Health Care

Lawmakers reach late-stage deal to ‘keep the lights’ on for health care reform

Lawmakers and the governor reached a deal to pass a health care package that, as one senator put it, will “keep the lights on” for health care reform.

The package contains $3.2 million in new state health care spending, which is eligible for roughly another $3 million in federal match. The money will be used to level-fund exchange subsidies for out-of-pocket costs, target increases to Medicaid rates and invest in initiatives to strengthen the primary care system.

Six months ago Vermont was poised to move forward with an ambitious single payer health care plan. In December, Gov. Peter Shumlin pulled the plug on the initiative, which would have been largely funded through a payroll tax, because he said Vermont couldn’t afford to pay for a publicly financed health care program.

At the beginning of the legislative session, the governor proposed a plan to raise $90 million in payroll taxes to fund a much more modest health care initiative that would have increased the Medicaid reimbursement rate.

Lawmakers rejected the payroll tax, and struggled to find funding for a greatly diminished health care bill. Many legislators were at loss to explain what happened.

“For perspective, $3 million is what we spend as a state on health care in four hours,” said Deb Richter, a physician and advocate for universal health care, who was among several health reform advocates who expressed disappointment with the final bill.

The health care program is paid for with a 33 cent increase in the cigarette tax and a commensurate increase in taxes on other tobacco products. Provisions taxing e-cigs and placing greater restrictions on their sale and use were struck.

The bill is a shadow of earlier proposals from both the governor and lawmakers.

“It’s really one of the biggest failures of this session of the Legislature, you know, that we came in thinking we would perhaps put together a universal single-payer type health care system, and now that we might walk out the door with next to nothing is frankly pretty amazing,” said Sen. Anthony Pollina, D/P/W-Washington, a member of the Senate Health and Welfare Committee.

In negotiations with the Senate Thursday, Rep. Bill Lippert, D-Hinesburg, chair of House Health Care, said his committee wanted “a more substantial proposal” to address significant ongoing health care needs for Vermonters, but he recognizes “that’s not where we are right now.”

Sen. Claire Ayer, D-Addison, chair of Senate Health and Welfare, said it was “a disappointment that we had to back away from universal care but it made sense to a lot of us.” She added that this year’s health care bill will “keep the lights on” while lawmakers “regroup” and try to move forward next year.

While the Legislature would have liked to spend more on health care, according to House Speaker Shap Smith, D-Morrisville, the spending in the bill represents what was feasible in a difficult budget year.

Smith said he doesn’t expect any movement toward universal publicly financed health care next year, but in the long run such a system will be “necessary,” because the current health care system is “unsustainable.”

The problem is that currently the changes needed would be “too disruptive,” and the state needs to find a way to increase the comfort-level of all stakeholders before they’re “willing to move forward.”

Gov. Peter Shumlin, who put his single-payer ambitions on hold last year, said Friday on WDEV’s The Mark Johnson Show that health care reform in Vermont has not stalled out. The state is working to implement payment reforms that will allow Vermont to move the state away from fee-for-service medicine to a system that reimburses for better patient outcomes, he said.

“Providers are gonna get paid for keeping Vermonters healthy, and that’s going to be the first priority,” Shumlin said. “I think it’s finally going to bring our health care spending under control.”

The health care bill also calls for a litany of reports and language setting out policies for the Green Mountain Care Board to consider as it crafts health reforms, including some meant to protect independent physician practices.

Shumlin bemoaned lawmakers’ refusal to embrace his payroll tax proposal on WDEV Friday. It would have created a “dedicated” revenue source for health care, which would draw $100 million in federal Medicaid match, Shumlin said.

“Everybody knows that we’ve got huge health care challenges. … We sign folks up for Medicaid and then we don’t pay for it,” Shumlin said.

“We’re proud that we’ve cut our uninsured rate in half since I’ve been governor. We do that through the Affordable Care Act by signing folks up for Medicaid, and then we say to the providers, but we’re not going to pay you for it,” he added.

For weeks the governor had expressed skepticism about the necessity of a smaller health care package.

The difference between the governor’s proposal and the health care packages lawmakers offered is that “the Legislature is asking Vermonters to pay,” despite the fact that much of the spending in the legislative proposals was also eligible for federal match — and that his $90 million payroll tax would be paid by Vermont businesses.

Shumlin’s other argument, that his payroll tax proposal would help to pay for an expanded Medicaid program, is something he’s only begun to articulate with any clarity in the last few weeks.

Although administration officials did make clear in January that some money from the payroll tax would cover Medicaid’s increased caseload, Shumlin has since explained there are other pressures facing the program. Robin Lunge, chief of Health Care Reform, said those additional pressures only became clear later in the session.

In fiscal year 2017 Medicaid will face a $40 million shortfall caused by declining federal match rates and other onetime costs. In addition, state estimates on the cost of covering its expanded Medicaid roles are coming up short, by as much as $13 million, according to the Joint Fiscal Office.

Smith said Friday it was not clear to him that the governor’s proposal would have relieved pressure for the general fund to support Medicaid.

“My understanding was that it was meant to address cost-shift, and the issue of provider reimbursements and its consequences on insurance premiums,” Smith said.

Administration officials said it’s too early to say if they will bring back the payroll tax proposal next session.

The health care bill increases the role and authority of the Green Mountain Care Board and allows the regulatory body to help it pursue a federal all-payer waiver the state will use to incorporate Medicare into new models.

It also contains provisions from the original bill as introduced, which offer greater regulation of pharmacy benefit management companies, and requires hospitals to notify patients who are placed on observation status about whether Medicare covers the service — a practice that has resulted in unexpected costs for beneficiaries.

The spending provisions are as follows (figures are annualized and include federal match if applicable):

• $760,000 for exchange cost-sharing subsidies that reduce out-of-pocket costs for low- and middle-income Vermonters. The money restores what was cut from the underlying budget and does not increase those subsidies over last year.

• $2.8 million (with federal match) to increase Medicaid rates for primary care providers, Designated Agencies, home health providers and a much smaller increase for independent mental health and substance abuse providers.

• $2.45 million to increase payments to providers participating in the Blueprint for Health managed care program.

• $340,000 for the Green Mountain Care Board to add three new positions and support their expanded regulatory authority.

• $670,000 to restore funding for the Health Department’s health care worker student loan repayment program that was cut from the budget.

• $40,000 for the Health Care Advocates office, a Legal Aid health care consumer advocacy project whose role has expanded to assist people struggling with the exchange.

• A study by the administration about how Vermont could publicly finance universal primary care services will be covered by the Agency of Administration’s existing budget.

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  • Dennis Lalancette

    “Shumlin bemoaned lawmakers’ refusal to embrace his payroll tax proposal on WDEV Friday. It would have created a “dedicated” revenue source for health care, which would draw $100 million in federal Medicaid match, Shumlin said.”
    There was no written commitment that these funds would have been used to address the cost-shift. This was simply a way to develop another revenue source. 0.7% would continue to grow annually as this administration is unable to restrain spending.

  • Scott Woodward

    It’s discouraging that not much will get done this session on health care, but the silver lining is that we’re now in a place to really examine the priorities. Before this issue is revisited again in subsequent legislative sessions, I think it would be wise for the legislature to build itself a runway and outline how it might reach consensus on the priorities rather than doing this piecemeal next session (if there’s still time with this 11th hour effort). The bottom line is that we just don’t know what we want absent a universal system. And, as always, I hope whatever we do will include greater price transparency and smoothing out the variances in service pricing.

    • Walter Carpenter

      “And, as always, I hope whatever we do will include greater price transparency and smoothing out the variances in service pricing.”

      I believe that price transparency is in the bill.

  • John Freitag

    “At the end of the session, legislators learned their efforts weren’t enough to equal the challenge. Next year, they will face another 50 to 70 million budget gap”. quote from Anne Galloway in previous article.

  • Jim Barrett

    All Shumlin and the legislators need now is more money, a continuing story of a broke state that only passes new taxes each year. The thirst for more money to cover additional spending is well known all across the Nation and as a result we have more and more people slipping into poverty. Shumlin is the TAX AND SPEND MAN.

  • John McClaughry

    Why did it take these solons three years (and millions of dollars) to figure out what critics of single payer pointed out (for free) in 2011?
    The sad thing is that the people who were so enthusiastically wrong from 2011-2014 will now be in charge of making another run at the same unworkable idea.