[O]fficials have cut $22.5 million from the Department of Vermont Health Access proposed budget for next fiscal year.
But the reduction is not all that it seems, Commissioner Cory Gustafson told the House Appropriations Committee Thursday.
Rather than slicing deep into staff or programs, Gustafson said most of the savings comes from crafting a more realistic budget for design, development and implementation of technology projects. That brings the fiscal 2019 budget more in line with what the state actually will spend, Gustafson said.
“I think it’s about being a little bit more thoughtful about what we can do in a year,” he said.
The department, which manages the state’s publicly funded health insurance programs and administers Vermont Health Connect, puts most of its money on the “program” side of the budget. That exceeds $100 million for fiscal 2019 and is up $1.95 million from the current year.
Given the total amount of spending involved, Gustafson characterized the program budget increase as “relatively stable.”
The department’s significant budgetary decrease comes on the administrative side, where spending is expected to drop from $187.7 million to $163.2 million in fiscal 2019.
The major factor in that drop is a $25.8 million reduction in technology spending. That mostly impacts federal money, since the U.S. government provides 90 percent of the funding and the state provides the remainder.
Officials said the department has “scrutinized” its contracts and allocations. They found that past budgets simply incorporated all approved federal money without consideration of whether it would or could be spent in a given year.
“We still have a plan to improve our technology abilities,” Gustafson said told the committee. “Really, what’s happening here is that our budget is now going to match project plans and anticipated annual spending, rather than just throwing in our budget everything we have approval to spend on a certain project.”
In an interview, Gustafson added that “we are trying to be more incremental in our technology efforts, so it all kind of fits together.”
Other department budget highlights include:
• Eliminating a primary care case management fee, saving $3.3 million.
The fee is meant for primary care providers “to coordinate services and compensate them for any extra support needed for complex cases,” officials said. But “there isn’t necessarily accountability for those dollars. It’s just sort of an add-on payment,” Gustafson said.
He added that “we have a number of case- and care-management efforts under way in other parts of our system now.”
Committee members asked the department to provide more information about potential impacts on primary care providers, who are in short supply throughout the state.
• A settlement with Dartmouth-Hitchcock Medical Center regarding the department’s rate-setting policies adds $6.6 million to the fiscal year 2019 budget.
Gustafson said the increase “feels like a big number,” but it resolves a long-standing dispute between the New Hampshire-based hospital and the department.
• A rate adjustment to comply with federal regulations cuts $1.5 million from the budget.
This means the department is “changing the methodology and rates paid to suppliers of durable medical equipment; prosthetics/orthotics and supplies; and clinical lab services,” according to the fiscal 2019 budget proposal.
Officials said they have no choice but to implement the cuts.
• The department expects to save $4.7 million by decreasing disproportionate share hospital payments. That’s funding sent to hospitals that serve a significant number of uninsured patients.
Since the advent of the Affordable Care Act and the state’s own Vermont Health Connect, low-income patients have had access to low-cost insurance and the rate of charity care provided by hospitals has gone down. Michael Costa, the department’s deputy commissioner, said the federal government plans to eventually phase out so-called DSH payments.
“It’s not entirely clear what they’re going to do,” Costa said. “So part of the policy imperative here is to get ready for those cuts and start to ratchet down the state’s DSH expenditures.”
DSH payments totaled $27.4 million in the fiscal year 2018 budget, Costa said.
• The department pays a contractor for operating the Medicaid Management Information System and for fiscal services related to program spending. That contract is going up, resulting in a $4.1 million increase in the fiscal 2019 budget.
• The department processes premium payments for Vermont Health Connect, and officials now want to save $2.1 million in fiscal 2019 by turning that function over to insurance carriers.
Gustafson, a former government relations officer for Blue Cross Blue Shield of Vermont and a Vermont hospital association, said the state currently is negotiating with insurers, and he acknowledged that budgeting for the change in 2019 is “aggressive.” But he said improvements in Vermont Health Connect make the idea feasible.
“Our enrollment is better, so the carriers are more likely to entertain this conversation,” Gustafson said. “The carriers did not want bad data in their system.”
The idea, he added, is “getting the state out of the middle of insurance coverage.”
