The Shumlin administration’s much-anticipated financing plan for a single-payer health care system landed on the desks of Vermont legislators Thursday evening.
Drawing from 2011 numbers, the study projects Vermont would save an estimated 1.5 percent annually on a roughly $6 billion health care finance system.
Taxpayer dollars would fund an estimated $1.61 billion of the system — an estimate that relies heavily on the assumption that federal revenues would rise as a result of increased enrollment in Medicaid, which some skeptics question.
The study’s conclusion is undercut by a caveat that the estimates might turn out to be invalid due to outdated numbers and shifting details surrounding the structure, slated for implementation in 2017. The report does, however, provide a general financing structure for plugging in new numbers.
What surprised many legislators was that the so-called plan, which was mandated by Act 48 in 2011, lacked a specific vehicle for how the public would pay for such a system.
“It’s not really a plan but a variety of options set forth on the table,” said House Speaker Shap Smith, D-Morrisville, about the proposal that the University of Massachusetts (UMass) drew up for $300,000. This sum also included another plan for funding elements of the health benefit exchange, set to open on Oct. 1, 2013.
A previous single-payer report by Harvard professor William Hsiao recommended an 11 percent employer payroll tax, which was extremely unpopular among the business community. The UMass report makes no tax recommendations.
“Quite frankly, a plan at this point in time would be premature,” Smith said. “I suggested that to the governor last year, given the fact that we didn’t have a waiver in place.”
The federal waiver Smith referred to is necessary for the state to break away from the requirements of the Affordable Care Act. It is essential to the state for implementation of the single payer health care system that Gov. Peter Shumlin has promoted for the past two years. The earliest Vermont could obtain this waiver is 2017.
Smith said that it would not be constructive for the Legislature to consider public financing options until 2015 because of the many potential changes to the state’s health care system between now and then. Smith’s statement echoes those made by Gov. Peter Shumlin, who wants the Legislature to focus its health care energy on issues surrounding the implementation of the health benefit exchange.
But not all Vermont legislators want to wait until 2015 to begin discussing how to publicly finance a health care system the state is on track to implement according to statute.
Democratic Sen. Tim Ashe, who chairs the Senate Finance Committee, said the Legislature must begin to consider financing options now — not later.
“You need broad recognition that you’re heading in the right direction before implementing a $1.6 billion tax increase,” he said. “I don’t believe the Legislature can show up in January and leave in May and convince the public. It has to happen starting today. Frankly, the Green Mountain Care Board, the Legislature and the administration have paid too little attention to the sticker shock that these changes will have on Vermonters.”
He said this year his committee — responsible for revenue generating measures — will look at the proposed single-payer models and the potential public revenue sources that would fund them. Ashe also wants to work with the Shumlin administration to initiate a substantive dialogue with the public — something the administration has been talking about for several months.
Earlier last week, Democratic Rep. Mike Fisher, who chairs the House Health Care Committee, said that his committee would also need to at least discuss how to generate public revenue for a single-payer system.
“I know we’ll need to spend some time contemplating how to fund Green Mountain Care after 2017,” he said.
Democratic Rep. George Till, who is the only physician on the House Health Care Committee, said that a specific plan from the administration for how to fund a single-payer system would have been helpful.
“It would have moved the discussion along … (but) I don’t think we got a financing plan,” he said.
Progressive Rep. Chris Pearson, who also sits on the House Health committee, said that while the document is not what many legislators had hoped for, it does paint a clearer picture of Vermont’s health care finance situation.
“I don’t think it’s what people expected in terms of the likely tax structure we should use, but I think there are some very valuable things. I think we’re moving towards better understanding the current system, so there’s value there, but, admittedly, I’ll expect some backlash.”
What’s in the UMass study?
The UMass study contextualizes what a single payer model for Vermont might look like in the projected health care finance landscape of 2017 through 2019.
Its estimates are based on the assumption that all Vermont residents would be automatically enrolled in the single-payer plan, called Green Mountain Care. At the same time, the UMass team anticipates that about 70,000 Vermonters will continue to receive insurance from their employers or from another source, such as Veterans Affairs.
For those individuals, who receive health insurance outside the state system, their private insurance would pay first and the state’s plan would supplement.
UMass estimates that implementing a single-payer system would cost the public about $1.61 billion a year. It would bring savings of $35 million in the first year, which would grow to $281 million stretched out over the system’s first three years.
Those savings, which average about 1.5 percent annually at the three-year outset, would grow as the overall cost of the system grows from about $5.92 billion to $6.45 billion.
In the first year, the bulk of those projected savings stem from streamlining administrative processes. The total amount paid out in claims is predicted to rise $87 million due to automatic enrollment and increased coverage for many people. But UMass projects that administrative costs would decrease by $122 million. That’s the $35 million difference in spending.
The increased benefits under the proposed single-payer plan include dental and vision for children, full health insurance coverage for the previously uninsured, as well as additional medical, pharmaceutical and dental benefits for the previously under-insured. The plan also sets Medicaid rates for providers at 105 percent of Medicare.
On the revenue side of the equation, the biggest jump — aside from the $1.61 billion in unspecified public financing — comes from a $249 million increase in federal Medicaid funds. This increase assumes that Vermont is awarded an extension of its federal 1115 waiver, which gives the state leeway to spend Medicaid dollars on innovative proposals.
According to the report, this $249 million increase is based solely on the projected increase of roughly 9,000 Medicaid eligible Vermonters, as tables 38 and 39 show on pages 60 and 61 of the report. According to this projection, Medicaid would provide funds for 175,422 Medicaid beneficiaries under a single-payer system instead of 166,293. The federal rates are identical for both systems.
Jeffrey Wennberg, director of Vermonters for Health Care Freedom, is extremely skeptical of these projected revenues.
Due to the Affordable Care Act, Vermont will raise its Medicaid eligibility level in 2014 to 133 percent of the federal poverty line, up from the 100 percent it’s at today. This shift greatly increases the pool of those Vermonters who are eligible for Medicaid. Since the Affordable Care Act will make it illegal to forgo health insurance, Wennberg doesn’t expect the state to expand its Medicaid population come 2017.
Robin Lunge, director of Health Care Reform for the Shumlin administration, said that Medicaid eligible Vermonters would slip through the cracks without coverage that is automatically applied.
“Right now, we rely on people to sign up,” she said about the Medicaid program. “When you enroll everyone (automatically) and on the backend figure out their income eligibility … then you can get those federal funds flowing through much more quickly and easily.”
The exact savings presented in the report, UMass explains in a 13-point list of caveats (pages 79-80), should be taken with a grain of salt and are subject to change.
“Any representation that there are going to be savings as a result of this reform should be looked at with the most skeptical of eyes, given the recent experience under the Affordable Care Act,” Wennberg said, referencing cost hikes under the Affordable Care Act.
“We’re seeing dramatically higher increases as a result of the enactment of the Affordable Care Act,” he added. “Those increases make sense, but they are totally contrary to the promises that were … sold to the public. Any promises made here should be looked at very skeptically.”
