The No. 1 issues for lawmakers this year is how to pay for a growing gap between Medicaid spending and the state’s share of the cost.
The Medicaid gap in the 2016 fiscal year is between $30 million and $40 million. (The number varies based on projections.) The state faces another gap of $50 million to $60 million in fiscal year 2017.
The Shumlin administration attributes the cost increases to an influx of new Medicaid patients in the program, many of whom were previously uninsured.
Even as the gap widens, legislators will study an expansion of a popular subsidized health care program.
Advocates want to extend Dr. Dynasaur to all children and young adults up to age 26. Currently, only children who are low income are eligible for subsidized medical care under the program. Lawmakers will also review a recently released study assessing the cost of implementing a universal primary care program.
Legislators will also evaluate the efficacy of the so-called all-payer model which would dramatically change the business of health care in Vermont.
Meanwhile, troubles with Vermont Health Connect persist. Blue Cross Blue Shield is asking lawmakers to consider calling for an audit of the state’s health care exchange.
Paying for Medicaid
There’s a growing consensus among lawmakers that the state-federal Medicaid program is straining other parts of the state budget.
Medicaid represents 31.6 percent of the state’s $5.5 billion budget for fiscal year 2016, according to the Joint Fiscal Office. (Public education eats up 32.5 percent of the pie.)
Medicaid is a health care program for low-income people that is funded by the state and federal government. The state pays a 45 percent match rate for Medicaid expenditures, and the rest is picked up by the Centers for Medicare and Medicaid Services. (In some instances, the federal match rate is higher.)
The biggest cost driver is an increase in the number of Vermonters who use Medicaid to pay for health care. The Shumlin administration expanded Medicaid substantially as part of Vermont Health Connect and now about a third of Vermonters receive subisidized medical care.
At the same time, hospitals and doctors are treating more Medicaid patients, and health care administrators say reimbursements are too low. The reimbursement rate is roughly 60 percent of the full market rate paid by commercial insurance and health care providers say the low rates make it difficult for them to stay in business.
Gov. Peter Shumlin said in an interview last month that funding Medicaid is the “biggest” issue facing the state. He proposed a 0.7 percent payroll tax on all Vermont employers in the 2015 session to increase Medicaid reimbursement rates and fill the projected gap, but he said he won’t float the proposal again in 2016.
“I made a very bold proposal last year to fix the funding system,” Shumlin said. “I gave the right plan, and it was rejected, so we’ll let brighter minds, I guess, try to figure that out. … I made the case. I pushed it hard. If people have other ideas, I’m all ears. But it’s a problem that’s got to be solved.”
Jim Reardon, who retired Oct. 31 from his job as the administration’s top budget writer, said lawmakers have two options for addressing the Medicaid budget gap: raising revenue or cutting services for Medicaid recipients.
Steve Klein, the director of the Joint Fiscal Office, recently explained to lawmakers that a third option is cutting other areas of state government.
Shumlin has promised to “come in with a balanced budget” on Jan. 21 and he has repeatedly said he doesn’t support cutting benefits. In a Nov. 17 news conference, he called it “heartless” to sign up roughly one-third of Vermonters for the Medicaid program and then “nibble away around the edges” at benefits.
“When we refuse to pay for it we do two things–we under-reimburse our providers so our doctors and nurses can’t stay in business, and we rob every other agency of state government in order to balance our Medicaid budget,” Shumlin said. “So this is just not good fiscal policy.”
Instead, the Shumlin administration has proposed a complicated rearrangement of state funds to address the $30 million to $40 million gap for fiscal year 2016, which ends in July, as part of the Budget Adjustment Act that usually passes in January. Lawmakers will also need to build the projected $50 million to $60 million gap into the fiscal year 2017 budget.
Sen. Claire Ayer, D-Addison, the chair of the Senate Health And Welfare Committee, said her committee will look at underlying causes for the Medicaid gap — whether it’s “chronic underbudgeting,” more people on Medicaid, or more services being used.
In October, budget analysts at the Joint Fiscal Office said the gap was likely a result of poor projections when the state-funded Vermont Health Access Plan, or VHAP, for low-income adults ended and those users moved over to the state-federal Medicaid program because of changes in 2014 under the Affordable Care Act.
Analysts also say there is a population of people who qualified for Medicaid but were never on VHAP. That’s because the way Medicaid calculates eligibility allows users to take more deductions on income.
And the Shumlin administration operated Vermont Health Connect under a federal waiver that allowed people to stay on Medicaid for two years, so there may be some on Medicaid who no longer qualify.
The latest Joint Fiscal Office estimates show there are about 205,000 Vermonters using a Medicaid program, including the standard program for adults living in poverty, Dr. Dynasaur for kids, pharmacy assistance programs, and programs that allow people to use Medicaid as a secondary insurer. The state’s population is 626,000.
Vermont Health Connect audit
The Shumlin administration met self-imposed deadlines for Vermont Health Connect in May and October, and officials have argued it would cost too much to move to the federal health exchange. Lt. Gov. Phil Scott and House Speaker Shap Smith have both advocated for abandoning the exchange in favor of the federal website.
Rep. Bill Lippert, D-Hinesburg, the chair of the House Health Care Committee, said implementing the milestones in 2015 helped maintain progress on Vermont Health Connect, but constituents keep informing him of billing issues, so the committee needs to keep its eye on “ongoing implementation.”
Vermont Health Connect was dysfunctional when it was launched in 2013, and it took two years to fix the glitches at a cost of more than $200 million. The exchange does not include a Small Business Health Options Program, or SHOP, a website for small business enrollment. State officials want the Centers for Medicare and Medicaid Services to approve a waiver that would allow small business customers to continue to enroll directly with the insurers, Blue Cross Blue Shield of Vermont and MVP Healthcare.
Meanwhile, Blue Cross Blue Shield says billing issues persist. Lippert said the House Health Care Committee will look closely at the insurer’s recommendation to commission an independent audit on Vermont Health Connect’s long-term sustainability.
Act 54, passed in 2015, authorized the Shumlin administration and the Green Mountain Care Board to negotiate with the Centers for Medicare and Medicaid Services to set up an all-payer financing model.
The model would channel all sources of health care funds into one stream, including Medicare, Medicaid and commercial insurance.
The state wants to use the all-payer model to regulate the cost of the health care system and encourage doctors and hospitals to take care of a block of patients for a set price. The Green Mountain Care Board plans to limit the growth of health care expenditures to 3.5 percent per year.
The board also wants to make all government programs and commercial insurers pay doctors and hospitals in the same way.
Maryland is the only state that has a similar waiver from the federal government and its all-payer model is applied only to hospitals.
The Green Mountain Care Board plans to include hospitals and doctors in Vermont’s all-payer system.
Al Gobeille, the chair Green Mountain Care Board, which regulates hospital budgets and health insurance rates, said he wants to have a “terms sheet” for the so-called all-payer waiver by the beginning of the session. A waiver from the federal government, which was to be agreed on in October, has yet to be finalized.
Lawmakers hope to scrutinize the deal with the feds during the session.
“There’s a lot of concern from the provider community,” said Sen. Claire Ayer, D-Addison, a registered nurse who chairs the Senate Committee on Health and Welfare. “We don’t know if that’s justified or not. We’d like to know what the details are and how they improve cost, quality, and access.”
Universal primary care
Act 54 also directed the Shumlin administration to perform a study on how Vermont could provide universal primary care — including routine doctors’ appointments, mental health treatment, pediatrics, and gynecology.
The Agency of Administration’s Office of Health Care Reform released an analysis Dec. 16 from Wakley Consulting Group. The study found that paying for all primary care claims would cost Vermont between $220.2 million and $281.9 million in 2017.
Under a “status quo” estimate, insurance companies and government programs spend about $35.14 per member per month on primary care, and patients pay $5.30.
If patients share 13 percent of primary care costs under a universal primary care plan, Wakley projects that the state would spend $34.94 per member per month, and patients would pay $5.24 per member per month.
If patients pay nothing for primary care, Wakley projects that Vermont would need to pay $44.01 per member per month for the program because free primary care would be an incentive for more people to use the program.
The Wakley study also projects how much primary care claims would cost in 2017 if the state used the universal plan to raise reimbursement rates for primary care providers by 10 percent, 25 percent, or 50 percent. The additional costs under several different scenarios are between $22.1 million and $134.7 million.
Vermont would need to spend 7 percent to 15 percent on top of the projected claims costs to administer a universal primary care program. Additionally, among other limitations the study cites, Vermonters covered by a universal primary care program would be ineligible for a federal health savings account, unless the state could get some kind of waiver from the federal government.
Budget analysts at the Joint Fiscal Office says the Wakley study is flawed because it only addresses primary care claims, it doesn’t analyze “uncertainty” over how fast primary care costs will go up, and it relies on “outdated” numbers for how many people are on Medicaid.
“In addition, the report currently says nothing about costs of providing universal primary care beyond 2017,” the Joint Fiscal Office review said. “Some discussion of expected cost growth rates beyond 2017 will be important for policy makers as they contemplate future costs.”
Dr. Dynasaur 2.0
House Speaker Shap Smith, D-Morristown, has backed a proposal to study whether the state could expand Dr. Dynasaur — a subsidized health care program for children to all Vermonters under age 27, regardless of income.
In a preliminary proposal, backers of the Dr. Dynasaur 2.0 plan said it would add 120,000 people to the state-federal program. Financing could include a 2 percent payroll tax on all Vermont employers. Backers of the plan also want to study whether the state could increase reimbursement rates so that doctors and hospitals could afford treat the new patients.
A broad coalition of advocacy groups support studying the proposal. They include the Vermont chapter of Main Street Alliance, the Vermont-NEA, Voices for Vermont’s Children, and the Vermont Public Interest Research Group.
Mental health integration
Lippert said his committee will hold joint hearings with the House Human Services Committee, to look at better integration of mental health and substance abuse services in the health care system.
“Mental health and substance abuse really is part of health care, and an important part of health care,” Lippert said. “I think there’s a recognition more and more that (separating mental health from health care) is not a helpful distinction.”
On the Senate side, Ayer said she wants to continue addressing the psychiatric nursing shortage at the Vermont Psychiatric Care Hospital in Berlin. The hospital has 25 out of the state’s 49 Level 1 beds for patients with acute psychiatric illnesses.
Under the Shumlin administration’s proposed budget adjustment, the Department of Mental Health would use $409,960 to increase pay rates to attract and retain psychiatric nurses at the Vermont Psychiatric Care Hospital so that it can stop relying on traveling nurses.
Under the administration’s proposal, the money is offset by savings the state accrued when one wing of the hospital was closed this summer due to understaffing, and from vacancy savings at designated agencies that couldn’t bill as many patients when they were understaffed.
Ayer said she wants to continue evaluating pay incentives for psychiatric nurses and explore whether the state can train advanced practice nurses already in Vermont to work with psychiatric patients.