Switching to a publicly financed health care system will probably come with a higher price tag and it might not reap any administrative savings, according to a report commissioned by a coalition of health care providers, employers and the state’s largest insurer.
The report calls into question the underlying financial pillars of the Shumlin administration’s financing plan for a single payer health care system, unveiled in January in accordance with Act 48.
Not content to accept those numbers at face value, a group of stakeholders hired Avalere, a Washington, D.C., consulting firm to analyze the Shumlin administration’s financing assumptions. The group, Vermont Partners for Health Care Reform, is a coalition of parties that would be affected by a single-payer system, including Blue Cross Blue Shield of Vermont, Vermont Medical Society, the Vermont Association of Hospitals and Health Systems, Fletcher Allen Health Care, the Vermont Chamber of Commerce, the Vermont Assembly of Home Health and Hospice Agencies and the Vermont Business Roundtable.
Bob Atlas, one of two Avalere representatives who presented the findings to the Health Care Oversight Committee on Thursday morning, began by assuring lawmakers that their product had no political bent.
“I do want to underscore the term ‘independent,’” Atlas said, describing his firm’s work.
Vermont Partners for Health Care Reform commissioned Avalere to comb through the financing plan for potential failings. The findings lend credence to the group’s concerns about single payer.
Paul Harrington, who runs the Vermont Medical Society, explained the impetus for the report.
“We felt that the administration’s report contained some assumptions … that really needed to be questioned because if that $1.6 billion [cost to Vermont taxpayers] relied on unrealistic administrative savings or payments to physicians and hospitals in the state that would basically erode our current system, there would be serious consequences in 2017,” Harrington said.
Avalere took those assumptions, tweaked them based on their own calculations, and came up with a higher cost estimate — $1.9 billion to $2.2 billion — than the administration’s $1.6 billion prediction.
Atlas, at the end of his presentation, encouraged lawmakers to “consider alternatives that are a little less disruptive,” suggesting that, “the current path may not be the only path or the most painless path to the outcomes you are looking for.”
The report also forecasts a decline in the reimbursement rate for providers. The administration’s financing plan assumes that providers would be reimbursed at 105 percent of the Medicare rate. The plan pegs the current reimbursement rate at 107 percent, which means providers would see a 2 percent rate reduction.
But according to Avalere’s calculations, providers are currently being reimbursed at 122 percent of Medicare, making the switch to single payer more detrimental for doctors and hospitals.
That drop in payments could be significant enough to prompt an exodus of physicians from the state, Atlas warned.
“We do believe there is a risk that physicians will see Vermont as a challenging environment to continue to practice,” he told lawmakers. Hospitals would be affected, too, according to Atlas, but doctors “tend to be the canary in the coal mine, in terms of greater sensitivity to cost fluctuations.”
Atlas’ prediction falls in step with a central concern of the Vermont Medical Society and its coalition partners.
“We feel that if providers were paid at the level in the administration’s report it would be very difficult to attract and retain physicians in the state and our hospitals would be under significant financial duress,” Harrington said.
The Avalere report also says the administrative savings forecast by Shumlin officials are far too optimistic.
The financing plan pegs current administrative costs at 12 percent. When the state transitions to single payer, the administration expects to whittle those costs down to 7 percent by taking over the functions of private insurers.
But Avalere’s analysis shows that administrative costs in Vermont already fall below that — it pegs them at 6.7 percent on average — and concludes that the move to single payer might not create any additional savings.
Administration response
Gov. Peter Shumlin’s director of health care reform, Robin Lunge, received an advance copy of the report, and she came to Thursday’s hearing bearing a letter that disputed the bulk of the findings.
In an interview after the presentation, Lunge said she was not fazed by the report.
Avalere’s prediction that the switch to single payer wouldn’t create administrative savings “intuitively doesn’t make sense,” she said.
Lunge suggested that Avalere hadn’t done an “apples to apples comparison” and described its assessment of current administrative costs as too low.
She also took issue with Avalere’s calculation of reimbursement rates, arguing that the state had used a more sophisticated calculation to come up with its estimate of 107 percent. Lunge also maintained the rate reduction will be compensated for by administrative savings realized by providers.
Even with the higher cost estimate from Avalere, Lunge argued, the total price tag would still fall well below the state’s current health care costs.
“Even using their numbers, quite frankly, it shows we can move to Green Mountain Care, cover all Vermonters with a better benefit, on average, than what people have today for the same or lower cost. So, quite frankly, I think the Avalere report, even with their assumptions, affirms that basic premise,” she said.
State officials have consistently said the numbers in their report, from the University of Massachusetts, are placeholders, subject to change. Given that uncertainty, Lunge did concede in her letter that looking at a revenue range “is a more useful concept than a single number.”
Rep. Anne O’Brien, D-Richmond, told the Avalere consultants that she appreciated the report but found it “premature.” She made the same critique that Avalere made about the administration’s finance plan: It relied too heavily on assumptions.
“We have to make assumptions,” Atlas responded. “The concern of our clients … is if we launch this very bold experiment and then evaluate the reality of it, the patient may have died before we have an opportunity to test whether it’s successful.”
Sen. Kevin Mullin, R-Rutland, said he hopes the report will spur discussion about the state’s planned transition.
“At some point, you have to make assumptions and that’s how you get people to the table to start to debate those,” Mullin said. “This is the most in-depth conversation we’ve had in here about the $1.6 billion estimate, so, thank you.”
The Shumlin administration “welcomes the dialogue with providers,” Lunge said. “It’s very important to test assumptions.”
