Sen. Randy Brock, left, BISHCA staff attorney Robin Lunge, center, and Sen. Peter Galbraith. VTD file photo by Josh Larkin.
A new draft report shows that the state of Vermont could save hundreds of millions of dollars if it adopts the recommendations outlined by H.202, the health care reform bill as passed by the Vermont House of Representatives. (The bill was altered somewhat by the Senate Health and Welfare Committee last week and the legislation, and a number of amendments, will be taken up by the full Senate at 2 p.m. on Monday.)
If a single-payer style health care system is implemented, the state would save about $55 million in 2015, according to data from Steve Kappel, a consultant who helped to prepare the report. In 2016, the state could save $201 million. (The aforementioned figures do not include dental and vision care.) These net savings are based on a calculation that includes an extension of essential benefit plans for uninsured residents and improved plans for underinsured Vermonters. The state currently has 47,000 uninsured and more than 100,000 underinsured residents.
Overall savings would be 5 percent to 6 percent of spending under the health care reform plan, according to the report. The authors of the report found that “the savings from a reformed system continue to exceed the cost of expanded coverage and other investments.”
The calculations are conservative — they do not include the full administrative savings estimated by Harvard economist William Hsiao in his report to the Legislature. Hsiao said the state could capture $180 million in the first year (net) of health care reform, based on administrative savings for providers of 5.3 percent.
Long-term savings are even more dramatic, according to the study. The new estimates indicate that Vermont health care spending will be about $6.71 billion in 2015. The state currently spends about $5 billion a year. The report shows that baseline state spending on medical care will be about $8 billion in 2018. If the state implements a single-payer style system in 2014, it could save about $1 billion in health care spending in 2018, according to the report. (See the chart on page 13.)
These figures assume 2.65 percent in savings in administrative costs for providers.
Rep. Mark Larson, chair of the House Health Care Committee, said the House requested the report in response to concerns that projected savings under a unified health care system were too optimistic.
“People wanted confirmation that savings could be achieved,” Larson said. Opponents of the bill asserted that the savings were overstated, Larson said, and “this answers that critique.”
“Even under more conservative assumptions, we can cover all Vermonters and save money compared with the current system,” Larson said.
Larson said if the state also pursued medical malpractice savings there would be even more significant savings.
“We always knew there would be a substantial cushion,” Larson said. “This report confirms that’s still the case.”
The report was prepared by Kappel, of Policy Integrity, the Vermont Legislative Joint Fiscal Office and the Vermont Department of Banking Insurance, Securities and Health Care Administration. The Vermont House requested the study, which was based on estimates from Hsiao’s report.
Hsiao predicted that the state could save 25.3 percent in health care spending if it reduced administrative inefficiencies (3 percent for payers; 5.3 percent for providers), embarked on payment reforms (9 percent), continued with Blueprint for Health efforts (1 percent), curbed fraud and abuse (5 percent) and reformed malpractice policies (2 percent).
The authors of the new report used more “pessimistic assumptions” than those Hsiao relied on in his reports to the Legislature. The legislative study includes models that reduce the amount of anticipated administrative savings to be achieved through a uniform payment system by 50 percent. Even in this scenario, the study shows significant savings.
In addition, the figures used in the new report are adjusted for inflation and are based on the latest health care finance data from BISHCA. Hsiao’s report was based on 2010 dollars. The actuarial value used in the report is identical to Hsiao’s: 87 percent, the current average value of insurance coverage for Vermonters.
BISHCA released a new “expenditure analysis” in March that updates spending estimates and forecasts for 2008 through 2013.
The report does not include medical malpractice reforms because “medmal,” as it’s called, is not included in H.202, though it is an issue lawmakers want to address when more specifics for the reform plan have been hammered out.
The report provides data for six different scenarios, including malpractice savings.
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Having ALL Vermonters in a “single-payer/few-payer” system would create the greatest savings. Any such system must include all people on a government payroll; state, county and town. No one should have a “Cadillac” plan, obtained by union “negotiations” at taxpayer expense.
No so-called “wrap-around” plans for Vermont-NEA members, etc., paid for by local taxpayers, plans that are in addition to the basic plans every Vermonters would receive.
That way all Vermonters have the same plans and the same services. All treated equally before the law. Vermont could lead the way. It would be the lowest cost way to go, the least complex and the easiest to administer, AND create the greatest savings. No big host of people would be required to administer it. That would be democracy and fairness. Plans with high deductibles should also be offered to people who want them.
Medicaid and Medicare have 10% administrative costs and 90% benefits. HMOs have 20% administrative costs and 80% benefits.
The additional 10% HMOs keep is about $250 billion per year which is used for lavish offices and multimillion dollar paychecks for top management, PR, advertising, and paying politicians, etc., to keep the gravy train going.
We can’t have all the current inefficient health care we want, but we certainly are entitled to the same level and extent of health care, at the same cost, as in Europe, etc. That means glasnost and perestroika, openness and restructuring.
Doctors seeing themselves as small business men is part of what is wrong with US medicine. It is an anachronism that exists nowhere but in the US. That must change.
I lived in Europe for 28 years under a single-payer system that covered ALL workers, including government workers, professors in colleges, policemen, teachers, loggers, farmers, business owners, etc.
I was operated two times, stayed in the hospital for 10 days for each operation and I never received any paper work nor any bills.
It is a fair system that provides care at about HALF the cost per person per year, AND covers everybody, AND has better outcomes, such as lower infant mortality and longer life expectancy.
In Europe and elsewhere, doctors see themselves as employees of the nation’s health care system. They are employees, are paid well, and are insured by the system. They do not send out invoices. They merely state the services provided to a patient and provide that information to the accounting department which forwards it to the government, or government authorized agent, for payment.
The patient does not see any paperwork.
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According to this article, Rep. Larson said that this report answers opponents of the bill who believe the savings predicted by Dr. Hsiao are overstated. That is an absolutely absurd contention.
If you look on Mr. Kappel’s web page, you’ll see that his clients include a number of liberal entities and institutions, which is a fairly clear indicator of the results he provides them. But even more important, his client list includes Dr. Hsiao!
So Rep. Larson, in an effort to dispel criticism about the single-payer bill, turned to a consultant who worked with the single-payer bill’s architect?
If that’s what passes for due diligence in the liberal echo chamber of Vermont’s Statehouse, then it’s no wonder everyone there thinks their policies are so wonderful, and are so content to blast through opposition like it’s got nothing to offer.
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Mr Kheiry
The article stated clearly that the new study used some different assumptions than Dr. Hsiao.
I have not yet read the study. Have you? Until you do, it seems inappropriate to assume the game is fixed. I’m unclear why Mr. Kappel’s client list should substitute for reading the report.
Like Mr. Kappel (who I do not know personally), my client list includes “a number of liberal entities and institutions.” But the work is rigorous and transparent, and that’s what matters.
If you have no direct knowledge of Mr. Kappel’s report (actually, the article said he was part of team), why do you assume the report is unworthy?
Attacking individuals is not your usual MO.
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Mr. Hoffer,
You’re right that I haven’t read the report, and you’re right that I avoid ad hominem criticism; if my comment strikes anyone as being critical of Mr. Kappel, then I apologize to them and to him; it was not my intention. I was actually trying to be critical of Rep. Larson’s assertion that he has answered critics of his committee’s bill by hiring somebody who is obviously coming from a similar – if not the same – ideological background as himself, and who worked with Dr. Hsiao on the original report.
Imagine yourself in a conservative state like Texas, and the legislature is considering complete deregulation of the healthcare sector. The legislature retains Cato Institute policy analyst Michael Cannon to provide them with a study about how feasible their plans are. Predictably (and probably rightly), Progressive critics say the study is based on flawed and/or incomplete assumptions. So the legislature hires a like-minded colleague of Cannon’s, who has worked with him in the past, to tweak the assumptions and run the numbers again… and lo and behold, this “new” report still manages to confirm the previous findings that total deregulation will save the day.
That would be absurd. Rep. Larson’s contention is likewise absurd. My assumption is that Mr. Kappel is extremely diligent, competent, and rigorously honest. Just like Mr. Cannon would be. But clearly, their wordviews color the conclusions they reach, notwithstanding that each of their analyses would be entirely based upon facts.
If we REALLY wanted to address everyone’s concerns, we’d throw people at opposite ends of the political spectrum in a room to hash out a solution. THAT would be a study worth our money, if one ever emerged.
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Assigning dark ulterior motives, name calling, and pronouncing something “absolutely absurd” – all with nary a shred, a whisper, a hint, of evidence, does not merit a response. And anybody who has known Mr. Kappel and is familiar with his work (as I have for more than twenty years) knows how empty attacks on his integrity are.
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Mr. Donovan,
As I noted in my reply to Mr. Hoffer, I pronounced Rep. Larson’s contention absurd, not Mr. Kappel’s study. I don’t doubt Mr. Kappel’s integrity; I would contend only that his worldview colors his conclusions, as is the case with all human beings. If that were NOT true, then the Vermont legislature would have no problem hiring healthcare analysts from the Hoover Institution or the Mercatus Center to assess Dr. Hsiao’s report, and Paul Krugman and Veronique de Rugy would always draw the same conclusions from the same facts.
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