The single-payer framework: How Vermont is using the ACA exchange as a vehicle for reform

Editor’s note: This is the first in a three-part analysis of the Shumlin administration’s plans for a single payer health care system.

A Fletcher Allen doctor watches during the health care bill signing. VTD/Taylor Dobbs

A Fletcher Allen doctor watches during the health care bill signing. VTD/Taylor Dobbs

With the adjournment of the Legislature this spring, the health care reform effort in Vermont passed a second birthday of sorts. It’s still substantially on track, but some angst and political opposition has emerged along the way.

The major step taken this year was the establishment of the legal framework for the exchange, a new structure within state government to manage the transition of the current health care insurance industry to the requirements of a reformed system. Most of this spring’s insurance legislation was driven by federal law, but at least one key element — barring small group sales outside the exchange — was specific to the Shumlin administration’s design.

A second piece of this spring’s work was the shift of the responsibility for cost management of the health care delivery system to the Green Mountain Care Board; the board will assume most of the powers exercised in the past by BISHCA, the Department of Banking, Insurance, Securities and Health Care Administration (and now renamed the Department of Financial Regulation). Establishment of the board, the first step in Gov. Peter Shumlin’s initiative, was completed last spring.

The concept of an insurance exchange is a major component of the federal Affordable Care Act known colloquially as “Obamacare.” The purpose of the exchange is to form a bridge from the current insurance-based, fee-for-service system to one that bundles payment to hospitals and doctors so they can take responsibility for the cost efficiency of the delivery system. An important component of the federal law is that individuals must have health insurance with federal subsidies to help them pay for it.

Under the law, each state must have such an exchange in operation by Jan. 1, 2014; if a state doesn’t create one, the feds will set one up for them. A minority of states, a dozen or so, are establishing exchanges immediately; most are waiting for the feds to act.

Some states that have moved ahead have had political difficulty. In New York, for example, Gov. Andrew Cuomo set up an exchange by executive order after the New York Senate refused to authorize it.

The Vermont exchange is designed to operate in two stages. The first goes into effect in 2014 and covers what is known as the small group market — individuals and employers with 50 or fewer employees.

The second stage of Vermont’s plan takes effect Jan. 1, 2016, when the exchanges will expand to cover firms that employ 51 workers or more. The second stage introduces the requirement that all employers with 51 or more workers provide health insurance to the workers (nearly all such firms — 98 percent of those in Vermont—already do so). That expanded system will include penalties for failing to insure workers.

We will ignore stage two for now for two reasons.

The first is that the U.S. Supreme Court is on track to issue an opinion in June on whether the mandate is constitutional. If the high court voids the mandate, the exchange could still go into operation in 2014, but the overall atmosphere for reform would shift in a way that could drive some changes in the 2016 reform structure.

Moreover, the national election in November could materially affect the whole effort. If the Republican challenger defeats President Obama and especially if the Republicans win control of the U.S. Senate (they already control the House) they can almost certainly strangle Obamacare in its crib.

Barack Obama speaks to a crowd of supporters on the University of Vermont campus on March 30, 2012. Photo by Ceilidh Galloway-Kane

Barack Obama speaks to a crowd of supporters on the University of Vermont campus on March 30, 2012. Photo by Ceilidh Galloway-Kane

Assuming, however, that Obama prevails and the high court rules only on the individual mandate, then the Vermont exchange is virtually certain to open for business on Jan. 1, 2014, about 18 months from now. So, what will it look like, how will it affect small business in the state, and how will it affect the uninsured?

It should be noted at the outset that much of the public discussion of the exchange — in blogs and the web and in newspapers and radio and television — has been dominated by people who are highly critical of the single-payer idea in Vermont, as well as many of the details of the exchange. Some of this sentiment is ideological — if the government is doing it, it must be bad — or based on self interest: It will disrupt the way they now do business and cost them money. (We’ll assess the validity of the opposition later in the series.)

A wholesale restructuring of the health care industry in the United States under the Affordable Care Act will be extremely complicated and there is no way yet to parse what it might look like, but from the Vermont perspective the exchange portion of the program looks like a terrific deal for both workers and individuals. That’s because there are federal subsidies to support both coverage for the currently uninsured and for small businesses who now provide health coverage for their workers and those who don’t.

The first formal analysis on this question was the so-called Hsiao report, which kicked off the Shumlin initiative last year, and which estimated that these subsidies could run from $200 million to $400 million per year. Those figures constitute a goodly chunk of the whole hospital bill for the state, now running to about $2 billion. None of this is Shumlin’s idea; it is entirely an outgrowth of the first step toward Obamacare and it is a huge slug of money to grease the skids toward the much more complex steps to follow in 2016.

It works like this: As of 2014, all health insurance for individuals and companies with 50 or fewer employees will be sold through the exchange. All the insurance sold there must have a fully elaborated set of benefits in terms of what is covered, as well as conditions that prevent insurance companies from rejecting people on the basis of factors such as pre-existing conditions.

Obamacare establishes four levels of permitted richness of plan that can be offered. They are denoted by “metal” levels: The platinum level calls for the employer to pay 90 percent of the claims submitted on behalf of the people covered in the pool; these payments would be paid according to the policy purchased by the company. The remaining 10 percent would be paid by some combination of the company and the employees, through mechanisms such as copays and deductibles. The gold level percentage figures are 80-20, silver 70-30 and bronze 60-40.

The federal subsidy limits the individual’s burden on a sliding scale up to income levels of $92,200 for a family of four. The individual consumers of health care will pay for their share in the form of copays and deductibles and a share of the total premium for the coverage.

The Department of Financial Regulation has estimated the impact on the following model participants in the program:

  • A couple with no children now buy insurance that costs $13,200 per year. Their family income is $52,000 per year. If they buy insurance through the exchange in 2014, they would receive a federal tax subsidy that would drop the cost for the same coverage to $4,994, a savings of 63 percent.
  • A single, self-employed electrician, annual income $40,000 per year. He buys insurance with the same coverage as example one. His annual cost now is $7,200. Cost from the exchange would be $3,804.
  • A family of four, mother, father and two kids, with an annual income of $32,000. They now buy an insurance policy with a $10,000 deductible at an annual cost of $8,400. If they buy insurance in the exchange, their costs drop to $960, a savings of 89 percent. Moreover, if they were spending the whole $10,000 on medical care, they would save $7,500 because their deductible in the exchange would be much lower.

For most individuals and employees of small businesses in Vermont, the combination of the exchange structure and the federal subsidies are a financial boon. They either provide insurance coverage to the bulk of those that have none now, or they hold out the prospect for improving the coverage of those who have very high deductibles or pay very high premiums.

There are some caveats. One is illustrated by the final individual example provided by the Department of Financial Regulation: the family of four with an annual income of $450,000 per year who buy health coverage in the private market, and in the future will have to buy it inside the exchange. They will get no financial boost because their income exceeds the federal $92,200 limit.

A second caveat concerns those individuals who have no health care insurance now — and don’t want to pay anything in the future for health insurance, whether they can afford it or not. Those individuals will have to purchase care in the exchange in 2014 because of the personal mandate in the federal law. That would change obviously if the Supreme Court kills the mandate. The purpose of the individual mandate is to make sure that everyone pays what he or she can afford for health care coverage, since at some point everyone is certain to be treated if they get sick or injured.

If the mandate survives, it will be enforced by the federal government through the income tax system. When the individual files his tax return, he will have to report whether he has health coverage. If he or she doesn’t, they will have to pay a penalty according to the following formula: a minimum of $695 a year or 2.5 percent of family income, up to a maximum of $2,085. The penalty would be phased in between 2014 and 2016, and there would be exceptions, including “financial hardship,” people whose income is so low they don’t have to file a tax return, and those for whom the lowest cost plan would consume more than 8 percent of their income.

In short, most small business employees and individuals who buy insurance would have health coverage, and for a significant portion of the Vermont population, the federal tax subsidies would make it less expensive than it has been in the past.

Small businesses and the mandate

What about the employers, the small businesses, the backbone of the Vermont economy? What is the effect on them? Could they afford it? Would it drive them out of business? These are critical questions.

The Department of Financial Regulation estimates that there are 16,500 such firms in Vermont and about 7,500 now provide some kind of health insurance. What is the effect on them? And what about the companies that don’t provide health insurance?

These questions lie at the heart of the anti-reform effort in Vermont since its inception in early 2011. We’ll return to this issue in much more detail in No. 3 of the series, and while there may be some employers who may pay more than they do now, the vast majority should get a significant reduction.

Under federal law, no employer with 50 or fewer workers has to provide health insurance and that does not change when the full impact of Obamacare kicks in in 2016. Employees will have to obtain coverage as individuals, but at no cost to small businesses.

How about those companies that do provide insurance? There has been much talk about how some companies could face increases of up to 18 percent per year. That would be catastrophic. We’ll return to this issue in more detail later, but the fact is that no small employer has to pay an increase of 18 percent because he or she isn’t required to pay for health insurance. This provision is the ultimate safety valve for the small business community.

The Department of Financial Regulation laid out this scenario when the agency issued its examples earlier this year. XYZ company with an owner, Mr. Jones, and seven employees, pays a total premium of $153,600 per year in the current insurance market. Each person, including the owner, has a $2,500 deductible. The employees in the company, including the owner, pays 20 percent of the cost of the premium, or a total of $30,720.

DFR Commissioner Steve Kimbell. VTD/Josh Larkin

DFR Commissioner Steve Kimbell. VTD/Josh Larkin

If XYZ went into the exchange, the company would pay roughly the same amount it does now, but the company would qualify for a 16 percent tax credit worth just under $5,000.

In the scenario envisioned by the Department of Financial Regulation, the primary benefit for XYZ from health care reform would be a very significant reduction in the year-over-year increases in premiums, driven by the inflation in the delivery system itself. But let’s say that XYZ currently has a low-cost policy, either because its employees are unusually healthy, or it buys its coverage through an association, such as a Chamber of Commerce, which has been able to assemble an unusually low cost pool of insured individuals. Going to the exchange then might generate an increase, say, as much as 18 percent of the annual premium.

If Mr. Jones were to eliminate his personal coverage and his employees went into the exchange as individuals, the total premium for the employees would drop from $30,720 to just over $27,000. The owner, however, would be on the hook for the full cost of $14,475 since the example assumes he would have a $100,000 salary and hence not be eligible for the tax credits.

The key metric for the company, however, would be the elimination of $153,000 from its operating expenses for the year. The owner, Mr. Jones, shouldn’t have much difficulty finding a way to get a piece of that to make up for his $14,000 health insurance policy. He could pay himself the $14,000 for his own policy and pick up the whole $27,000 cost for his seven employees and he would still have more than $100,000 to play with.

In the example, his employees would be covered, he could get his entire $14,000 premium paid for, and he could take his $100,000 salary up to $200,000.

There is a second potential benefit to the exchange which is a dramatic simplification of the whole insurance question. Insurance companies are not responsible for the huge run-up in health care costs over the last 50 years — the delivery system produced inflation rates that the companies could absorb only with great difficulty. But in responding to that pressure, the whole health insurance industry has become hideously complicated.

It is so complicated, in fact, that a whole new industry has grown up to deal with it — agents and brokers who have mastered health insurance’s complexities and who manage them for clients. A major goal of the exchange is to reduce the complexity to manageable levels.

Every year, purchasers scramble to keep their costs as low as possible. Buyers move from carrier to carrier, trying to get the best possible deals. This process has been particularly damaging to individuals and employees. Across the country, employers have been steadily shifting the burden for the cost of care to the employees. The buzzword for this shift is replacing defined benefits with defined contributions. You translate the first as “we pay your health insurance.” The second amounts to “we pay what we can afford and you pay the rest.” And the percentage that is “the rest” has been growing steadily for a decade.

One of the interesting elements in the federal exchange law is that it aims at eliminating the effects of so-called cherry picking, whether it is deliberate or not. The gross effects of cherry picking — getting only health people into your patient pool, denying care for all sorts of reasons, have been eliminated in Vermont. But Obamacare levels the playing field for insurance companies inside the exchange. If one company ends up with a healthier pool of people than another and hence has lower costs and higher profits, that company has to share those profits with its competitor.

As we noted earlier, the framework and much of the detail of the exchange function is being driven by federal law, but the state is playing a role in one major element of the Vermont exchange. That is the provision that insurance for the small group market can be sold only within the exchange. This feature has been strongly opposed on the grounds that it can eliminate options for small businesses that already have working relationships with insurance companies, or that are nervous about where the whole reform effort is headed.

The reality in Vermont seems to vitiate that argument. There are only two companies now that sell insurance to the small group market. They are Vermont Blue Cross and Blue Shield and MVP, the Schenectady, N.Y.-based health maintenance organization. Both will offer coverage in the exchange and if they don’t offer enough plan options, the Green Mountain Care Board can order them to.

The exchange, in summary, is a first step toward reform, but it is nevertheless just a first step. The much bigger challenge lies in developing much greater integration in the delivery system and then building a new reimbursement system so that doctors and hospitals can take responsibility for both the system’s cost and quality performance.

We’ll look at those questions next.


Comments

  1. Hod Palmer, III :

    The subsidies that the Federal government will be providing will be borrowed from China and exacerbate the national deficit. Oops!

  2. Hod Palmer, :
  3. Tom Pelham :

    Tsk, Tsk, Tsk Hamilton. Commenting on a peice I wrote a couple of days ago on Digger, Kevin Ellis wrote, “But when you call it Obamacare, a word invented by Republicans who have made it their job to destroy the president, it is a fair conclusion that you don’t like the presidents (sic) health care law.” On this morning’s news, I saw Democratic Congresswoman Jan Schakowsky also use the term “Obamacare” in a postive light. Oh my, what’s the world coming to?

  4. Ham writes “The purpose of the exchange is to form a bridge from the current insurance-based, fee-for-service system to one that bundles payment to hospitals and doctors so they can take responsibility for the cost efficiency of the delivery system.”
    Well, no it’s not. (See 33 VSA 1801), The Exchange is a government-patrolled place to select among government- approved insurance policies, and qualify for the tax credit subsidies. The Green Mountain Care Board is charged with effecting payment reform, but the Exchange is not; and in any case the Exchange will disappear in 2017 when GMC springs full blown.

    • Jason Farrell :

      Mr. McClaughry,

      I find it odd that you’d cite “33 VSA 1801″ and then neglect to quote the statute to support your point. Instead you chose to create your own definition of the statute when clearly, the “Purpose” of the law is defined in the statute you’d just previously cited.

      33 V.S.A. § 1801. Purpose

      (a) It is the intent of the general assembly to establish a Vermont health benefit exchange which meets the policy established in 18 V.S.A. § 9401 and, to the extent allowable under federal law or a waiver of federal law, becomes the mechanism to create Green Mountain Care.

      (b) The purpose of the Vermont health benefit exchange is to facilitate the purchase of affordable, qualified health benefit plans in the individual and group markets in this state in order to reduce the number of uninsured and underinsured; to reduce disruption when individuals lose employer-based insurance; to reduce administrative costs in the insurance market; to contain costs; to promote health, prevention, and healthy lifestyles by individuals; and to improve quality of health care.

      As part of your self described description of the law you typed, “The Green Mountain Care Board is charged with effecting payment reform, but the Exchange is not” but when I read the statute you cited, one of the laws purposes is clearly “to contain costs” which one could logically surmise could include effecting payment reform in the exchange.

  5. Jim Chhristiansen :

    The success or failure of this reform is based on Federal government spending. The same Federal government that, according to USA Today, spent or pledged to spend almost every single cent earned by every American family in 2011 on federal programs.

    http://www.usatoday.com/news/washington/story/2012-05-18/federal-deficit-accounting/55179748/1

    Taxing all American incomes at a 100% rate will not generate enough revenue to pay existing and pledged Federal and State expenditures.

    This is a financial fantasy.

  6. Dan McCauliffe :

    H559 was passed earlier this year with the intent of transitioning away from Vermont’s health insurance system towards the single payer goal. Vermont is the only state forcing individuals and businesses with 50 or fewer employees into the exchange where insurance cost for many will be higher. By not allowing small businesses to continue to purchase outside of the exchange, it is likely that more employers will drop coverage, particularly by not penalizing them for doing so. However, it is still uncertain whether employers will be penalized by the still standing Catamont assessment (http://vtdigger.org/2012/05/22/scheuermann-health-care-reform-must-be-fair-and-transparent ).

    Forcing small businesses into the exchange is purposeful so that employers are more likely to drop coverage so their employees will qualify for federal subsides that the state can capture to help pay for the single payer system in future years. As I stated above, the deal is sweetened by not penalizing employers for dropping coverage, and the employer does not have to pass on the savings, gained by not paying for employee health insurance, on to the employees. Do employers really think they can drop coverage without any blowback (Catamount assessment excluded)? I think many are aware that there will likely be considerable payroll taxes, as suggested by the Hsiao report, and other fees assessed against businesses to help pay for the single payer system. More importantly, the question begging for an answer is whether or not these taxes, fees and assessments will be significantly greater than what small businesses are currently paying for health insurance.

    But what happens once our current health insurance system is dismantled and the federal subsides do not come, or are significantly curtailed if not axed all together, when congress gets serious about addressing our growing federal budget deficit? Will Vermont’s single payer system be sustainable if there is far less than the projected 200-400 million dollars in annual federal subsides? If not, what is the backup plan?

    We all await the outcome of the Supreme Court ruling later this month and of the November elections to better predict the course that our health care reform effort will take. I am hopeful that we will have another opportunity to look at other countries health care systems as a better model for Green Mountain Care, than the Canadian Model that best matches the current plan. Other countries have universal access and spend less money per capita on health care than the US, but do not have the long waiting times that plague the Canadian single payer system. Although I realize ranking lists are not without weaknesses, if you look at the rankings of health care systems throughout the world, Canada shares the same honor as the United States of being nowhere near the top. In fact a 2010 Commonwealth Fund study found Canada dead last in timeliness and quality of health care compared to six other developed countries, and 6th overall, just ahead of the US. http://www.commonwealthfund.org/Publications/Fund-Reports/2010/Jun/Mirror-Mirror-Update.aspx
    To end on a positive note, let me add that the same organization ranked the health care systems of the 50 US states in 2009. And of the 50 states Vermont was ranked #1! I wonder how Vermont would currently rank against Canada. http://www.commonwealthfund.org/Maps-and-Data/State-Data-Center/State-Scorecard.aspx

    • Paula Schramm :

      Thanks to Hamilton Davis for writing the first of three in-depth articles on plans for a Vermont single-payer health care system. Not only is he providing helpful information and clarity, but hopefully enabling a more focused and accurate debate than often has been taking place.
      However those making comments will have to meet him half-way for this to happen. Case in point :
      This is what Hamilton Davis wrote in his article :
      ” while there may be some employers who may pay more than they do now, the vast majority should get a significant reduction.”

      This is how Dan McCauliffe presents it at the beginning of his comment piece:
      ” individuals and businesses with 50 or fewer employees… ( are forced )… into the exchange where insurance cost for many will be higher.”

      Maybe Mr. McCauliffe and I are reading different articles ?

      • Dan McCauliffe :

        Paula,

        I too agree that Mr. Davis provided a good review on this topic, although it would have seemed less partisan if he left out this paragraph:
        “It should be noted at the outset that much of the public discussion of the exchange — in blogs and the web and in newspapers and radio and television — has been dominated by people who are highly critical of the single-payer idea in Vermont, as well as many of the details of the exchange. Some of this sentiment is ideological — if the government is doing it, it must be bad — or based on self interest: It will disrupt the way they now do business and cost them money.” I agree with both Ellen and Walter who disagree in part with Mr. Davis’ statement as they feel supporters of the exchange have dominated the newspaper letters to the editor.

        In response to your comment: My statement that “many” will see an increase, is not inconsistent with Mr Davis’ statement that the “vast majority” would see a decrease. Although I can not confirm his claim, according to the Administration’s Act 48 Integration Report approximately 80,000 Vermonters are covered under associations and they would see an 18.4% increase in their rates, if purchased in the exchange. There will be additional people who will also see increases. So I stand by my claim that many will see increases in the cost of their health care insurance when purchased in the exchange.
        http://www.leg.state.vt.us/reports/2012ExternalReports/274971.pdf

  7. Carol Frenier :

    Jim Christiansen hits the nail on the head. Unfortunately the conversation about single payer health care is largely focused on distribution of services and not much focused on generating the wealth needed to pay for those services. Federal dollars come from our taxes or from the taxes of people from other states. They are not free.

    Furthermore, governments, however good they might be at other tasks, have performed poorly (and bureaucratically) at controlling costs and at providing creative, innovative services.

    So those of us who are skeptical about single-payer are concerned about the problems that have shown up elsewhere with government run systems: rationing, especially for the really sick, and diminishment of quality, on the delivery side; and driving away businesses that provide the revenue to pay for government services, on the revenue side.

    And then there is the issue of choice. As a small business owner I object strenuously to being forced to buy insurance through the exchange. The author says that “the exchange portion of the program looks like a terrific deal for both workers and individuals.” Perhaps so, perhaps not. We have no way to tell at this point. As others have said, if the current administration is so sure that the exchange is going to be that good, why force people to participate?

    Finally, what about businesses that bear the brunt of the cost? The safety value of not having to provide insurance to employees won’t mean anything if the state needs to eventually impose a hefty payroll tax to pay for the program. Furthermore most employers I know would not feel ethically comfortable denying insurance coverage for their employees.

    I love the state of VT, but I am seriously thinking of leaving the state if single-payer goes into effect. With the best of intentions, I think the Democrats are leading up down a path to an inferior health care system and a badly damaged economy. Nothing I have heard or read has convinced me otherwise.

  8. Ellen Oxfeld :

    This is an interesting article, but one part is a bit off. The author says, “much of the public discussion of the exchange — in blogs and the web and in newspapers and radio and television — has been dominated by people who are highly critical of the single-payer idea in Vermont.” That is certainly not true of letters to the editor — which have favored single payer in almost all the papers by a wide margin.

  9. walter carpenter :

    “Furthermore, governments, however good they might be at other tasks, have performed poorly (and bureaucratically) at controlling costs and at providing creative, innovative services.”

    Carol, while this is certainly true, it is not just confined to governments. Private industry is guilty of the same, if not worse.

    “The author says that “the exchange portion of the program looks like a terrific deal for both workers and individuals.””

    Speaking as an employee this is a much better deal than the employees, in general, have now. For one, it begins to separate health care from employment. An employee on employer-sponsored insurance is limited to whatever insurance plan their employer has. If the employer switches insurance plans, for whatever reason, the employee has no choice but to go along or to drop the insurance all together and hope they can get along without it. This happened to me once. It happens to Vermonters every day. While there is Catamount and Vhap, these are based on income eligibility requirements and many who cannot afford health insurance on their own are ineligible for both programs. Employers no longer have to be insurance brokers either. Speaking as a former business owner (awhile ago) and having talked to a great many current small business owners, they cannot wait.

    “I love the state of VT, but I am seriously thinking of leaving the state if single-payer goes into effect.”

    It is sad that you are thinking of leaving Vt if single-payer goes into effect, but I also have to ask if you think it is better to keep the status quo and leave 50,000 Vermonters uninsured and the thousands more underinsured. The health system cannot get much worse for them. Soon the $5 billion we spend on health care now will top $6 billion, $10 billion, etc. and these exchanges have started the process to curb this. Vermont could be an even better place than it is now when single-payer comes through.

    “That is certainly not true of letters to the editor — which have favored single payer in almost all the papers by a wide margin.”

    I have seen a lot of these in favor of single-payer.

    • Phil Arbolino :

      Walter:

      A couple of points:

      1. When private industry is inefficient, it loses its own money, and I can go to a competitor. When gov’t is inefficient, it loses taxpayer dollars, and then simply increases taxes to make it up. And, as in the case of GMC, there is no competitor, no Plan B.

      2. You cite 50,000 VTers uninsured…a # that seems to increase with every iteration from the folks on your side. Can’t wait til the point when the # of uninsured actually exceeds the # of residents of the state. But I digress…

      The common sense question that folks like you fail to ask is “At what cost are we venturing to cover those uninsured?”

      OH, WAIT! The Governor won’t tell us, now, will he?

      3. The 50,000 that you cite? It has been discussed here and in other venues, that when you cull out those who CHOOSE no coverage, that # decreases. Also, when you cull out those who would be covered by a spouse’s insurance, but refuse the coverage, that # would again decrease. So its not really 50,000. Its more like 24-28,000.

      So, Walter, how many tens or hundreds of millions of dollars (in the aggregate) should we spend to cover 28,000?

      Or does that not matter to you….since “the other guy” is going to be made to pay the bill?

      • Gary Murphy :

        Phil, It is true that there are people who choose not to purchase insurance coverage. That does not necessarily mean they do not want health insurance. I choose not to purchase health insurance that is offered my employer. It is not because I cannot afford the premium, it is because the insurance comes with a $4,500 deductible. I would actually like to have health insurance but under the present circumstances, I would probably have a better return on my money by spending the amount it would cost me a week for insurance on scratch off lottery tickets.

      • walter carpenter :

        “When private industry is inefficient, it loses its own money, and I can go to a competitor. When gov’t is inefficient, it loses taxpayer dollars, and then simply increases taxes to make it up. And, as in the case of GMC, there is no competitor, no Plan B.”

        Phil, sorry to be so late in answering. Did not see your reply. This point might be true in theory, but you try it in health care insurance and see how far you get. Or, for that matter, any other business. The reality outside the theory is that private enterprise is just as inefficient and wasteful, if not more so. You could go to a competitor, of course, but that competitor is most likely no different in their own wastefulness of your dollars. AT&T and Verizon, for instance, are about the same in price, services, and in their ability to abscond with your dollars. The airline industry is also another example.

        “So its not really 50,000. Its more like 24-28,000.”

        Phil, read what Gary said. Do you think that 25,000 Vermonters choose not to have health insurance. They choose it because it is unaffordable, for the premiums or the deductibles, not offered by their employer, cannot qualify for Vhap or Catamount, and so on. And we currently spend 5 billion a year on health insurance and cannot insure all residents in Vermont? 24 -28,000 is a disgrace.

        “So, Walter, how many tens or hundreds of millions of dollars (in the aggregate) should we spend to cover 28,000?”

        Well, we spend 5 billion now and cannot cover all of our citizens. That should tell you something about the efficiency of our current status quo.

  10. Ok, have we redefined Healthcare savings to mean, premiums will be reduced/subsidized by the government. How does this reduce the cost of health services?
    How does this address 49% of the increase in healthcare premiums is directly attributable to increases hospital care costs (nope, not insurance company’s profits) between 2005-2009?
    How does this address the 33% increase in physician and clinical costs,(nope, not insurance company’s profits) between 2005-2009?
    According to NIHCM’s study, 82% of the increase in private healthcare insurance costs is the result of increased hospital care costs, increased physician and professional services costs. How does anything this administration is doing address this.
    Does it make sense to first cover everyone and then hope to reduce costs or does it make better sense to first demonstrate the ability to achieve healthcare saving and then fold people into it?

  11. Paula Schramm :

    Just a quick knee-jerk response to Dan Feliciano’s interesting question,

    “Does it make sense to first cover everyone and then hope to reduce costs or does it make better sense to first demonstrate the ability to achieve healthcare saving and then fold people into it?”

    One of the things that creates big avoidable expense is to wait until your sickness has progressed and extreme measures are needed to save your life and health. Yet this is what routinely happens when people don’t have health care coverage or have a high-deductible insurance. They wait and hope “it will get better”, or neglect getting the expensive test they may need for a proper diagnosis .
    Even in Vermont where our health care is comparatively good, 60 people DIE each year because they didn’t have access to health care. ( No, the emergency room isn’t a place where you get mammograms, colonoscopies or checkups for diabetes and clogged arteries ! )

    What costs the most in health care is the relatively small percentage of people with serious and chronic conditions. Prevention is a big money-saver and having health care accessible to everyone is an integral part of achieving healthcare savings.

    • Phil Arbolino :

      Paula:

      You’ve made the perfect, logical argument for Maine-style, patient-centered cost-containment like high-deductible, HSA plans. Well done!

      Since “What costs the most in health care is the relatively small percentage of people with serious and chronic conditions. Prevention is a big money-saver and having health care accessible to everyone is an integral part of achieving healthcare savings.”

      See…there should be catastrophic coverage for those circumstances that you mention, while the great majority of us put money aside in our own HSA accounts (with some tax advantages) and pay for our own day-to-day healthcare like flu, some diagnostics and bloodwork, etc and leave the real chronic stuff to catastrophic coverage.

      After all, the warranty on your car doesn’t cover flat tires, broken headlights or a chipped windshield, does it?

      • Paula Schramm :

        Phil: No, mine isn’t the argument for the current Maine-style set-up at all. I was just directly addressing Dan Feliciano’s question about whether to cover everyone first, or to try to achieve savings and then cover everyone.

        While there is a relatively small percentage of people needing high cost care at any given time, that does not logically transfer to a certain set group of people who have to deal with “the real chronic stuff” as you put it. Anyone can suddenly find themselves facing a need for lots of high cost care. I, very sadly, know of people of all ages, including children, who develop cancer, brain tumors, auto-immune diseases and so on. How do you know you are the one who will never need such care….or be in a car crash or other accident that can suddenly transform your life ?

        What I am arguing for is everyone paying their share to create and maintain the infrastructure and personnel needed to be there to give that care if and when you should ever need it.

        I find the Maine version of health right now a confusing mix of cheap high-deductible policies for young people, suddenly able to save a lot on premiums, even if what is covered is a bit sketchy….then greatly increased premiums for some other people, especially if they are in rural places. Lots of people sounded very confused about what they could expect. Then there is the “chronic pool” which insurance companies can divest themselves of, and which go into a tax-payer supported care group. How this will all work out over time is scary to conjecture…. It sounds, as usual, good for the insurance companies, but not necessarily for all the people of Maine.

  12. walter carpenter :

    “while the great majority of us put money aside in our own HSA accounts (with some tax advantages) and pay for our own day-to-day healthcare like flu, some diagnostics and bloodwork, etc and leave the real chronic stuff to catastrophic coverage.”

    That is, if you have the cash on hand to handle the thousands of dollars in deductibles before the catastrophic insurance kicks in. Some of these plans can carry a $10,000 deductible. As for the HSA accounts, these may work great in theory, if you have the kind of salary that can make them worthwhile, but if you are making ten bucks an hour, these will not amount to a doctor’s visit. And once the savings run out, there come the thousands of dollars in bills.

    I am curious about this maine-style “patient-centered…” I wonder what “patient-centered” means. So far, the only constant about the Maine law is that it lets these patients who are at the center pay more for their health care, especially if they are older and have a medical history.

  13. Carol Frenier :

    Walter -

    You wrote, “It is sad that you are thinking of leaving Vt if single-payer goes into effect, but I also have to ask if you think it is better to keep the status quo and leave 50,000 Vermonters uninsured and the thousands more underinsured.”

    There are more choices than single-payer vs. the status quo. The real question is: what plans have the best chance for solving the problems of access and cost and quality in our health care system? Before ObamaCare and Act 48, several states had conducted successful experiments with high risk pools to cover those in need. That’s a lot cheaper than overhauling the whole system. Furthermore, studies show that high-deductible plans matched by HSAs really do give patients more control over their health care AND they can bring down costs if well constructed. These plans are not for everyone, I agree. But, again, this is not an either or situation. Choice, choice, choice. That is what looks best to me.

    And I agree with Phil that the numbers on the underinsured are murky. I have tried to get a detailed understanding of how these numbers are arrived at through Robin Lunge’s office, but it remains very vague to me. Basically people self-reported and the survey designers interpreted what they said. That is not exactly scientific. So, bottom line is: we really don’t know how many Vermonters are underinsured. If we are going to do a system overhaul based on concerned for the uninsured and underinsured, don’t you think we need to get really specific and thorough about what numbers we are talking about?

  14. walter carpenter :

    “Furthermore, studies show that high-deductible plans matched by HSAs really do give patients more control over their health care AND they can bring down costs if well constructed. These plans are not for everyone, I agree. But, again, this is not an either or situation. Choice, choice, choice. That is what looks best to me.”

    Carol, thanks much for your answer. I am curious what studies these are and who did them and what evidence that they give to support these conclusions. Having been on one of those high-deductible plans before, I can attest that they give pathetically little choice. Essentially, on a high-deductible plan you have two choices, and only two: either put off the care or go for the care and get stuck with thousands of dollars in medical debt. In general, with these plans, one is paying for insurance that they cannot use, which is a boon to the insurance companies selling these policies. While I have not experienced HSA’s before, I have had friends who had have been on them. One woman I know had a sick child that soon used up her HSA and then she was facing a financial crisis as well as a health one. This is not unusual with an HSA.

    I am also curious how a high-deductible/hsa can bring down medical costs. I suppose that if no one can afford to get care then that will help to bring down down medical costs, but again I do not see how it can be done without a complete overhaul of our broken system which causes these constant cost rises in the first place.

    Choice. Again, I am curious what kind of choice you mean. Choice in insurance does not always translate into health care, as one’s choices are limited within the borders of the policy. Under a single-payer type system, the choice is the whole system.

    “If we are going to do a system overhaul based on concerned for the uninsured and underinsured, don’t you think we need to get really specific and thorough about what numbers we are talking about?”

    I think that part of the problem is that this is so volatile. The numbers of underinsured keep fluctuating for reasons we are probably now so familiar with. The point is that they are underinsured. Would it not be better to have all Vermonters insured in the same way and not have to bother ourselves with the problem of being underinsured or uninsured, for that matter?

  15. Mark Price :

    Hamilton gave the example the Mr. Jones pays $153,000 in premium for himself and seven employees and that Mr. Jones will save so much under the new plan that he’ll actually be able to pocket $100,000 in savings under the single payer plan. Mr. Hamilton uses this as an example of how the new health care system will be wonderful to small business. Mr. Hamilton states that businesses that are part of associations and pay less in health care premiums may end up paying more.
    The fact is that the vast majority of small businesses that pay for employee Heath care do belong to such associations. The bottom line therefore is that small businesses will end up paying more than they do now under the new health care reform. The rate of 18% of payroll seems to be the number that’s being floated. I employee ten people and pay health care premiums. If I were to be taxed an additional 18% of payroll I would have no choice but to terminate 2 employees in my business. When will small businesses be respected for their ” global” contribution to the economy and stop being the source of revenue for everything. Why can’t some people see that. If my business is profitable I hire more people, buy new equipment, do more business with local vendors. The more that’s taken from my business the fewer I can employ and the less business I do with others.
    I have no doubt that greater than 80% of small businesses that provide health care coverage for their employees will end up paying more. It’s always the case when new regulations are passed. In addition the GMC board is relying too heavily on federal subsidy- money that us being borrowed and increasing our debt and really hurting the younger generations. Every new program sounds great when someone else is paying for it That someone else is our children.

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