[T]he state of Vermont has become increasingly reliant on funding through an agreement with the federal government that allows Vermont to use federal Medicaid money to pay for parts of state government and various discretionary programs.
Vermont’s use of Medicaid money for those purposes has more than doubled since fiscal year 2007, the first full year of an agreement with the federal government to fund Medicaid through what’s called a global commitment waiver.
The agreement essentially turns the Agency of Human Services into a managed care organization. Under this so-called MCO, if the agency is able to save money on treating Medicaid patients, the state can transfer that money out of the Medicaid budget for direct patient care and apply it to other health-related initiatives.
The money used under this provision continues to be a hybrid of state and federal dollars. As a general rule, although it varies by year, the federal government pays for about 55 percent of the cost of these initiatives, which the state calls MCO investments.
In fiscal year 2015, the most recent year that data is available, Vermont spent $128.9 million on 83 of these MCO investments. That’s a 132 percent increase over fiscal year 2007, when the state and federal governments spent $55.5 million on 51 initiatives.
The Agency of Human Services released the information to VTDigger after a request under the Vermont Public Records Act. VTDigger analyzed the data as part of its ongoing Medicaid investigation.
MCO investments fall into VTDigger’s “other” category of Vermont’s $1.7 billion Medicaid program, meaning they’re relatively small expenses. But they have also grown considerably. In fiscal year 2008, MCO investments represented 5.5 percent of the $1.1 billion in Medicaid spending, and by fiscal year 2015, they were 7.7 percent of the $1.7 billion in spending.
Sarah Clark, the chief financial officer for the Agency of Human Services, said the agency has monitored the growth of MCO investments as a proportion of total Medicaid spending. Clark said actuaries want the state to keep the ratio lower than it was in fiscal 2015.
“From an actuary perspective, we’re supposed to keep that percentage between 5 and 7 percent as a reasonable, from a risk perspective, percentage to maintain,” she said. “That has necessitated a moratorium on new investments. … We’re maintaining our current pool of investments, but we’re not accepting new applications.”
Data show that in fiscal year 2015, the biggest sums of MCO investment money within state government went to the Department of Mental Health ($42 million), the Vermont Department of Health ($19.3 million), the Department for Children and Families ($16.9 million) and the Department of Vermont Health Access ($16 million).
Outside of state government, the money went to school nursing services ($10 million) the University of Vermont College of Medicine ($4 million), Vermont Information Technology Leaders ($2.9 million), the Green Mountain Care Board ($2.5 million) and the Vermont State Colleges ($400,000), among others.
To spend the state money and receive the federal contribution, the state needs to tell the federal government that the health-related initiative falls into one of four categories: (1) reducing how many people are underinsured 0r uninsured; (2) increasing access to quality health care for Medicaid patients; (3) increasing quality of life for Medicaid patients; and (4) creating public-private health care partnerships.
Since the global commitment waiver started, the most-cited and fastest-growing of these is Category 2: improving access to quality health care for Vermonters who are uninsured, underinsured or using Medicaid. Examples include school nursing services and the Vermont Veterans Home.
Medicaid MCO spending on outside programs
Vermont has used Medicaid money since fiscal year 2006 to fund at least a dozen initiatives that are outside the scope of the Agency of Human Services and general state government. These miscellaneous expenditures grew from $15.2 million in 2007 to $25.5 million in 2015.
Selina Hickman, the resident expert on the global commitment waiver at the Agency of Human Services, said MCO investments are a tool that allows the state to either save money by bringing in federal matching dollars or use federal money to expand public health programs.
Since the waiver started, Vermont’s initiatives have included physician training at the University of Vermont College of Medicine. In fiscal year 2007, the state used $3.9 million in MCO investments for the medical school; the amount has stayed right around $4 million every year.
Tuition at UVM College of Medicine is currently $33,460 per year for Vermont residents and $58,020 for out-of-state residents. Spokespeople for the medical school spent more than a week finding answers to VTDigger’s request to explain what the money is spent on and why the school should get it.
Jennifer Nachbur, a spokesperson for the UVM College of Medicine, said in a statement the MCO investment money is “used for activities, facilities, personnel and services associated directly with organizing and supporting the successful completion of medical student education.”
“Those expenses include support for educational information systems staff and equipment; staff engaged in medical education, including the Offices of Medical Student Education, Student Affairs and Admissions; faculty involved in the direct teaching of medical students; and classroom and teaching facilities that support medical student education,” Nachbur said.
Vermont gave the Green Mountain Care Board $2.5 million to run its regulatory practices in fiscal year 2015. The board received just $789,434 in fiscal year 2012, when it first started, and has asked the Legislature for $4.9 million in the upcoming fiscal year.
Al Gobeille, the board’s chairman, said he would prefer to get the board’s money from Vermont’s general fund. But he said lawmakers and the Shumlin administration decide which pot of money will be used.
Vermont Information Technology Leaders, or VITL, split part of a $339,500 chunk of money in fiscal year 2010, the first year the organization is listed on the agency’s documents for receiving MCO investments. That rose to $2.9 million in fiscal 2015.
VITL is essentially a statewide nonprofit for facilitating electronic health records. In January, Chief Financial Officer Nancy Brock said her organization gets money from various sources and manages its money without regard to where it is coming from.
“When I look at the way that we’re managing VITL and VITL money from my perspective, I’m expecting that the state is managing their side of the equation as to where that money is coming from,” Brock said.
Shumlin administration’s MCO spending
On the state’s side of the equation, MCO money under the global commitment waiver has become increasingly popular to fund health care reform efforts, especially the Shumlin administration’s efforts to decentralize the mental health system.
At the Department of Mental Health, MCO investment funding grew from $8.3 million in fiscal year 2007 to $42.1 million in fiscal 2015. About $25.4 million of that year’s total went to run the Vermont Psychiatric Care Hospital in Berlin, including taking care of involuntarily admitted patients.
The Department of Vermont Health Access has an additional line item for inpatient psychiatric care, such as care for the uninsured and underinsured, or patients at the Brattleboro Retreat. Neither expense could otherwise be billed to Medicaid.
That line item has driven up the Department of Vermont Health Access’s budget for MCO investments; it grew from about $900,000 in fiscal year 2007 to $16 million in fiscal 2015. About $7.8 million of the fiscal 2015 MCO investments total was spent on inpatient psychiatric care.
In fiscal year 2015, Vermont also gave money to designated agencies to take care of underinsured Vermonters ($6.9 million); it paid for the Vermont Blueprint for Health, a tool for health care reform ($2 million); and it paid for substance abuse treatment through the Health Department ($2.9 million).
Mental Health Commissioner Frank Reed said Vermont spent about $18.8 million a year of its portion of Medicaid money on mental health services before damage from Tropical Storm Irene forced the closure of the Vermont State Hospital in Waterbury in 2011, and before the Shumlin administration decentralized the mental health system.
Today, Reed said, because his department has used the MCO investment mechanism, Vermont is spending about $21.4 million of state money to pull in federal dollars, adding up to about $30 million of hospital and community-based services.
Reed doesn’t consider this a huge increase, especially when adjusted for inflation. “We have increased it, yes, but at the cost of all these additional services and supports that have been made available,” he said.
“We can always do more services,” Reed said. But he said higher spending may not necessarily lead to better outcomes for patients.
