The move to a publicly financed universal health care system could cost the state from $1.76 billion to $2.17 billion, state officials said Thursday.
Lawmakers received a revised estimate of the cost of Green Mountain Care from a combined team representing the Legislature’s Joint Fiscal Office and the Shumlin administration.The group cautioned that the range could vary “dramatically” based on unresolved policy questions.
“A range is hard to legislate around, and you guys are going to eventually need hard numbers,” Steve Klein, chief financial analyst with the Joint Fiscal Office told lawmakers. “We view this as a step in that process.”
The new range is based on a state-commissioned study of the program’s cost by the University of Massachusetts and the actuarial firm Wakely Consulting Group.
It lands between the hard number given in that study and a higher estimate from the consulting firm Avalere in a study commissioned by providers and business groups.
The new estimate did not revise the UMass study’s total cost of $5.9 billion. Instead, it drilled down into the study’s estimated $1.6 billion in state costs, adjusting it to reflect higher expected implementation costs, lower federal matching and other anticipated revenue changes and costs not included in that study.
Also not part of the estimate is an $89 million shortfall in the state’s Medicaid fund spread out over the next three years, which Klein said the state will need to address regardless of the transition to Green Mountain Care.
“Probably the area where we have the most uncertainty is the implementation startup and transition,” Klein said.
The estimate offers a range of $50 million to $150 million for implementation and transition costs that were not in the UMass study.
Federal medical assistance has dropped since that study as well, adding between $21 million and $36 million, and ongoing technology, consulting and staffing needs could add from $33 million to $45 million, according to the revised estimate.
“There are some ways in which we fund the state Medicaid program that may not make sense in the future,” said Michael Costa, deputy director of health care reform.
It’s not clear how a provider tax would work in a universal publicly financed health care system, he said.
Costa said it’s possible the feds would agree to replace that money, but it’s also possible lawmakers could eliminate the tax, leading them to build a range of zero to $157 million — what that tax generates in a year — into their estimate.
The claims assessment and employer assessment, which currently fill the state’s health care fund, might also be eliminated in the new system.
“If every employer is paying in, having a special employer assessment probably doesn’t make sense,” he said. “If most private insurance claims go away, there’s likely not going to be a claims assessment.”
That builds another $51 million of uncertainty into the equation.
Other sources of revenue would have to be identified in a financing plan to recoup the loss from eliminating those taxes.
There is also the question of whether there needs to be cash reserves for a transition to Green Mountain Care, how much, and where the reserves will come from.
The estimate builds in zero to $125 million, or 5 percent of the state’s overall cost, for a reserve fund.
If the state contracts with a private administrator to operate Green Mountain Care, and it’s decided the system needs reserves, those could be built into the request for bids, Klein said.
There is also the question of what happens to the reserves of insurers in the current system after the transition happens.
“Can you transfer those reserves or somehow make use of them?” Klein said, suggesting that the state could somehow appropriate the reserves of private insurers.
Private insurers couldn’t just spend those down, because their reserve levels are set by the Green Mountain Care Board.
The administration doesn’t have a position on the need for reserves, Costa said.
“In the governor’s view, the more that we can use private administrator services the better,” Administration Secretary Jeb Spaulding said. “The governor does not want to build a whole inside administrative superstructure in state government.”
If the state should need reserves, its largest private insurer Blue Cross Blue Shield of Vermont happens to have roughly $130 million in reserves, for example.
The timing for when revenue needs to be available is also a question mark for legislators.
“People are paying insurance premiums now, individuals and businesses, there’d be a transition to Green Mountain Care, and you wouldn’t want people to pay twice if you can help it,” Costa said. “It’s not yet clear how we would manage that transition,” he added.
When policymakers start to map out the transition to the new system, there may be a need for revenue to increase as the go-live date of January 2017 approaches.
The Joint Fiscal Office and the administration identified several other policy choices they were unable to account for, which will alter the range they gave.
“As you change policy levers the range will change dramatically,” Klein said.
The benefit package that lawmakers settle on, what portion of medical expenses the plans cover, reimbursement rates for providers if certain populations are exempted, and changes in subsidies could all slide the range up or down the cost spectrum.
“This range is not static, we should expect it to change and, hopefully, get narrower,” Spaulding said.
The Joint Fiscal Office and the administration will continue their collaboration to refine these numbers and update them as policy decisions are finalized.
“The more we can work together without, you know, looking like we’re one branch of government … we’d be more than happy to do that,” Spaulding said.
Mike Fisher, D-Lincoln, agreed, saying there will be a “healthy tension” between the Legislature and the administration as the numbers solidify and policy choices become new laws.