Feds deal blow to Shumlin’s plan for health insurance subsidies

Gov. Peter Shumlin gives his second inaugural address. Photo by Roger Crowley

Gov. Peter Shumlin gives his second inaugural address. Photo by Roger Crowley

Gov. Peter Shumlin’s $10.3 million proposal to fund health insurance subsidies is fraying at the seams.

The Centers for Medicaid and Medicare (CMS) said it is unwilling to fund roughly 20 percent of the subsidies’ cost, money which the administration was counting on.

This fiscal year 2014 proposal is composed of two parts: a $6.5 million allocation to help pay premiums for Vermonters earning up to 300 percent of the federal poverty line, and a $3.8 million allotment to reduce out-of-pocket maximum costs for income earners up to 350 percent of the poverty line.

These programs are meant to cushion the fiscal blow of the health benefit exchange, which is the health insurance marketplace that all Vermonters — who aren’t employed by businesses with more than 50 employees — are legally required to buy insurance from in 2014.

At that time, the state-subsidized insurance programs Catamount and VHAP will expire. Without state aid, the combination of premiums and out-of-pocket costs is slated to more than double for Vermonters earning 133-300 percent of the federal poverty line.

To finance roughly 55 percent of the two proposed programs, the administration was preparing to request Medicaid funding through what is called a federal 1115 waiver. This waiver is what currently allows the state to spend Medicaid funds more liberally via its Global Commitment program.

The state currently uses this program to help pay for school health services, information technology and the salaries of certain health care regulators, among other items.

The state’s current waiver expires at the end of 2013, and the administration was hopeful that it could receive Medicaid contributions for these two low-income insurance programs under a new waiver.

But on Tuesday, CMS told the administration that it would not fund the $3.8 million cost-sharing program. CMS did, however, agree to fund the larger $6.5 million premium-assistance program.

CMS provides matching Medicaid assistance to Vermont at a standard rate of roughly 55 percent of the cost of a particular item. That means the feds will pay for 55 percent of the $6.5 million premium-assistance program.

What it also means is that the administration and the Legislature must find an additional $2.1 million of revenue for FY 2014, if they are to provide the entire $3.8 million for cost-sharing subsidies that they proposed. That $2.1 million represents the 55 percent of the cost-sharing subsidy that the administration was hoping the feds would fund.

In FY 2015, the $10.3 million is slated to double, which means the state would have to come up with roughly $4 million extra the following fiscal year.

The reason the administration only proposed $10.3 million for the new programs in FY 2014, which begins in July 2013, is that the exchange takes effect halfway through the fiscal year — at the start of calendar year 2014. Therefore, the $10.3 million is half the cost of an entire fiscal year’s worth of subsidies.

So, why won’t CMS fund the cost-sharing program?

According to Robin Lunge, the administration’s director of health care reform, the feds didn’t elaborate in great detail, but they reportedly said the program would be difficult to run in light of the sea change set to stir up the nation’s health care finances in 2014 — most of which is caused by the federal Affordable Care Act.

“I think, in part, it was a capacity issue,” Lunge added.

Moving forward, the administration is aiming to submit a new revenue proposal to the House Health Care Committee on Thursday.

“It’s possible we won’t be able to get the work completely finished … but we hope to get them a revised proposal at the end of the week at the latest,” Lunge said. “We’re currently considering what our options are and what we’ll propose because of course there are a number of different ways we could proceed.”

Andrew Stein


  1. Duncan Kilmartin :

    Just another example this Administration putting the cart before the horse, of which there are a growing number of examples. How many false promises of what someone else is going to do before we wake up.

    Remember Liz Miller? I do! She and “her” Public Service Department, at the order of the Governor, uncritically supported GMP’s takeover of Vermont’s utility soul and the Lowell Wind Project, while claiming to protect the public interest, i.e. your pocketbook and mine.

    Instead of insisting on New England ISO approval before investing over $160,000,000 of taxpayer and ratepayer money by assurances that the $10,000,000 plus capacitors were part of the project before construction started and a pre-PSB CPG determination that ISO New England grid would accept all the electrical power from the Lowell towers,they deceived us into believing this was a fool/fail proof project.

    Hallquist of VEC. Volz of the PSB, and the gang at GMP, all have egg on their faces. In playing us for fools, the real fools have been revealed.

    What you ask, Duncan, does electrical power have to do Shumlin’s (anti)healthcare?

    Simple, my friend, simple!

    How many parades will this Administration enter (healthcare, doctor assisted suicide, legalization of marijuana, GMO’s, no broad based taxes, expansion of social programs, etc.), wearing the Emperor’s New Clothes before they and their supporters hear the true cry of the five year olds in the crowd shouting out,

    “Mom, mom, look, look, they don’t have any clothes on!!!!!”

    “When will they ever learn, when will they ever learn? The answer my friend is blowing in the (Lowell) wind, the answer is blowing in the wind!”

    They may never see the answer, but the citizens should.

  2. Kathy Callaghan :

    What I have predicted has started to come true, although I am surprised that it surfaced so soon. To wit: Anyone who is relying on the Feds to hold up their end, on funding either the Exchange or GMC (“single payer”), over the long term, is sadly mistaken. Perhaps even over the short term.

    This should be a wake-up call to all Vermonters to insist that the funding of GMC be at least determined NOW, before we go any further. We need to know the true cost impact and whether Vermont taxpayers can truly afford it.

    Having managed large public and private health care plans and worked with actuaries for over 30 years, I can attest to the following:

    There are cities and counties with larger health plan memberships than the population of Vermont. Every year actuaries determine the future cost of those health plans. They do so taking what is known, and assuming a number of variables. As relates to GMC, now that GMC has proposed plan designs, a competent national actuarial firm could estimate the cost of “single payer”, using a number of variables; i.e., number of people who will join, health status of the overall risk pool, and any other unknowns. This is not rocket science. These assumptions are used every day to determine projected costs for existing health plan plans, and for new health care plans which do not currently exist.

    Costs should be projected out at least 5 years, assuming (1) full projected federal funding; (2) partial fed funding; and (3) no fed funding. If the answer to (3) is beyond the pale, the time is now to adjust accordingly. We can only afford what we can afford.

    Hiding the real cost impact is not going to make this any more affordable later on. Vermont taxpayers have a right to know whatever is determinable right now.

    It matters not what legislators or administration officials “think” we need to know, or when.

  3. Walter Carpenter :

    “They do so taking what is known, and assuming a number of variables. As relates to GMC, now that GMC has proposed plan designs, a competent national actuarial firm could estimate the cost of “single payer”, using a number of variables; i.e., number of people who will join, health status of the overall risk pool, and any other unknowns.”

    There have been so many studies to date which have proved that single-payer will save money and cover all of us. I do not think we will need an “actuary,” per say to handle all the different rates in which our fragmented system now has, rates that skyrocket every year, due to things like the infamous cost shift, to cite one factor at random. While there will be cost adjustments under single-payer, we will not need to employ an outside “actuarial” firm to figure these out, as we will no longer be within the private insurance model.

    • Kathy Callaghan :

      Mr. Carpenter: Re: “rates that skyrocket every year due to things like the infamous cost shift”, the cost shift will still be there. The cost shift comes from Medicare and other plans underpaying providers. And nothing will change there. Other plans will still underpay providers. In Vermont, ERISA plans like IBM, General Dynamics and others will not be in the “single payer: plan. (that’s why it is not a single payer plan!)

      Does anyone really think that Medicare will increase its payments at a time when all of Washington is looking to “revise” Medicare. Alas no, the cost shift is here to stay. And so are skyrocketing health care costs, for a variety of economic reasons that have nothing to do with cutting out administration or insurance company profits.

  4. Walter Carpenter :

    Ach, forgot to add that this single-payer cannot come soon enough.

  5. Kristin Sohlstrom :

    This was the plan all along, right? Not news at all.

  6. Jay Davis :

    I have often wondered why seniors are forced to drain any bank account and have an income of less than 1200 a month to avoid having their paltry SSI docked 120 dollars a month for part B Medicare. Medicare is not free. Its not even fair.

    I’ve called Sandars about this and get nowhere, no response.
    I was forced to take part B after I turned 65 or lose my co insurance from Vermont Blues.
    Prior to being 65, I had no 1300 a year out flow for heathcare and Blues picked up the whole bill, except 20 percent.

    This is a clear Republican plan to just take needed living money from monthly SSI allowances.

  7. Dave Bellini :

    “…we will not need to employ an outside “actuarial” firm to figure these out, as we will no longer be within the private insurance model.”

    That’s exactly why we DO NEED an independent healthcare actuarial firm. Getting out from under the insurance companies would be a good thing. Being self-insured would be a good thing and it would save money. Finding out how much things really cost would be a good thing. Politicians, (of any party) put politics first. REAL actuaries just do the math. Auditors and actuaries should be completely independent.

    I’m in the state employees health plan. It’s self-insured. We kicked out the insurance company products years ago. We hire medical healthcare actuaries to get cost projections, discuss any impact of possible plan changes and to help advise us in keeping costs down. IT WORKS. It should be the model for single payer. Why not replicate a model that works? It makes too much sense? Why does the state avoid copying a plan with premium holidays followed by a 0.0% increase??!!

  8. Walter Carpenter :

    “That’s exactly why we DO NEED an independent healthcare actuarial firm. Getting out from under the insurance companies would be a good thing.”

    Dave, thanks much for your input here. My thoughts are parallel to yours here about getting out from under the insurance companies. My thinking here was that we would not need an outside actuary, as we have them here and, with single-payer, why would need an actuary in health care. We would have the GMCB and the Department of Financial Regulation. Maybe I am wrong, but thanks again. I did know that the state employee health plan was self-insured.

  9. Thank God I am old and have Medicare! I have just reviewed VtDigger’s last month’s articles on health care reform in VT, and have been sitting in on some of the hearings and GMCB. As others have said, it is the ACA of Obamacare that is the REAL problem here and all the false promises that were made that we would have subsidies and assistance from the federal government! Now that we are in such a tight financial bind we are seeing how awkward and bureaucratic the federal governments demands are putting on the GMCB and Robin Lunge to try to make heads or tails out of the fiscal numbers. We truly need single payer now. If only we could skip the three year wait for 2017 and do it the “Vermont Way”!

  10. Perhaps this is a place for our new State Auditor to get to work. Maybe we will need some really innovative number crunching to get over this huge hump as we look forward to 2017. It sure is hard to have to rely on federal mandates in the ACA and to have promises broken. As our dedicated GMCB and Shumlin Administration struggle onwards and upward, they sure have my support. Many of us are soo….
    disappointed that Obama Care is nothing more than a handover to the insurance industry. I just watched the Gov. of Utah explaining his for profit Exchange that doesn’t even address Medicaid, leaving that up to the federal government. Private charities will fill the bill in Utah! It is not the Vermont way!



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