Gov. Peter Shumlin’s proposal to raise the state’s Medicaid reimbursement rate by 2 percent may not pass muster in the House of Representatives.
Increasing the Medicaid reimbursement rate is important to addressing the shift in health care costs from people with publicly financed coverage to the commercially insured, according to state regulators and other officials.
Lawmakers on the House Ways and Means Committee, who are responsible for raising revenue, aren’t enamored with Shumlin’s proposal to double the claims assessment. They say it is a tax on insurers who will pass the cost on to customers through premiums.
Part of the increase in the claims assessment would go to cover the Medicaid rate hike.
“Our committee rejected a similar proposal last year, and I don’t think the view of the committee has changed in that time,” said Ways and Means Chair Jane Ancel, D-Calais.
The House Appropriations Committee, which handles expenditures, isn’t sure the state can afford the increased reimbursement rate without raising the claims assessment or some other equivalent revenue boost, said Martha Heath, D-Westford, chair of the Appropriations Committee.
Mitzi Johnson, D-South Hero, the committee’s vice chair, said: “One of the first places we’ll look to cut are places where the governor proposed an increase, and that includes the Medicaid reimbursement rate increase.”
But not increasing the Medicaid reimbursement rate would hurt middle-income Vermonters and small businesses, according to Al Gobeille, chair of the Green Mountain Care Board.
“Next year if you don’t properly fund Medicaid you’ll put the burden on small businesses and individuals to carry the bulk of the increase in health care spending,” Gobeille said.
If Medicaid payments don’t keep pace with provider costs, the difference is passed on to people paying commercial insurance premiums, said Mark Larson, commissioner of the Department of Vermont Health Access.
Abandoning the Medicaid rate increase casts doubt on whether state government would be a responsible payer when it replaces commercial insurance as part of Green Mountain Care, according to Bea Grause, director of the Vermont Association of Hospitals and Health Systems.
“If the Medicaid budget is analogous to the whole public financing discussion, where you’re going to have to have a conversation about financing Green Mountain Care each year, then it’s worrisome,” she said.
The Shumlin administration committed last year to increasing the Medicaid reimbursement rate by 3 percent each year for three years.
But the hospital association supports the administration’s proposal to raise the rate by 2 percent tied to inflation, because it shows a commitment to addressing the disparity among payers.
Ancel said the two money committees in the House are working to iron out the stresses on the budget, and make decisions that are in Vermonters’ best interest.
Those committees have a tough job, Shumlin said at a press conference Monday, and he doesn’t want to quarterback their decision making too closely.
“We went through the same exercise that they’re going through now, only we had more lead time, because we had to present the budget,” he said.
His team picked the claims assessment to pay for the Medicaid rate increase because it was the best option they could find, Shumlin said.
The resistance to raising the claims tax is going to leave lawmakers with a $14 million hole to fill, he said.
But the $14 million hole Shumlin is referring to doesn’t correspond to the amount needed to pay for the Medicaid reimbursement rate increase.
Lawmakers on Ways and Means have balked at the increase because the administration hasn’t explained exactly what it’s being used to pay for.
The claims assessment feeds the Health Care Resources Fund, which is used to cover the state’s Medicaid budget as well as a wide array of other health care expenses.
The fund is filled by numerous revenue sources including the General Fund, cigarette taxes, a hospital provider tax and assessments on employers and health care claims. That money is then pooled and used to cover the state’s health care costs.
Administration officials have said that makes it impossible to tie revenue increases for the fund directly to expenditures.
Shumlin’s proposed budget includes $8.33 million for increasing the Medicaid reimbursement rate. That sum contains $4.3 million to raise the rate 2 percent this fiscal year, and $4 million to cover the remaining cost of last year’s 3 percent increase.
Because of how the increases are spread over the fiscal year, the state hasn’t finished paying for last year’s increase. The federal government matches the increased spending, so the actual rate hike comes out to more than $19 million for providers.
Johnson, who focuses on health care spending for the appropriations committee, said she’s committed to covering the cost of last year’s increase, but what her committee is considering cutting is the $4.3 million increase Shumlin proposed for this year.
However, even the combined increase for this year and last year doesn’t add up to the $14 million Shumlin wants to bring in using the claims tax.
Johnson said the decision to fund the state’s costs of Vermont Health Connect through the Health Care Resources Fund are putting additional stress on that account.
“When we allowed Vermont Health Connect to be paid for out of the Health Care Resources Fund it increased pressure on the Medicaid budget,” she said.
Both Ancel and Johnson said a possible solution would be a more modest increase in spending out of the Health Care Resources Fund that would trigger less need for new revenue.
