27 of our $1.27 homestead tax rate goes to subsidize districts that spend more. In a district that spent $16,000, their homestead tax rate would have been $1.69 in FY16. If every district had spent $16,000, their tax rate would have been approximately $1.91, a $.22 subsidy.

“Given these unfortunate circumstances, it is no surprise that many school districts have spent at a rate that eclipses inflation, income growth, and grand list growth. The money comes cheap, and gets cheaper if the district spends even more. It is the equivalent of buying a compact car and paying a surcharge, while the person purchasing the full-size sedan gets a sizable discount. Even though the full-size costs more, more value is received for the money and a lot of full-size sedans leave the lot. The end result, of course, is high education property tax rates to pay for all of those full-size sedans.

“Act 46 and its allowable growth rate is intended to address at least part of this dysfunctional funding system. Prior to Act 46, if a district picked the full-size sedan, other districts that picked the compact car had to help pay for the full-size. The allowable growth rate puts an end to this practice going forward. For FY17 and FY18, the district(s) that pick the full-size sedan are going to have to pay more in the form of a penalty for exceeding their allowable growth rate.

“For those districts that cannot or will not control their education spending, this allowable growth rate probably seems unfair. They should take a moment to consider the perspective of districts that have committed to controlling their spending increases and remained within their allowable growth rate. It’s not that they don’t want any other district to be able to choose the full-size sedan, they just don’t want to have their homestead property tax rate increased to pay for it.

“What would be the result of repealing or delaying the allowable growth rate? Simple, a run on full-size sedans and homestead taxpayers up in arms over the homestead education property tax rates required to pay for them.”

How Does This Impact Us?

Many towns have a lower allowable growth rate under Act 46 than our local districts, which means that we would benefit from the greater spending reduction pressure on the higher-spending districts with lower AGRs. Without Act 46, we will continue to bear the negative impact of higher statewide spending despite our ongoing frugality.

What’s important to recognize is that Act 46 does not force any district into draconian cuts, as some folks are asserting. A decision can be made to exceed the “allowable growth rate” by whatever a district feels is necessary, and the penalty is having to pay for that extra spending from our own local property taxes, without help from the statewide education fund.

That’s a local voter decision, which affects local property taxes, as it should.

I will support any effort to “hold harmless” districts affected by the Agency of Education error, but I will not vote to repeal the Act 46 restrictions, nor to raise the thresholds.

What’s more important in the long run is that I will continue to press for an overhaul of our outdated, complex, inequitable education funding formula.

***

Thanks for the honor of representing you! You can contact me or Rep. Patti Lewis by email (counterp@tds.net for me; pattijlewis@myfairpoint.net  for Patti) or by leaving a message at the statehouse at 828-2228. We welcome your feedback and input.

January 9, 2016 Legislative Update

A new year and a new legislative session have begun, and it sounds a bit like a broken record: a mid-year budget deficit and an even bigger deficit looming for the coming fiscal year. We just keep on passing budgets that spend more than the economy is expected to grow, and should hardly be surprised by the outcome.

The chair of my Health Care Committee took a moment for reflection, nonetheless, to ground us for our work ahead, reminding us of the “extraordinary ongoing experiment in democracy” that we are participating in.

Imagine the concept, he said, of people deciding to have every town elect someone from among themselves – just another ordinary lay person without any special expertise – to send to Montpelier to try to make decisions about what is best for the town and the state.

We’ve only been trying it for a few hundred years, and it’s not a perfect system, but it’s what we’ve got and it’s better than the alternatives other folks have tried.

For the 11 of us around the table in the Health Care Committee room – six Democrats, three Republicans, one Progressive and one Independent – it was a time to remember that we share the common purpose of trying to make Vermont a better place for us all and future generations, even if we don’t agree on how to best get there.

Our Chair, Bill Lippert, suggested that in the midst of the turmoil of pressing issues of the months ahead, we keep in mind our goals and aspirations for a better system for the delivery of health care, even if they cannot or will not be achieved in the short term.

***

What are those most pressing short term issues?

Medicaid

Headlines have been telling us that a third of Vermonters are now on Medicaid, and that we hadn’t projected the size of the Obamacare increase, driving our tax burden to unsustainable levels.

That’s not fully accurate; the devil is always in the details.

About a quarter of Vermonters now have Medicaid as their primary form of health insurance. The rest of those leading to the “one third” number are those who receive some level of financial help through Medicaid for their regular health insurance: premium assistance for insurance bought through the health exchange, for example, or Medicaid as a secondary payer while on Medicare but financially needy.

Our forecasters were actually pretty accurate about how many persons would be eligible for help, but the numbers of which persons would fall into which category were off. More people were eligible for regular Medicaid as a result of both the economy (lower incomes) and the changes in federal definitions of what constitutes “income.”

Fewer ended up on premium assistance, and the cost ended up $52 million higher than expected this year. Of that, $23 million is the state’s share.

That $23 million shortfall is the largest, but not the only increase in health care spending being proposed for this mid-year adjustment to the current year’s budget. The “$1 million here, $2 million there” other increases (called “upward pressures” in government bureaucrat language) bring the total shortfall to $35 million.

That, of course, will carry forward into the needs in the budget for the year ahead.

***

All Payer Model

When the governor decided last year what some of us had known for a long time – that Vermont couldn’t go it alone to create a universal health care system – our Green Mountain Care Board began exploring other mechanisms to achieve payment reforms that would create a fairer and more sustainable way of financing our health care.

The Green Mountain Care Board was created by the legislature to lead health care reform, and this five-member board was vested with significant power to regulate hospital and private insurance rates.

Many parts of the Affordable Care Act (Obamacare) are still rolling out. Medicaid expansion was only one piece. The federal government is in particular pushing for cost containment measures for Medicare. (Refresher: Medicaid is health care funded by the state and federal government for those with low income; Medicare is the federal health insurance paid for through payroll deductions for the elderly and persons with disabilities.)

One of its tools is the “Accountable Care Organization” – ACOs – which are a lot like old managed care companies except that the management of care and costs is done by the provider organizations themselves, rather than an insurance company. Many Vermonters are not even aware that their Medicare is now being managed by an ACO.

The ACO gets paid for the Medicare services delivered, and if, through better management of patient care, it costs Medicare less than the estimate of what it would have cost otherwise, the ACO gets to split the savings with the government.

In our current payment system, care providers are paid differently by private insurance, Medicare, and Medicaid. One of the things that drive health insurance premiums up so high is that Medicaid doesn’t pay its full share of costs, so that cost is transferred to private payers, something called the “cost shift” that amounts to a hidden tax to pay for Medicaid.

The vision of the “all payer model” is for Vermont to set payment amounts for all providers: payments by Medicaid (which it already does); by private insurance (which it does indirectly, through its insurance rate-setting authority); and for Medicare (which would require federal approval, called a “waiver.”)

An ACO could then manage care for all the patients it serves without receiving different rates for different patients. The actual services a patient receives would remain controlled by existing law. In other words, if Vermont obtained a “Medicare waiver” in order to build an all-payer model, it could not touch the benefits that Medicare recipients are entitled to, but it could set the rates that are paid to the ACO.

The Achilles heel in this that isn’t discussed much is that an all payer model would mean Vermont would have to start bringing Medicaid rates up to even off into a similar range as the other two payers. Where would that money come from?

This whole idea needs a great deal of care and thought, but right now, under Vermont and federal law, the state can seek the Medicare waiver without the consent of the legislature.

Another member of the Health Care Committee – Paul Poirier, an Independent from Barre City – and I are having a bill drafted to require legislative approval before a waiver could be signed with the federal government.

This model may actually prove to be a valuable tool for payment reform, but it is full of potential pitfalls as well. We need to have the scrutiny and the confidence of much more oversight if we are going to take this plunge.

***

The Health Exchange

Much more out of the public eye these days is Vermont Health Connect, the exchange for signing up for health insurance that was such a fiasco in its first year of attempted operation.

It’s doing better, but it’s far from functioning smoothly or the way intended, and new glitches keep erupting.

One of the new “glitches” has to do with people who discover their insurance has been cancelled because they didn’t pay their premium by the due date, even after receiving a grace period.

Nothing wrong with that, it would seem.

Except that we are cashing their checks!

Usually, in business, if your check is cashed it means acceptance of a late payment.

The state says it plans on fixing this, not cashing checks if a person is being cancelled, but it isn’t a priority. There are too many other priorities – other “glitches – that are ahead of it in line.

That gives an idea of how much work is still ahead.

***

Thanks for the honor of representing you! You can contact me or Rep. Patti Lewis by email (counterp@tds.net for me; pattijlewis@myfairpoint.net  for Patti) or by leaving a message at the statehouse at 828-2228. We welcome your feedback and input.