Two years after Gov. Peter Shumlin characterized the problems facing Vermont Health Connect with that gastronmical analogy, the state’s Affordable Care Act-mandated health insurance marketplace has much of the technology that was missing at its Oct. 2013 launch.
Flanked by state officials and exchange customers, Shumlin announced Thursday the state has met the second of two deadlines he set in May to determine if the state would stick with Vermont Health Connect or find another option.
The website will go dark Thursday night so the new software can be uploaded, and stay offline until Monday. When it goes live again, customers will be able to make some simple changes to their personal information online and other functions will be added over the coming weeks leading up to the Nov. 1 start of open enrollment — when Vermonters will sign up for 2016 health insurance plans.
More important for open enrollment, administration officials say they have automated the process for people to renew coverage, replacing the labor intensive and error-prone paper applications relied upon last year.
Shumlin said Thursday’s milestone was not a “mission accomplished” moment. Instead it was a chance to update the public on the exchange’s progress and thank the workers who he said have sacrificed nights and weekends to make the system better. Officials were clear that problems could arise when the updates are live, but they said they are “optimistic” that Vermont Health Connect has turned a corner.
Workers have cleared a backlog of more than 10,000 requested changes that date back to before the state automated the process for changing people’s coverage or personal information, which officials said they completed in June. There are still 186 complex cases where customers’ accounts will have to be deleted and reinstated. Those customers have been notified, officials said.
The customer service will be improved as well, meaning changes reported in the first 15 days of a month will be reflected on a customer’s next bill, officials said.
Getting to this point has not been cheap. As of March, Vermont had used 5 percent of the federal IT grants available for all 50 states to implement exchange technology, according to a congressional report. Officials did not come to the news conference with an up to date spending figure but said later it was $144 million.
Officials said they anticipate Vermont will use the entire $198 million federal earmark to complete the exchange. Vermont has also used at least $10.6 million in Medicaid money the feds allowed states to use for integrating exchanges with Medicaid.
The exchange’s first two years were replete with frustration and uncertainty for customers who were frequently billed the wrong amount, had coverage canceled unexpectedly or continued to receive bills long after canceling a policy.
Shumlin was quick to point out that other governors who tried to build state-based exchanges experienced varying degrees of difficulty, with several abandoning the effort altogether. For the period covered by the congressional report, Vermont is in the middle of the pack (ninth out of 14 states) when it comes to spending.
Unlike many other states, Vermont made a “prudent” decision to leverage federal money toward making its exchange double as its Medicaid portal, Shumlin said. Connecticut and California, among others, have struggled to integrate their Medicaid programs and exchanges.
Roughly 35,000 Vermonters purchase health insurance through the exchange, but when you count the 200,000 Medicaid beneficiaries — nearly one-third of the state’s population — who will interact with system, its costs are justified, Shumlin said.
Shumlin will deliver a formal report to the legislative Joint Fiscal Committee with a cost analysis of transitioning to the federal exchange, as well as his recommendation, which will clearly be to stick with the current system. That committee will make a final decision on how Vermont should proceed.
The governor gave a preview of what those costs are Thursday, saying a transition to the federal exchange would involve $24.5 million in one-time expenses, $11 million of which would come from state coffers. A transition would add $5 million to the cost of operating the exchange on an annual basis, he said. And Vermont would not be able to offer additional state subsidies through a federally supported exchange, he added.
The current exchange is expected to cost $42 million to operate annually, according to Lawrence Miller, Chief of Health Care Reform, with $16 million coming from the state.
House Speaker Shap Smith, who is seeking the Democratic nomination for governor, told reporters outside his Statehouse office that he was encouraged by Shumlin’s announcement, but “clearly we need to see how things are functioning in a live environment,” he said.
“I think that (lawmakers) will feel better if they see their constituents’ experiences are getting better,” he said.
Smith said that if the governor is correct, and it’s not cost-effective to move to the federal exchange, the Joint Fiscal Committee will need to balance that expense against early indicators of the exchange’s performance.
Asked if he feels he bears responsibility for Vermont Health Connect’s struggle, Smith said, “I wasn’t building the exchange, and we weren’t the ones designing it, either. I’ll leave it to the people of the state of Vermont to make that decision.”
Candidates’ relationship to, and views on the exchange, are undoubtedly going to be a campaign issue. Smith said the Legislature pushed the administration to be accountable and remedy the situation, but ultimately he doesn’t think lawmakers were in a position “to make this work any more effectively than the administration did.”
Republican Lt. Gov Phil Scott, who is also running for governor, issued a statement Thursday afternoon saying he’s “glad” the exchange is making progress, because of the frustrations it has caused Vermonters.
“The real measure of whether or not Vermont Health Connect is working will not be in words, but rather in the experiences of the Vermonters and small businesses who are forced to use it,” Scott said.
Conspicuously absent from his statement was any call to abandon the exchange, a drum the lieutenant governor has beat consistently for much of the last year. Instead he closed on a different note: “While heartened by today’s announcement, my hope is we acknowledge the lessons learned from Vermont Health Connect’s failures before undertaking any future IT projects.”
The state is in the planning stages for two other major human services IT projects that combined with exchange are expected to total $420 million.
Medicaid costs unsustainable without additional revenue, Shumlin says
As Shumlin pointed out, Vermont’s exchange spending has gone further because it supports the state’s Medicaid program as well. Instead of a program for 35,000 people, it supports the 200,000 who rely on some form of Medicaid.
But that raises another issue, which is whether Vermont can afford its Medicaid program. The low-income health coverage program’s expanded eligibility under the Affordable Care Act has helped Vermont achieve the second-lowest uninsured rate in the nation.
Any state that chose to expand the program is struggling to pay for it, Shumlin said, but expanding Medicaid was the right thing to do for residents who would otherwise struggle to access medical care, he said.
At the same time, diminishing federal support for the program, its increased utilization and a potential change to the Medicaid formula — as well as a 53-week year — have ballooned a Medicaid shortfall that could be as high as $75 million this year, according to the legislative Joint Fiscal Office.
“Our challenge is that we keep signing more and more folks up for Medicaid, and then we refuse to pay for it,” Shumlin said, adding that he proposed a solution — in the form of a 0.7 percent payroll tax — last year that lawmakers rejected.
“We keep robbing every other sector of government to pay for the increasing Medicaid caseload that we refuse to pay for with a dedicated revenue source,” Shumlin said.
Shumlin said he’s unlikely to bring back the payroll tax for another round in the Legislature, and the retiring governor hinted it might be a challenge his successor will have to face.
“Vermont is going to have to address this problem,” he said.
Smith echoed Shumlin saying he’s heard from legislative leaders in other states that Medicaid is straining their budgets. Smith said he supported the governor’s payroll tax, saying he was one of the only people to come forward and endorse the plan, but doesn’t think it could gain traction with his colleagues.
“Quite frankly, I think most people are willing to have a hidden tax rather than a real one,” Smith said, referring to the upward pressure an underfunded Medicaid program places on health insurance premiums. Doctors and hospitals, who say they lose money treating Medicaid patients, look to recoup that money from private health plans.
Making Medicaid sustainable may eclipse the exchange as a campaign issue, as any candidate for governor will be quizzed on his or her plan to address the problem.
In a telling exchange, Seven Days’ columnist Paul Heintz asked Smith “In addition to the payroll tax, what other taxes are you hoping to raise going into this election year?”
Smith responded that he didn’t say he was looking to raise a payroll tax, but as a way to address the Medicaid shortfall, he thought it made sense. As a “realist,” Smith said he recognizes there’s no appetite for the payroll tax and he did not offer an alternative.
