by Rob Roper
Waterbury — Bob Gaydos is a principal at Digital Insurance, the nation’s leading employee benefits agency specializing in insurance for small businesses and mid-sized companies, and he is a partner at Waterbury-based Choice Strategies. For over twenty years he’s helped hundreds of companies create and implement strategies for providing health insurance to their employees. He knows insurance, he knows what it takes to run a successful business, and he knows Vermont. He’s also getting to know very well Act 48, Vermont’s new universal health care law.
Gaydos is worried about the impact the law will have on Vermont’s employers and its tax base, and, given the way the law is being implemented, believes it is not nearly worth the risk our politicians are taking. “Remember, this is all up in the air. We have constitutional battles. We have elections coming up. The next president could rescind all of the funding for the premium tax subsides which would just make the entire thing deflate, so we’re not taking an educated risk – we’re not taking a look at the situation and evaluating the risk – we’re taking a gamble.”
Bob Gaydos is emerging as one of the most articulate voices of caution and common sense in Vermont’s ongoing healthcare debate. He recognizes the need for reform and that the way we provide health insurance today is not the way we will provide health insurance ten years from now.
At a recent forum in Ludlow, Vermont, Gaydos described the problem as he sees it: “[The third party payment system] creates a payment problem, and this payment system creates an expectation problem. Everybody wants any doctor, all the time, any treatment, any care, any cost, regardless of the outcome. Well, that’s just impossible. That leads to the unsustainability… We’ve been getting away with it because we’ve been borrowing ourselves into ground for the past thirty years. That’s why we have a funding problem. We have created a system that is inflating three times faster than the rate of inflation, and we ask employers to pay for it. That’s just an impossibility. They can’t pay for a product that is increasing at three times the pace of their profit…. So, we do have to change. Absolutely….”
But, the change being offered under Act 48 poses some serious threats to jobs, tax revenues, and, ultimately, the quality of the care we receive, and Gaydos makes strong arguments on each of these points.
He describes a meeting with a Vermont based employer who has a presence in twenty-one states around the country. “We were in a meeting with their CFO [Chief Financial Officer] and their HR [Human Resources] department, and we were talking about the effects of Act 48 and what it meant to them in the long run. Of course the HR people were very worried. And finally, and quietly, the CFO said, ‘It’s quite simple, we just won’t hire people who live in Vermont.’ That’s a scary statement.”
According to Gaydos, the business community in Vermont was blindsided by the way the Governor and the legislature went about implementing their healthcare scheme. “I was literally getting phone calls from business members, they were on vacation calling me going, ‘what’s going on?’ They didn’t see it coming. They didn’t believe that Governor Shumlin would be elected and then would immediately propose a full-blown healthcare reform bill of this magnitude without input from the business owners. They were in shock…. They felt like they were never heard at all. And they weren’t.”
“Many of them went and met with legislators,” Gydos recalled. “They would always come back and say to me, Bob, it was meaningless. They just listened to me and left. They didn’t really care what I said to them as a business owner.”
Gaydos explained the impact this experience has left on some employers. “I don’t understand how we say we’re going to do something when we don’t even know how we would pay for it…. They’re very distraught over this. I had one business owner say to me recently in a meeting when we talked about it, I’ve never been so nauseous as a business owner as I am right now.”
If this situation doesn’t improve in 2012, the consequences could be dire. “The problem is that business owners are very mobile,” says Gaydos, pointing out that any tax-based system Vermont imposes will have to generate revenue equal to 15 percent of the entire state’s economy. “If we’re not going to collect premiums from individuals, and we’re not going to collect premiums through employers, that means we’ve got to do an income tax, a sales tax, a property tax, an assets tax, or a variation of those… So, the business owners are mobile. They can leave. If we take 15% of the from assets of money earning $300,000 that’s $45,000 — we just paid [someone] to leave the state, because they could leave, buy a house, pay the mortgage, and have money left over. So, we have to be really careful.”
“This state has one asset,” warns Gaydos: “The tax base. We could destroy the tax base if we give financial motivation to have higher paid jobs leave the state. And that’s the risk Green Mountain Care will take.
The other threat Green Mountain Care poses is to the quality of care Vermonters ultimately receive. As Gaydos points out, you can’t repeal the law of supply and demand, and the marketplace will ultimately assert itself and adapt to whatever government puts in place.
One unintended consequence of government interfeierance in the insurance market Gaydos is already seeing occur is businesses simply employing doctors directly for the benefit of their employees. “We already have employers in parts of the United States that are literally buying practices. Because they’re saying, we can create a better world for the doctor. We’re spending $15,000 a year on families. We’re spending $10,000 a year on each of these individuals for claims. We can run these practices for $1200 and $1500. Why don’t we just buy them? And they create a beautiful world for the doctor. Salary. Great positions. And the clientele, you don’t have 2500 patients. They only have 500. That’s how they run these systems. So, there’s already an unforeseen competition for the primary care providers.”
Of course, under this scenario, 2000 patients who previously had access to a doctor no longer do. A similar dynamic is at work with the rise of concierge practices. Also know as “membership medicine” or a “cash only practice,” concierge medicine offers doctors an opportunity to escape the red tape of dealing with (and being shortchanged by) government programs like Medicare and Medicaid, as well as the red tape of dealing with private insurance, and still have a profitable practice. The losers in this situation are those who can’t afford to buy into the practice or don’t fit into the doctor’s smaller universe of patients.
Gaydos sees real solutions coming from a freer market for health care. “We actually have not had a free market in the United States since about 1945…. We have this really distorted, weird, employer sponsored, funky, fifty different state thing that doesn’t function like a free market.”
The creation of a healthcare exchange as outlined in the Federal healthcare law could have potential for meaningful and helpful reform, but not as Vermont is interpreting that mandate. “Clearly, we have gone a different direction than national reform intended,” says Gaydos. “There’s nothing in national reform that says the exchange should be the ONLY place people buy insurance.” What Vermont is moving toward is having the exchange be the only place people can buy insurance and, simultaneously, limiting the number of providers who can participate in the exchange, ultimately, to a “single payer.”
Gaydos disagrees with that approach. “Let’s build this exchange. Let’s build a vibrant, open, market-based exchange. Let’s seek the players who would come in and participate in it. Let’s have competition….. either we’re going to create a global budget, or we’re going to create a market that actually functions. But, we can’t continue to do the “in between” thing we have now. I would rather trust the market.”