First contractor for single-payer financing plan backs out; proposal on track for January report to the Legislature

Jeb Spaulding, secretary of the Agency of Administration, talks to reporters at a press conference called by Sen. Randy Brock, the GOP candidate for governor. Photo by Anne Galloway

Jeb Spaulding, secretary of the Agency of Administration, talks to reporters at a press conference called by Sen. Randy Brock, the GOP candidate for governor. Photo by Anne Galloway

The Shumlin administration said this week that a financing plan for a single-payer health insurance system is still on track to be completed by Jan. 15, 2013.

Lewin Group, a health policy research firm, was originally slated to draw up the plan. But when its parent company, United Health Group, realized that arrangement might create a conflict of interest, it pulled out. Robin Lunge, director of health care reform for Vermont, said United Health Group had another subsidiary that wanted to bid on state projects, and the group didn’t want to jeopardize such opportunities.

In May, the state received bids from Brandeis University and the University of Massachusetts Medical School (UMass). At the beginning of July, the state hired UMass to create two health finance plans: one for financing single payer and another for the state’s health benefit exchange, which goes into effect on Jan. 1, 2014.

The state capped the contract with UMass at $300,000, and the contract’s estimated costs are just shy of $298,000. The plans are funded in part by federal funds, but Lunge wasn’t available by publication time to give the exact amount and provide a reason for why the state chose to hire UMass instead of Brandeis.

The finance plan for the health benefit exchange will look at ways to fund and run various facets of Vermont’s new health insurance market.

One area it will explore is how to provide extra assistance to those individuals who are currently covered by state-subsidized insurance plans, like the Vermont Health Access Plan and Catamount Health. In 2014, many of those individuals, who are over 133 percent of the poverty line, will be required to enter the exchange. Medicaid will cover those below that threshold.

The benefit exchange plan will also look at how to fund the state’s “navigator program,” which will provide in-person assistance to help Vermonters use the exchange.

Jeb Spaulding, secretary of administration, expects the Legislature will use this plan to form policy in the upcoming legislative session. He does not, however, expect the Legislature to make any big decisions about financing a single-payer system.

“What we won’t be doing is asking the Legislature to pass the financing system for where we want to be in 2016 or 2017 this year,” he said. “We’re not going to be able to execute on the single-payer, universal, publicly financed health care system that we’re intent to achieve by January 2014, probably not by 2015, maybe in 2016 and hopefully by 2017.”

Lunge and Spaulding are on the same page.

“Since we have time to be thorough and thoughtful,” said Lunge, “I think we should.”

When Harvard economist William Hsiao presented his Vermont single-payer analysis in early 2011, a lot of businesses were concerned about the 11 percent payroll tax it recommended for employers to help fund the system. Spaulding’s hope is that UMass can help the administration craft a finance plan that doesn’t place as large of a burden on businesses.

“There is some skepticism about whether it’s really possible to develop a single-payer finance system that’s practical and workable,” said Spaulding. “I believe it is, and I think this report should not only allow for good dialogue but put some people at ease.”

Right now, Lunge said UMass is ironing out the numbers and preparing to analyze the different financing scenarios that could exist under a single-payer system. Once researchers have done that, they will be tasked with conducting economic analyses of these options.

When UMass submits the report, Spaulding expects intense dialogue. But if the state and UMass can figure out how to implement a publicly financed health care system without weighing too heavily on taxpayers, Spaulding thinks Vermonters will be more prone to accept the administration’s proposal.

“If we can do this without overburdening any particular tax source or having a negative impact on our competitiveness, then I think we’ll be OK,” he said.


Andrew Stein

Comments

  1. Bruce Post :

    I have been removed from the world of health care policy for many years and am not up on the current “landscape” of consultants and also the tangled web of interrelationships in the business. But … this statement caught my eye:

    “Robin Lunge, director of health care reform for Vermont, said United Health Group had another subsidiary that wanted to bid on state projects, and the group didin’t want to jeopardize such opportunities.”

    So, I followed the thread to United Health Group, wondering how it was connected to the Lewin Group. What I found was startling:”The Lewin Group is an OptumInsight company. OptumInsight is a wholly-owned subsidiary of UnitedHealth Group. UnitedHealth Group is a diversified health and well-being company dedicated to making health care work better. UnitedHealth Group offers a broad spectrum of products and services through two operating businesses: UnitedHealthcare, a health benefits business that serves more than 70 million individuals nationwide, and Optum, a health services business with three operating divisions: OptumHealth, OptumInsight (previously Ingenix) and OptumRx (previously Prescription Solutions). OptumInsight offers expertise in health intelligence, connectivity and workflow, helping turn information into insights that, delivered at the right time and place, can enable better informed decisions throughout health communities.”

    The Lewin Group evidently was purchased by UnitedHealth in 2007. As Jim Jeffords often said, “Jeezum Crow!!!” The large private insurers have their tentacles everywhere. Octopus, anyone?

    Next, I found a Washington Post article on the health reform debate in Congress in 2009. The lead paragraph stated, in part: “… few number-crunchers have shaped the debate as much as the Lewin Group, a consulting firm whose research has been widely cited by opponents of a public insurance option.” http://www.washingtonpost.com/wp-dyn/content/article/2009/07/22/AR2009072203696.html

    The Lewin Group emphasizes its firewall between its analysis and its huge owner, but as a VP of Lewin told the Post: “Lewin has gone through ‘a terribly difficult adjustment’ since it was bought by UnitedHealth in 2007, he said, because the corporate ownership ‘does create the appearance of a conflict of interest.'”

    Holy cow! All these takeovers, interwined interests, mergers, insider relationships. Howard Dean once said that he wanted the rest of the country be more like Vermont, and I guess it is.

  2. Kristin Sohlstrom :

    Maybe the Chair of the Green Mountain Care Board should follow The Lewin Group’s example.

  3. Kathy Callaghan :

    To paraphrase Jeb Spaulding, it may be possible to “do this without overburdening any particular tax source or having a negative impact on our competitiveness” for the first year, or maybe two. Many new ventures work well at first. But the Administration has an obligation to perform 1,3,5 and 10 year actuarial studies, to determine if this system is sustainable over the long term. That analysis must occur before the present private insurance system is dismantled to create single payer. In fact, the sooner the better, now that the beneit plan designs are in place. The findings must be clearly and honestly presented to Vermont voters early enough for the right decision to be made.

    • Patricia Crocker :

      You are right Kathy. However, even 10 years is not long enough. The Taiwain system, engineered by the same Hsaio that initially advised VT is now, after 10 years, just starting to have big problems! I wonder if projections can be done past the 10 years. And even if they do, I don’t trust that it will be done honestly. They are pulling out all their tricks to try to sell this to the VT Public. You have to watch what the other hand is doing….

  4. Eric Bradford :

    “There is some skepticism about whether it’s really possible to develop a single-payer finance system that’s practical and workable”

    …and a LOT of skepticism about whether it was a good idea to even float the concept of single payer before answering this question definitively.

  5. Cynthia Browning :

    I tend to agree with Mr. Bradford.

    Ms. Lunge says: “Since we have time to be thorough and thoughtful, I think we should.”

    I think the time to be thorough and thoughtful would have been BEFORE asking the legislature for any level of commitment to the state run health insurance program.

    Especially since the payment mechanism is ALWAYS the hard part.

    I think we should focus on getting the Health Benefits Exchange to work as well as possible for as many Vermonters as possible. If we need more reforms after that, we can decide whether to pursue planning for the “single payer” “universal” state insurance program then. (I use the quotes because I don’t believe that it can really be either, despite the way these words are used in our discussions.)

    Rep. Cynthia Browning, Arlington

    • Patricia Crocker :

      Ms. Browning, what happens if this drives what insurers that we have left in this state out of the state? What is the Plan B? I truly fear for the proverbial $..t to hit the fan. As a healthcare provider myself, I am starting to research other state’s systems and getting all my ducks lined up so I can exit the state quickly if I have to. I don’t want to, but things are really starting to spook me out…

  6. walter carpenter :

    “I think the time to be thorough and thoughtful would have been BEFORE asking the legislature for any level of commitment to the state run health insurance program.”

    I disagree. Having been a contractor for a number of years (painting) whenever we bid on a job we always had to figure out what we were doing first, what it constituted, the area that we had to cover, and what we had to do to cover it. Then we would work out a price…. as robin lunge said, “Since we have time to be thorough and thoughtful, I think we should.” It is more or less what the shumlin administration and the GMCB is doing and they are going about it the right way, though I wish that we could do the single-payer sooner than later.

  7. Cynthia Browning :

    For Mr. Carpenter: I think that your comment actually supports my point. Before they asked for a commitment to the state run health insurance program last year, they should have done all the work involved in bidding on a job. Instead, they asked for a commitment to the program, with checkpoints for the budget and financing along the way as the details of the program were developed.

    There is a very real chance that the state run insurance program will never be implemented due to problems of costs and financing. But the conceptual commitment that the Administration and the Legislature made is distorting how other health reform decisions are being made. For instance, the Federally mandated Health Benefit Exchange is being designed as a funnel into the state run program, even though at the moment that is akin to a mirage.

    I am not ideologically opposed to a state run program, if it is well designed and financially sustainable — and those are two very big “ifs”. But I view it as poor policy making to ask for a commitment to something as undefined as the proposal in H.202 last year. In my opinion, politics is dominating economic realities in this discussion, and in that situation, economic reality will always strike back, sooner or later.

    Rep. Cynthia Browning, Arlington

  8. Kristin Sohlstrom :

    “There is a very real chance that the state run insurance program will never be implemented due to problems of costs and financing.”

    Little by little the truth is coming out. Gov. Shumlin also said he would walk away if single payer didn’t happen by a self-imposed date thereby already planning his exit strategy when it fails to come to fruition. In the meantime much time, money, emotion and effort are being wasted…and YET! Money still roles into Vermont from out of state to push the effort. It’s like digging holes and filling them back up again just so money can flow, isn’t it?

    • Patricia Crocker :

      You are right Kristin, my fear is that there does not seem to be any plan B. All the efforts and thought are going into Plan A. And if you oppose Plan A, there is a real fear of a group of people showing up on your doorstep to bully you, your family, and your neighbors!

      • Paula Schramm :

        Now, now, Patricia Crocker ! As I’ve been writing ad nauseum lately, it’s not opposing a certain thing that’s the relevant issue about getting people to legally petition you. What’s getting people concerned is one person ( supposedly) financing a huge and unaccountable amount of campaign support for every race in the state elections, down to my state rep. in my town. I’m going on about this so much because I think, although this is perfectly legal behavior now, it really throws the traditional way of campaigning at the local level way out of whack. It doesn’t seem right or fair for one person with a lot of money to handicap the local races so much. It seems downright un-Vermont !
        Right now I’m off to a fund-raiser at a local restaurant, to hear some live music, and raffle off a hand-made quilt to hopefully raise a tiny fraction of the money that Vermonters First bestowed upon my candidate’s opponent. He didn’t even ask for it, as far as I know !

        • Paula Schramm :

          Just to be sure I ‘m clear : VF didn’t bestow actual money but rather the kind of support in the form of fancy mailings with his name on them, and ballot applications with addressed envelopes to go with it, three different times across the towns, that would have cost a WHOLE lot for the candidate to do themselves. Nice freebie for him, not so nice for the others in the race.

  9. Hilton Dier :

    Remember, folks, that our health care system is rated #37 in the world by the World Health Organization, just below Costa Rica and just above Morocco. For the dubious privilege of being #37 we pay twice the money per person compared to country #1 on the W.H.O. list, France.

    There is a lot of running room for us to do better than we do now. We don’t have to have perfect deployment of single payer to pay less and get more.

    Maybe we should just copy the French model point for point, cut our medical expenses in half, and take a shot at #1.

  10. Chris Campion :

    Basically, we’ve entered into an undefinitized contract. We don’t know what the costs will be, but we’re going ahead anyway. There is a very good reason why companies from a variety of industries stay as far away from these types of contracts as they can, because without even a rough estimate of costs, you cannot know whether or not you’ll lose money on the contract.

    My assumption is that the report is bad news if they’re willing to push things off for a year, since it was such an urgent and critical matter to get single-payer passed as fast as possible. Why is there now no love for the uninsured?

    The fact is, the state has vehicles in place for the uninsured. If/when Obamacare is enacted, there will still be tens of millions uninsured. Essentially, nothing will have changed, except that insurance companies will likely be exiting the market, and that will make it even harder for health care consumers to choose the insurance that fits them, a choice that drives down costs in any competitive market.

    Given VT’s demographics, any new health care funding plan has to look at an upside-down pyramid. There will be far too few people paying in (in any new tax scheme) to support the aging population, since VT has such a low birth rate, and so many of our college graduates leave the state in search of work.

    Actually, the upside-down pyramid is a good visual representation of what’s been happening to VT for the last few decades. When we start printing our own Vermont Greenbacks, we can use that image instead of the right-sided pyramid that’s on the US dollar.

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