Gov. Phil Scott is rejecting a push from state regulators to dramatically increase Medicaid funding, disputing their argument that the underfunding of the program is the reason for rising commercial insurance rates.
Last month, Kevin Mullin, chair of the Green Mountain Care Board, which regulates Vermont health care spending, urged Scott to include more Medicaid funding in the budget he will present in January.
In a letter, Mullin told the governor that the state needs more funding to help address the Medicaid “cost shift,” which occurs when hospitals increase revenue from patients with private insurance to offset insufficient Medicaid reimbursements.
He said that in previous years, the state’s Medicaid program has seen saw larger, more regular funding increases.
According to Mullin, the low Medicaid reimbursement rates have made it hard for rural hospitals to take part in the state’s transition to an all-payer health care system and have helped lead to higher insurance rates — including the double digit rate increases for insurance plans on Vermont Health Connect approved by the care board in July.
Responding to Mullin this week, the governor said that in recent years the state has increased the rate that Medicaid pays providers, while, at the same time, the number of Vermonters in the program has decreased.
In a Sept. 10 letter, the governor told Mullin that “the root of the problem” of rising insurance rates is that the cost of health care is too high and continues to rise — not that the state’s Medicaid program has been underfunded.
“While your letter makes clear your frustration with the sharp rise in commercial insurance premium rates you approved, its attempt to shift responsibility for this increase to Vermont’s Medicaid program is, in my opinion, wrong,” Scott wrote.
Scott noted that in recent years participation in Vermont’s Medicaid program has decreased 21%, with about 43,000 fewer members since 2016.
“(A)s you surely recall from your time in the Legislature, when there are fewer people enrolled in a program, appropriations for that program do not grow as quickly, or at all,” Scott wrote in the letter to Mullin, a former Republican state senator who was appointed to the Green Mountain Care Board by Scott.
Still, Scott noted that over the last five years the state has boosted the amount it reimburses providers for Medicaid services by $40 million, though he acknowledged that none of the money has gone directly to hospitals.
It instead has been spent on increasing reimbursements for providers, including primary care doctors, community health providers and the designated agencies that offer mental health services.
Scott said these increases have lowered health care costs because “they buffer Vermont’s downstream, community-based health providers to mitigate upstream costs in more expensive settings.”
In a recent interview, Mullin said that the state should fund the Medicaid program up to the federal cap — which would mean about $70 million in additional dollars.
Mullin wants to harness part of the additional funding to draw down tens of millions of federal dollars to help hospitals invest in the transition to the all-payer model.
He says that low reimbursement rates are making it more difficult for small rural hospitals to afford the transition to the all-payer system run by OneCare Vermont, which pools Medicaid, Medicare and commercial insurance monies and distributes payments to providers on a flat per-patient basis.
Lawmakers, including Sen. President Pro Tem Tim Ashe, D/P-Chittenden, and Rep. Kitty Toll, D-Danville, who chairs the House Appropriations Committee, said funding Medicaid up to the federal cap strains the budget.
Last week, the governor signaled to reporters during a press conference that he would oppose the Medicaid funding increase.
“The answer to every problem isn’t more money,” Scott said last week. “And I know these are challenging times and I know it’s not easy but I would ask the Green Mountain Care Board to go back and take a look and see what we can do to make sure that we’re offering health care in the most cost effective manner.”
On Thursday afternoon, Mullin said that there are a few points in Scott’s letter that he disputes but he declined to detail them.
“I just can’t have this type of discussion with the governor through the press,” Mullin said.
“We stick by our letter. I think that they did a very thoughtful and thorough response to our letter and I’m glad that the conversation is occurring and that there will be further discussions,” he said.
He added that hospitals need more financial assistance through the Medicaid program to encourage them to expand their participation in the all-payer system.
According to Mullin’s August letter, half of the all-payer system’s funding is shouldered by hospitals.
“That’s really the point of the original letter, just asking them to consider maximizing whatever investments they could make into delivery system reform to make it work,” he said.
In his letter, the governor said his administration is working on “creative proposals” to address the cost of health care and examining ways to maximize federal subsidies to support the state’s insurance marketplace.
Despite his criticism, the governor said he wasn’t dismissing the regulators’ request for more Medicaid funding out of hand, and would take it into consideration.
A paragraph about expanding the Medicaid ACO was removed Friday afternoon, pending clarification.
