Editor’s note: This op-ed is by Steve Kimbell, the commissioner of the Vermont Department of Financial Regulation. Responsibility for the regulation of hospital budgets will shift from the Department to the Green Mountain Care Board on July 1.
Change is unsettling. It is sometimes painful. Most of us avoid it until standing pat is more painful than changing.
We are at that point in Vermont with the cost of our health care system. Total health insurance costs per employee for large employers went from $4,918 in 2001 to $10,743 in 2009, an increase of 118 percent. If we continue business as usual, that cost will be $28,530 by 2019.
As a percentage of our state’s economy, spending on health care has grown from 6.5 percent in 1966 to 19.2 percent in 2010. That has caused flat or even declining wage growth in much of our economy. It has crippled the ability of our towns and cities and our school districts to make necessary infrastructure improvements. It has stifled business investment, the key to economic growth.
Total dollars spent on health care in Vermont amount to $5 billion today. That number will be more than $10 billion by 2020 if we don’t change our behavior.
Employers have been forced to shift more and more of the cost of health insurance to their employees or to simply stop offering health insurance as a benefit. This has helped to make unpaid health care bills one of the leading causes of personal bankruptcy in our country.
And there is clear evidence from the rest of the world that quality, accessible health care can be delivered at a much lower cost than we pay in Vermont. Norway and Switzerland spend a little more than half what Vermont spends per capita. In 2009, health care spending consumed less than 10 percent of their economies. The numbers are similar in the rest of the world’s industrialized countries.
This is the context for decisions like the one made recently by the management and board of directors of Rutland Regional Medical Center (RRMC) to close the hospital’s inpatient rehabilitation center. It was a painful decision. But the alternative, erosion of the hospital’s ability to deliver its core services, would be worse.
This decision was not made in a vacuum, nor was it mandated by state regulators or the Green Mountain Care Board. It is consistent with the spirit of Act 48 of 2011, which requires that “overall health care costs must be contained and growth in health care spending in Vermont must balance the health care needs of the population with the ability to pay for such care.”
Part of achieving that balance will be decisions like the one to close RRMC’s inpatient rehabilitation center. This is not rationing of care.
Part of achieving that balance will be decisions like the one to close RRMC’s inpatient rehabilitation center. This is not rationing of care. Rather it is planning and executing in a careful way one step on the long path to slowing the rate of growth of health care costs in Vermont. Most rehabilitation services will still be available in the Rutland community in lower cost settings. And the hospital will be in a better position to perform its core functions in the face of inevitable cuts in Medicare reimbursement from the federal government.
Nor was the decision to close the rehabilitation center a quick decision. For the past 18 months, Vermont’s health care regulators have been working with the state’s 14 hospitals to develop the tools for cost containment. Growth rate targets have been negotiated at length, with a target of 3.75 percent established for FY13, which starts on Oct. 1. Hospitals have been aware of this target, which is a percentage point higher than the projected increase nationally in the cost of goods and services purchased by hospitals, for several months as they prepared their FY13 budget submissions to state regulators. How to meet the target is a local decision for each hospital and its community.
This collaborative cost-cutting effort is consistent with the intent of Act 48, which is “to achieve health care reform through the coordinated efforts of an independent board, state government, and the citizens of Vermont, with input from health care professionals, businesses, and members of the public.”
